Pre-Market Global Review - 3/8/13 - Jobs Friday

 



This newsletter provides market direction trading insights that are derived from our seasoned and unique, inter-market analysis.  We hope that this information will provide both the novice and seasoned trader with valuable assistance.  Our approach is to harvest clues  from the Market's “tea leaves” as to what the market is doing or is likely to do.  



March 8, 2013



Good Morning Traders,


As of this writing 5:00 AM EST, here’s what we see:

US Dollar – Up at 82.490 the US Dollar is up 175 ticks and is trading at 82.490. 

Energies – April Oil is down at 91.54.

Financials – The 30 year bond is down 4 ticks and is trading at 141.27. 

Indices – The March S&P 500 emini ES contract is up at 1546.75 and is up 16 ticks.

Gold – The April gold contract is trading up at 1579.00 and is up 39 ticks from its close.

 

Quick Note: Unless otherwise shown the above contract months are now June.   

 

Conclusion

This is not a correlated market.   The dollar is up+ and oil is down-  which is normal but the 30 year bond is trading lower.  The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice versa.  The indices are up and the US dollar is trading higher which is not correlated.  Gold is trading up which is not correlated with the US dollar trading higher.   I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down.   I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong.  As traders you need to be aware of this and proceed with your eyes wide open. 

 

With the exception of Shanghai and Singapore, the rest of Asia closed higher.  As of this writing all of Europe is trading higher.  It would appear as though the ECB did not damage the USD by driving it higher yesterday.  It seems as though they already reaped the reward of a lower Euro this past month, currently the Euro is trading at 1.31040 and a month ago it was upwards past the 1.34000 range.

   


  Possible challenges to traders today is the following:

 -  Non-Farm Employment Change is out at 8:30 AM EST.  This is major.

-  Unemployment Rate is out at 8:30 AM EST.  This is major.

-  Average Hourly Earnings are out at  8:30 AM EST.  This is major.

-  Wholesale Inventories are out at 10 AM.  This is not considered major.

Yesterday we said our bias was to the downside because the markets weren't correlated due to the Bonds trading higher.  The market elected to ignore this and drive the Dow 33 points higher.  Today the markets are not correlated with the missing ingredient being Bonds, again. Will either the Bonds or the USD correct itself before the trading session begins?  Difficult to say as today we have Jobs Friday.  As such our bias is neutral.  I personally don't trade Jobs Friday as historically speaking the markets don't behave with any sense of normalcy on this day.  Could this change?  Of course.   Remember anything can happen in a volatile market.

 

 

The great thing about market correlation is that it gives you an insight as to what the market fundamentals are.  Now you might ask yourself "why is that important"?  It's important because markets generally tend to lean towards those fundamentals regardless of what news is being reported.  Are there exceptions?  Of course.  Look at what happened yesterday, the markets were poised to go lower but didn't.  But as a trader if you see that it changed abruptly, you can take the appropriate action.  Remember that as traders, your number one rule is to preserve your trading capital because without it there is no trading. 

On the political front, it appears as though some members of the GOP that the President took out to dinner on Wednesday are starting to say that they weren't aware that President Obama has already cut 1.4 Trillion dollars from the budget, thereby reducing the deficit.  Apparently none of the leaders of their own party bothered to tell them and if the only thing they hear is GOP propaganda, what do they believe?  This amounts to open communication and quite frankly this is something I have to blame the President for.  He had every opportunity to do this during his first term but decided not to.  He now knows that if wants a truly historical legacy that he must meet with his opponents and have a one-on-one talk with them, at least to communicate what he doing and explain his point of view.  Surprisingly yesterday he met with Paul Ryan for lunch.  Yes, the same Paul Ryan who just ran against him and collectively they may to an agreement regarding the future of Medicare.

