Pre-Market Global Review - 8/6/13 - Weekend Malaise Extends into Monday

Good Morning Traders,
 
As of this writing 4:50 AM EST, here’s what we see:
 
US Dollar –Down at 81.920, the Sept US Dollar is down 16 ticks and is trading at 81.920.             
Energies – September Oil is down at 106.27.        
Financials – The September 30 year bond is down 7 ticks and is trading at 132.31.      
Indices – The September S&P 500 emini ES contract is up at 1702.75 and is up 1 tick.  
Gold – The August gold contract is trading down at 1290.20 and is down 120 ticks from its close.
 
Initial Conclusion: This is not a correlated market.  The dollar is down- and oil is down- which is not  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 lower which is not correlated 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. 
 
Asia closed mixed with half the exchanges closing lower and the other half higher. As of this writing Europe is trading mixed.
 
  Possible challenges to traders today is the following             
1.  Trade Balance is out at 8:30 AM EST.  This is major.        
2.  JOLTS Job Openings is out at 10 AM EST.  This is not major.
3.  IBD TIPP Optimism is out at 10 AM EST.  This is not major.
4.  FOMC Member Evans Speaks at 1 PM EST.  This is major.  
  
 Currencies     As a follow up to what happened yesterday with the Aussie Dollar, suffice it to say that the Aussie went up after the 10 AM ISM non- Manufacturing number.  The Canadian dollar also went up in value as well.  A few nuances that you should be aware concerning the CDN are the Canadians as a general rule try to keep their dollar as closely correlated to the USD as possible.  The reason for this is because when the Canadians attempt to initiate a foreign trade they must do so using US dollars.  Hence it is in their best interest to keep the two as closely correlated as possible.  The CDN usually makes a move either long or short at around 9 AM EST but the CDN doesn't make major moves (unless there's something dramatic happening like Jobs Friday) but rather makes consistent moves around the same time each day.  Generally it may advance or decline by no more than 20-30 ticks.  This could change of course, but generally speaking that's the move.  If you're trading one contract this means that you need to watch the move and should it start to decline in value from your entry, take the appropriate action.

Chart Courtesy of Trend Following Trades

Yesterday we said our bias was to the upside as at the time we analyzed the markets they were correlated as such.  This changed prior to market open and remained in negative territory for the rest of the trading session.  The Dow closed down 46 points and the S&P lost 3.  Today we are not dealing with a correlated market and our bias is to the downside.   Could this change? Of Course.  Remember anything can happen in a volatile market.

It would appear as though the foreign markets didn't buy the Jobs numbers either as Asia's major exchange (the Nikkei) lost 208 points Sunday night.  The European exchanges opened higher and for part of the morning yesterday remained higher but then lost ground.  We thought that perhaps the positive ISM number might have helped but to no avail.  It's interesting because I thought on Friday that the markets might have closed lower due to the Jobs report but I guess the Smart Money wanted to go into the weekend on a high note.  Unfortunately yesterday that note turned sour as they elected to take money off the table.  Could it have been due to the terror alert issued by the State Department over the weekend?  Possibly.  Of course, shutting down embassies worldwide didn't help.  When there's any clue of a geopolitical event occurring, you can rest assured that the Smart Money will take capital off the table as it's the safe option...

Many of my readers have been asking me to spell out the rules of Market Correlation.  Today Futures Magazine has elected to print a story on the subject matter and I must say I'm proud of the fact that they did  as I'm Author of that article.  I encourage all viewers to read that piece as it spells out the rules of market correlation and provides charts that show how it works in action. The article is entitled "How to Exploit and Profit from Market Correlation" and can be viewed at: 


http://www.futuresmag.com/2013/08/01/how-to-exploit-and-profit-from-market-correlation
 
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 our bias is to the downside.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.
  
In May, I spoke with John Karnas, CEO of Trend Following Trades.  John has an interesting background as he was a trader for a number of years prior to buying Trend Following Trades.  John is a believer in Trading Plans and has a very precise method of developing aspiring traders.  To download the article I've written,  go to:
https://markettealeaves.sharefile.com/d/s0e8e37fe5944fc79

My discussion with John can be viewed at: http://youtu.be/uVwHpMq1604

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 declining.  This is not 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 September crude dropped to a low of 106.45 a barrel and held.  We'll have to monitor and see if crude either goes lower or holds at the present level.   It would appear at the present time that crude has support at $105 a barrel and resistance at 110.  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:
- Budget Battle - ongoing.
- Debt Ceiling in the August time frame.      
- Asian Contagion - happening now 


Crude oil is trading lower and the US Dollar is declining.  This is not 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.  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.

Recently Published Articles:  
http://www.barchart.com/headlines/story/10598425/when-perception-becomes-reality

http://www.forexcrunch.com/the-sitzkrieg-jobs-report/

http://www.traderslog.com/john-karnas/

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 editions.
 

Nick Mastrandrea is the author of Market Tea Leaves. Market Tea Leaves is a free, daily newsletter that discuses and teaches market correlation. Market Tea Leaves is published daily, pre-market in the United States and can be viewed at www.markettealeaves.com  Interested