Thus far Wall Street has treated this issue as if it's a famine in China, in other words so far removed that it couldn't possibly have an effect on us.  Look at what happened yesterday with the Dow going to an all time high?  Does anyone remember 2007 when that last happened?  Didn't last too long, did it?  The point that I'm trying to make is don't be so fooled into believing that "this time it will be different."  The Smart Money has been pulling that ever since there's been a market.  What goes up will come down and vice-versa.  For the time being nothing will change as it will take some time before these cuts are felt thru out the economy.  Case-in-point, today we have  Jobs Friday and it will probably show a gain.  I would venture to say that that report will probably change in April unless some agreement is met in DC.   The longer this issue is present and not resolved, the worse it will be.  Remember that we still have the debt ceiling issue hanging over our heads and this won't happen until the May time frame.  Another aspect of this that we are seeing is no follow thru when it comes to fundamentals.  What I mean by this is when the markets are correlated to either the long or short side; they may take the opposite direction during the trading day but by the end of the day saner minds rule and they return to fundamentals.  They aren't doing that now.  So the markets could initially be correlated to the downside and then close higher by the end of the day, completely ignoring all fundamentals.  The Smart Money doesn't have any issue doing this but the danger to a trader is that if the Smart Money finally wakes up (and sooner or later they will) you as a trader could be stuck on the wrong side of the market.  And that will be painful.   

  

This is the new and improved GOP in action.  They won't outwardly hold the country hostage as they did in 2011; they'll set up events such that it works out that way.  It will be interesting to see what happens come April 15th as this is the day when either a budget is approved or Congress goes without pay.  The GOP is adamant about sticking to their guns and will not relent.  The question is what will the Democrats do? 

 
As readers are probably aware I don't trade equities.   While we're on this discussion, let's define what is meant by a good earnings report.  A company must exceed their prior quarter's earnings per share and must provide excellent forward guidance.  Any falloff between earning per share or forward guidance will not bode well for the company's shares.  This is one of the reasons I don't trade equities but prefer futures.  There is no earnings reports with futures and we don't have to be concerned about lawsuits, scandals, malfeasance, etc.



Anytime the market isn't correlated it's giving you a clue that something isn't right and you should proceed with caution..    Today market correlation is calling for a higher open and our bias is towards the long side.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.  For awhile now we've promised a video on how a trader can use Market Correlation in tandem with their daily trading.  A good friend of Market Tea Leaves: Carl Weiss of Sceeto and I produced a video on December 22nd that shows this.  Here it is:

 

 

 

 

 

Please note the video is about a half hour in length and we plan on producing more in the near future.  Also note that in the near future we will have other videos where we will interview various trading leaders.

As I write this the crude markets are trading lower and the US Dollar is advancing.  This is  normal.  Think of it this way.  If the stock market is trading lower, it's safe to assume that the crude market will follow suit and vice versa.  Crude trades with the expectation that business activity is expanding.  The barometer of which is the equities or stock market.  If you view both the crude and index futures side by side you will notice this. Yesterday crude dropped to a low of 90.37 a barrel and held.   We'll have to monitor and see if crude either goes lower or holds at the present level.   It seems that at the present time crude's support is at 90.00 with resistance at 96.00 a barrel.  This could change.  All we need do is look at what happened last fall when crude was trading over $100.00 a barrel. We'll have to monitor and see.  Remember that crude is the only commodity that is reflected immediately at the gas pump. 

Future Challenges:

 - Sequester spending cuts to commence March 1st.
 - Debt Ceiling in the May time frame.

 - European Contraction

Crude oil is trading lower and the US Dollar is advancing.  This is normal.  Crude typically makes 3 major moves (long or short) during the course of any trading day: around 7 AM EST, 9 AM EST and 2 PM EST when the crude market closes.  If crude makes major moves around those time frames, then this would suggest normal trending, if not it would suggest that something is not quite right.  If you feel compelled to trade consider doing so after 10 AM when the markets give us better direction.  This can make afternoon trading erratic.  As always watch and monitor your order flow as anything can happen in this market.  This is why monitoring order flow in today's market is crucial.  We as traders are faced with numerous challenges that we didn't have a few short years ago.  High Frequency Trading is one of them.   I'm not an advocate of scalping however in a market as volatile as this scalping is an alternative to trend trading.  

Remember that without knowledge of order flow we as traders are risking our hard earned capital and the Smart Money will have no issue taking it from us.  Regardless of whatever platform you use for trading purposes you need to make sure it's monitoring order flow.  Sceeto does an excellent job at this.  To fully capitalize on this newsletter it is important that the reader understand how the various market correlate.  More on this in subsequent blogs.

To View previous articles of Market Tea Leaves visit our archive.
 

To Subscribe Click Here:
http://eepurl.com/uoQzH

Pre-Market Global Review - 3/7/13 - Will the ECB Decimate Rally?

 



This newsletter provides market direction trading insights that are derived from our seasoned and unique, inter-market analysis.  We hope that this information will provide both the novice and seasoned trader with valuable assistance.  Our approach is to harvest clues  from the Market's “tea leaves” as to what the market is doing or is likely to do.  



March 7, 2013



Good Morning Traders,


As of this writing 5:00 AM EST, here’s what we see:

US Dollar – Down at 82.595 the US Dollar is down 112 ticks and is trading at 82.595. 

Energies – April Oil is down at 90.62.

Financials – The 30 year bond is up 3 ticks and is trading at 142.30. 

Indices – The March S&P 500 emini ES contract is up at 1541.75 and is up 11 ticks.

Gold – The April gold contract is trading up at 1580.40 and is up 60 ticks from its close.

 

Quick Note: Unless otherwise shown the above contract months are now June.   

 

Conclusion

This is a nearly correlated market.   The dollar is down- and oil is up+  which is normal but the 30 year bond is trading higher.  The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice versa.  The indices are up and the US dollar is trading lower which is correlated.  Gold is trading up which correlates with the US dollar trading lower.   I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down.   I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong.  As traders you need to be aware of this and proceed with your eyes wide open. 

 

Asia closed mixed with the Nikkei, Sensex and Singapore exchanges closing higher and the rest of Asia closing lower.  As of this writing all of Europe is trading higher.  A note on Europe.  Today the ECB will determine the minimum bid rate or the equivalent of our Federal Funds Rate.  This is very much liken to our FOMC meetings.  At 8:30 AM EST, the ECB will hold a press conference.  The last time this happened (Feb 7th) The USD went up dramatically in a short period and drove the US markets lower.  February 7th was the last time the USD was trading in the 79 area; from that time to the present the USD has traded upwards past the 80 mark.  I would urge caution to all traders regarding this.  The last time around it turned out to be a nasty surprise.  We have no idea what Mario Draghi is going to say, but if he's says anything remotely liken to what he said last month, this could be a problem.

   


  Possible challenges to traders today is the following:

 -  Challenger Gray Job Cuts are out at 7:30 AM EST.  This is major.

-  ECB Minimum Bid Rate is out at 7:45 AM EST.  This is major.

-  ECB Press Conference starts at 8:30 AM EST.  This is major.

-  Trade Balance is out at 8:30 AM EST.  This is major.

-  Unemployment Claims are out at 8:30 AM EST.  This is major.

-  Revised Non-Farm Productivity is out at 8:30 AM EST.  This is not major.

-  Revised Unit Labor Costs are out at 8:30 AM EST.  This is not major.

-  Natural Gas Storage is out at 10:30 AM EST. This will move the Nat Gas market.

-  FOMC Member Powell speaks at 1:15 PM EST.  This is major.

-  Consumer Credit is out at 3 PM EST.  This is major.

Yesterday we said our bias was to the downside because the markets weren't correlated due to the USD trading higher.  The market elected to ignore this and drive the Dow 42 points higher.  Today the markets are nearly correlated with the missing ingredient being Bonds. At first glance this looks positive to the upside however the ECB is reporting today and the Smart Money hasn't taken capital off the table.  Therefore our bias today is towards the downside.  Here's why.  Last month when the ECB reported we had positive economic news and seemingly there was nothing to drive the markets lower.  However a half hour after the press conference began the USD took off and did not look back.  This forced our markets lower and the USD to this day has not traded below the 80 mark.  It could be that this press conference turns out to be a non-event but I prefer caution.  Could this change?  Of course.   Remember anything can happen in a volatile market.

 

 

The great thing about market correlation is that it gives you an insight as to what the market fundamentals are.  Now you might ask yourself "why is that important"?  It's important because markets generally tend to lean towards those fundamentals regardless of what news is being reported.  Are there exceptions?  Of course.  Look at what happened yesterday, the markets were poised to go lower but didn't.  But as a trader if you see that it changed abruptly, you can take the appropriate action.  Remember that as traders, your number one rule is to preserve your trading capital because without it there is no trading.  Her's a video on what happened yesterday:

On the political front, it appears as though President Obama decided to take some folks out to dinner.  He decided to take out the lower level members of the GOP as he knows he can't convince the main mob of Ryan, Cantor, McConnell and Boehner to see his point of view.  There is supposedly a stop gap bill in Congress that will fund the Federal Government to year end.  But that will not stop the sequester from occurring.  There will still be an 85 Billion Dollars in the Federal budget.  It is not yet known if this maneuver will do anything for the Democrats.  I suspect not, but time will tell.

Thus far Wall Street has treated this issue as if it's a famine in China, in other words so far removed that it couldn't possibly have an effect on us.  Look at what happened yesterday with the Dow going to an all time high?  Does anyone remember 2007 when that last happened?  Didn't last too long, did it?  The point that I'm trying to make is don't be so fooled into believing that "this time it will be different."  The Smart Money has been pulling that ever since there's been a market.  What goes up will come down and vice-versa.  For the time being nothing will change as it will take some time before these cuts are felt thru out the economy.  Case-in-point, today we have Unemployment Claims numbers that will probably be good.  Tomorrow is Jobs Friday and again, it will probably show a gain.  I would venture to say that that report will probably change in April unless some agreement is met in DC.   The longer this issue is present and not resolved, the worse it will be.  Remember that we still have the debt ceiling issue hanging over our heads and this won't happen until the May time frame.  Another aspect of this that we are seeing is no follow thru when it comes to fundamentals.  What I mean by this is when the markets are correlated to either the long or short side; they may take the opposite direction during the trading day but by the end of the day saner minds rule and they return to fundamentals.  They aren't doing that now.  So the markets could initially be correlated to the downside and then close higher by the end of the day, completely ignoring all fundamentals.  The Smart Money doesn't have any issue doing this but the danger to a trader is that if the Smart Money finally wakes up (and sooner or later they will) you as a trader could be stuck on the wrong side of the market.  And that will be painful.   

  

This is the new and improved GOP in action.  They won't outwardly hold the country hostage as they did in 2011; they'll set up events such that it works out that way.  It will be interesting to see what happens come April 15th as this is the day when either a budget is approved or Congress goes without pay.  The GOP is adamant about sticking to their guns and will not relent.  The question is what will the Democrats do? 

 
As readers are probably aware I don't trade equities.   While we're on this discussion, let's define what is meant by a good earnings report.  A company must exceed their prior quarter's earnings per share and must provide excellent forward guidance.  Any falloff between earning per share or forward guidance will not bode well for the company's shares.  This is one of the reasons I don't trade equities but prefer futures.  There is no earnings reports with futures and we don't have to be concerned about lawsuits, scandals, malfeasance, etc.



Anytime the market isn't correlated it's giving you a clue that something isn't right and you should proceed with caution..    Today market correlation is calling for a higher open and our bias is towards the long side.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.  For awhile now we've promised a video on how a trader can use Market Correlation in tandem with their daily trading.  A good friend of Market Tea Leaves: Carl Weiss of Sceeto and I produced a video on December 22nd that shows this.  Here it is:

 

 

 

 

 

Please note the video is about a half hour in length and we plan on producing more in the near future.  Also note that in the near future we will have other videos where we will interview various trading leaders.

As I write this the crude markets are trading higher and the US Dollar is declining.  This is  normal.  Think of it this way.  If the stock market is trading lower, it's safe to assume that the crude market will follow suit and vice versa.  Crude trades with the expectation that business activity is expanding.  The barometer of which is the equities or stock market.  If you view both the crude and index futures side by side you will notice this. Yesterday crude dropped to a low of 89.55 a barrel but did not stay there.   We'll have to monitor and see if crude either goes lower or holds at the present level.   It seems that at the present time crude's support is at 90.00 with resistance at 96.00 a barrel.  This could change.  All we need do is look at what happened last fall when crude was trading over $100.00 a barrel. We'll have to monitor and see.  Remember that crude is the only commodity that is reflected immediately at the gas pump. 

Future Challenges:

 - Sequester spending cuts to commence March 1st.
 - Debt Ceiling in the May time frame.

 - European Contraction

Crude oil is trading higher and the US Dollar is declining.  This is normal.  Crude typically makes 3 major moves (long or short) during the course of any trading day: around 7 AM EST, 9 AM EST and 2 PM EST when the crude market closes.  If crude makes major moves around those time frames, then this would suggest normal trending, if not it would suggest that something is not quite right.  If you feel compelled to trade consider doing so after 10 AM when the markets give us better direction.  Also be mindful of the Consumer Credit numbers 3 PM EST.  This can make afternoon trading erratic.  As always watch and monitor your order flow as anything can happen in this market.  This is why monitoring order flow in today's market is crucial.  We as traders are faced with numerous challenges that we didn't have a few short years ago.  High Frequency Trading is one of them.   I'm not an advocate of scalping however in a market as volatile as this scalping is an alternative to trend trading.  

Remember that without knowledge of order flow we as traders are risking our hard earned capital and the Smart Money will have no issue taking it from us.  Regardless of whatever platform you use for trading purposes you need to make sure it's monitoring order flow.  Sceeto does an excellent job at this.  To fully capitalize on this newsletter it is important that the reader understand how the various market correlate.  More on this in subsequent blogs.

To View previous articles of Market Tea Leaves visit our archive.
 

To Subscribe Click Here:
http://eepurl.com/uoQzH

Pre-Market Global Review - 3/6/13 - The Markets Strike Back

 



This newsletter provides market direction trading insights that are derived from our seasoned and unique, inter-market analysis.  We hope that this information will provide both the novice and seasoned trader with valuable assistance.  Our approach is to harvest clues  from the Market's “tea leaves” as to what the market is doing or is likely to do.  



March 6, 2013



Good Morning Traders,


As of this writing 5:05 AM EST, here’s what we see:

US Dollar –Up at 82.175 the US Dollar is up 28 ticks and is trading at 82.175. 

Energies – April Oil is down at 90.60.

Financials – The 30 year bond is down 16 ticks and is trading at 143.05. 

Indices – The March S&P 500 emini ES contract is up at 1543.25 and is up 25 ticks.

Gold – The April gold contract is trading up at 1574.50 and is down 4 ticks from its close.

 

Conclusion

This is not a correlated market.   The dollar is up+ and oil is down-  which is normal but the 30 year bond is trading lower.  The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice versa.  The indices are up and the US dollar is trading higher which is not correlated.  Gold is trading lower which correlates with the US dollar trading up.   I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down.   I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong.  As traders you need to be aware of this and proceed with your eyes wide open. 

All of Asia closed higher.  As of this writing all of Europe is trading higher.

   


  Possible challenges to traders today is the following:

 -  ADP Non-Farm Employment Change is out at 8:15 AM EST.  This is major.

-  Factory Orders are out at  10 AM EST.  This is major.

-  Crude Oil Inventories are out at 10:30 AM EST.  This will move the oil markets.

-  Fed Beige Book is out at 2 PM EST.  This is major.

Yesterday we said our bias was to the upside because the markets were completely correlated to the upside with no outlier.  The net result was the Dow gained 126 points and closed at an all time high.  Today the markets are not correlated with the missing ingredients being Bonds and the Indices.  If the Bonds were trading higher and Indices were trading lower then we would have a correlated market to the downside.  Our bias today is towards the downside.  Here's why.  We don't (as of this writing) have a correlated market and anytime we've ever had the markets go to all time high, there's usually a pullback.  The Smart Money will want to take some capital off the table, just to be sure.  Could this change?  Of course.   Remember anything can happen in a volatile market.

 

 

The great thing about market correlation is that it gives you an insight as to what the market fundamentals are.  Now you might ask yourself "why is that important"?  It's important because markets generally tend to lean towards those fundamentals regardless of what news is being reported.  Are there exceptions?  Of course.  Look at what happened on Monday, the markets were poised to go lower but didn't.  But as a trader if you see that it changed abruptly, take the appropriate action.  Remember that as traders, your number one rule is to preserve your trading capital because without it there is no trading.  For those of you who did not see it, here's a video on why the markets rose on Monday afternoon:

On the political front, Paul Ryan is getting back in the news again as he's making a reprise of his failed attempt to modify Medicare.  Only now he saying it's age 55 versus 57.  This attempt failed in 2009 and 38 Republicans in the House voted against it.  He attempting to do the same thing with more Democrats in the House of Representatives.   These guys will not give up.  The American people overwhelmingly voted against this in November.  They say the definition of insanity is doing the same thing over and over and expecting a different result.  Oh well, goes to show you that nothing has changed in their camp.   The impact of the sequester won't be felt immediately and most people will shrug and say "see, that wasn't so bad."  That is until we start to have not so stellar economic reports and Wall Street starts to retreat.  A couple of months later that will show up in everyone's 401K but by that time it will be felt.  The DC folks are playing the usual blame game with the GOP dead set against any revenues increases (aka tax hikes) and the Democrats warning of impending doom.  Ironically the reason why there is a sequester to speak of is because when this law was enacted in 2011 it was thought to be so horrific that no one would consider the prospect or possibility of such an event occurring.  Yet here we are, with a sequester enacted. The US Government will officially run out of money by the end of the month, however the President has the right to extend funding should no compromise can be found.  I have no doubt he will do so.

Thus far Wall Street has treated this issue as if it's a famine in China, in other words so far removed that it couldn't possibly have an effect on us.  Look at what happened yesterday with the Dow going to an all time high?  Does anyone remember 2007 when that last happened?  Didn't last too long, did it?  The point that I'm trying to make is don't be so fooled into believing that "this time it will be different."  The Smart Money has been pulling that ever since there's been a market.  What goes up will come down and vice-versa.  For the time being nothing will change as it will take some time before these cuts are felt thru out the economy.  Case-in-point, today we have the ADP employment numbers that will probably show a gain.  This Friday is Jobs Friday and again, it will probably show a gain.  I would venture to say that that report will probably change in April unless some agreement is met in DC.   The longer this issue is present and not resolved, the worse it will be.  Remember that we still have the debt ceiling issue hanging over our heads and this won't happen until the May time frame.  Another aspect of this that we are seeing is no follow thru when it comes to fundamentals.  What I mean by this is when the markets are correlated to either the long or short side; they may take the opposite direction during the trading day but by the end of the day saner minds rule and they return to fundamentals.  They aren't doing that now.  So the markets could initially be correlated to the downside and then close higher by the end of the day, completely ignoring all fundamentals.  The Smart Money doesn't have any issue doing this but the danger to a trader is that if the Smart Money finally wakes up (and sooner or later they will) you as a trader could be stuck on the wrong side of the market.  And that will be painful.   

  

This is the new and improved GOP in action.  They won't outwardly hold the country hostage as they did in 2011; they'll set up events such that it works out that way.  It will be interesting to see what happens come April 15th as this is the day when either a budget is approved or Congress goes without pay.  The GOP is adamant about sticking to their guns and will not relent.  The question is what will the Democrats do? 

 
As readers are probably aware I don't trade equities.   While we're on this discussion, let's define what is meant by a good earnings report.  A company must exceed their prior quarter's earnings per share and must provide excellent forward guidance.  Any falloff between earning per share or forward guidance will not bode well for the company's shares.  This is one of the reasons I don't trade equities but prefer futures.  There is no earnings reports with futures and we don't have to be concerned about lawsuits, scandals, malfeasance, etc.



Anytime the market isn't correlated it's giving you a clue that something isn't right and you should proceed with caution..    Today market correlation is calling for a higher open and our bias is towards the long side.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.  For awhile now we've promised a video on how a trader can use Market Correlation in tandem with their daily trading.  A good friend of Market Tea Leaves: Carl Weiss of Sceeto and I produced a video on December 22nd that shows this.  Here it is:

 

Please note the video is about a half hour in length and we plan on producing more in the near future.  Also note that in the near future we will have other videos where we will interview various trading leaders.

As I write this the crude markets are trading lower and the US Dollar is advancing.  This is  normal.  Think of it this way.  If the stock market is trading lower, it's safe to assume that the crude market will follow suit and vice versa.  Crude trades with the expectation that business activity is expanding.  The barometer of which is the equities or stock market.  If you view both the crude and index futures side by side you will notice this. Yesterday crude dropped to a low of 90.02 a barrel and held.   We'll have to monitor and see if crude either goes lower or holds at the present level.   It seems that at the present time crude's support is at 90.00 with resistance at 96.00 a barrel.  This could change.  All we need do is look at what happened last fall when crude was trading over $100.00 a barrel. We'll have to monitor and see.  Remember that crude is the only commodity that is reflected immediately at the gas pump. 

Future Challenges:

 - Sequester spending cuts to commence March 1st.
 - Debt Ceiling in the May time frame.

 - European Contraction

Crude oil is trading lower and the US Dollar is advancing.  This is normal.  Crude typically makes 3 major moves (long or short) during the course of any trading day: around 7 AM EST, 9 AM EST and 2 PM EST when the crude market closes.  If crude makes major moves around those time frames, then this would suggest normal trending, if not it would suggest that something is not quite right.  If you feel compelled to trade consider doing so after 10:30 AM when the inventory numbers are released and the markets give us better direction.  Also be mindful of the Fed Beige Book release at 2 PM EST.  This can make afternoon trading erratic.  As always watch and monitor your order flow as anything can happen in this market.  This is why monitoring order flow in today's market is crucial.  We as traders are faced with numerous challenges that we didn't have a few short years ago.  High Frequency Trading is one of them.   I'm not an advocate of scalping however in a market as volatile as this scalping is an alternative to trend trading.  

Remember that without knowledge of order flow we as traders are risking our hard earned capital and the Smart Money will have no issue taking it from us.  Regardless of whatever platform you use for trading purposes you need to make sure it's monitoring order flow.  Sceeto does an excellent job at this.  To fully capitalize on this newsletter it is important that the reader understand how the various market correlate.  More on this in subsequent blogs.

To View previous articles of Market Tea Leaves visit our archive.
 

To Subscribe Click Here:
http://eepurl.com/uoQzH

Pre-Market Global Review - 3/5/13 - The Dow Rises, Again

 



This newsletter provides market direction trading insights that are derived from our seasoned and unique, inter-market analysis.  We hope that this information will provide both the novice and seasoned trader with valuable assistance.  Our approach is to harvest clues  from the Market's “tea leaves” as to what the market is doing or is likely to do.  



March 5, 2013



Good Morning Traders,


As of this writing 4:50 AM EST, here’s what we see:

US Dollar –Down at 81.990 the US Dollar is down 255 ticks and is trading at 81.990. 

Energies – April Oil is up at 90.53.

Financials – The 30 year bond is down 13 ticks and is trading at 143.17. Indices – The March S&P 500 emini ES contract is up at 1529.50 and is up 15 ticks.

Gold – The April gold contract is trading up at 1579.00 even and is up 65 ticks.

 

 

Conclusion

Finally we have a  correlated market and it is correlated to the upside.   The dollar is down- and oil is up+  which is normal and the 30 year bond is trading lower.  The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice versa.  The indices are up and the US dollar is trading lower which is correlated.  Gold is trading higher which correlates with the US dollar trading down.   I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down.   I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong.  As traders you need to be aware of this and proceed with your eyes wide open. 

 

All of Asia closed higher.  As of this writing all of Europe is trading higher.

   


  Possible challenges to traders today is the following:

 -  ISM Non-Manufacturing PMI is out at 10 AM EST.  This is major.

-  IBD TIPP Economic Optimism is out at 10 AM EST.  This is major

 

 

 

 

Yesterday we said our bias was to the downside because the markets were nearly correlated to the downside.  The major outlier being Gold.  The net result was the Dow gained 38 points after spending most of the trading day in negative territory.  Today the markets are completely correlated to the upside with no outlier.  Additionally Asia closed higher and Europe is currently trading higher.  Therefore our bias is towards the upside today.  Could this change?  Of course.   Remember anything can happen in a volatile market.

 

 

 

 

 

The great thing about market correlation is that it gives you an insight as to what the market fundamentals are.  Now you might ask yourself "why is that important"?  It's important because markets generally tend to lean towards those fundamentals regardless of what news is being reported.  Are there exceptions?  Of course.  Look at what happened yesterday, the markets were poised to go lower but didn't.  But as a trader if you see that it changed abruptly, take the appropriate action.  Remember that as traders, your number one rule is to preserve your trading capital because without it there is no trading.  Click here for a video on why the Dow Rose, Again:

 

  On the political front, nothing's new except the sequester is now the law of the land.  The impact of this will not be felt immediately and most people will shrug and say "see, that wasn't so bad."  That is until we start to have not so stellar economic reports and Wall Street starts to retreat.  A couple of months later that will show up in everyone's 401K but by that time it will be felt.  The DC folks are playing the usual blame game with the GOP dead set against any revenues increases (aka tax hikes) and the Democrats warning of impending doom.  Ironically the reason why there is a sequester to speak of is because when this law was enacted in 2011 it was thought to be so horrific that no one would consider the prospect or possibility of such an event occurring.  Yet here we are, with a sequester enacted. The US Government will officially run out of money by the end of the month, however the President has the right to extend funding should no compromise can be found.  I have no doubt he will do so.

Thus far Wall Street has treated this issue as if it's a famine in China, in other words so far removed that it couldn't possibly have an effect on us.  I suspect that will change if the economy turns sour and we start to have bad economic reports.  For the time being nothing will change as it will take some time before these cuts are felt thru out the economy.  However sooner or later it will.  The longer this issue is present and not resolved, the worse it will be.  Remember that we still have the debt ceiling issue hanging over our heads and this won't happen until the May time frame.  Another aspect of this that we are seeing is no follow thru when it comes to fundamentals.  What I mean by this is when the markets are correlated to either the long or short side; they may take the opposite direction during the trading day but by the end of the day saner minds rule and they return to fundamentals.  They aren't doing that now.  So the markets could initially be correlated to the downside and then close higher by the end of the day, completely ignoring all fundamentals.  The Smart Money doesn't have any issue doing this but the danger to a trader is that if the Smart Money finally wakes up (and sooner or later they will) you as a trader could be stuck on the wrong side of the market.  And that will be painful.   

  

This is the new and improved GOP in action.  They won't outwardly hold the country hostage as they did in 2011; they'll set up events such that it works out that way.  It will be interesting to see what happens come April 15th as this is the day when either a budget is approved or Congress goes without pay.  The GOP is adamant about sticking to their guns and will not relent.  The question is what will the Democrats do? 

 
As readers are probably aware I don't trade equities.   While we're on this discussion, let's define what is meant by a good earnings report.  A company must exceed their prior quarter's earnings per share and must provide excellent forward guidance.  Any falloff between earning per share or forward guidance will not bode well for the company's shares.  This is one of the reasons I don't trade equities but prefer futures.  There is no earnings reports with futures and we don't have to be concerned about lawsuits, scandals, malfeasance, etc.



Anytime the market isn't correlated it's giving you a clue that something isn't right and you should proceed with caution..    Today market correlation is calling for a higher open and our bias is towards the long side.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.  For awhile now we've promised a video on how a trader can use Market Correlation in tandem with their daily trading.  A good friend of Market Tea Leaves: Carl Weiss of Sceeto and I produced a video on December 22nd that shows this.  Here it is:

 

 

 

 

Please note the video is about a half hour in length and we plan on producing more in the near future.  Also note that in the near future we will have other videos where we will interview various trading leaders.

As I write this the crude markets are trading higher and the US Dollar is declining.  This is  normal.  Think of it this way.  If the stock market is trading lower, it's safe to assume that the crude market will follow suit and vice versa.  Crude trades with the expectation that business activity is expanding.  The barometer of which is the equities or stock market.  If you view both the crude and index futures side by side you will notice this. Yesterday crude dropped to a low of 89.33 a barrel but did not stay there.  We'll have to monitor and see if crude either goes lower or holds at the present level.   It seems that at the present time crude's support is at 90.00 with resistance at 96.00 a barrel.  This could change.  All we need do is look at what happened last fall when crude was trading over $100.00 a barrel. We'll have to monitor and see.  Remember that crude is the only commodity that is reflected immediately at the gas pump. 

Future Challenges:

 - Sequester spending cuts to commence March 1st.
 - Debt Ceiling in the May time frame.

 - European Contraction

Crude oil is trading higher and the US Dollar is declining.  This is normal.  Crude typically makes 3 major moves (long or short) during the course of any trading day: around 7 AM EST, 9 AM EST and 2 PM EST when the crude market closes.  If crude makes major moves around those time frames, then this would suggest normal trending, if not it would suggest that something is not quite right.  If you feel compelled to trade consider doing so after 10 AM when the economic reports are released and the markets give us better direction.  As always watch and monitor your order flow as anything can happen in this market.  This is why monitoring order flow in today's market is crucial.  We as traders are faced with numerous challenges that we didn't have a few short years ago.  High Frequency Trading is one of them.   I'm not an advocate of scalping however in a market as volatile as this scalping is an alternative to trend trading.  

Remember that without knowledge of order flow we as traders are risking our hard earned capital and the Smart Money will have no issue taking it from us.  Regardless of whatever platform you use for trading purposes you need to make sure it's monitoring order flow.  Sceeto does an excellent job at this.  To fully capitalize on this newsletter it is important that the reader understand how the various market correlate.  More on this in subsequent blogs.

To View previous articles of Market Tea Leaves:
www.benzinga.com/author/market-tea-leaves 

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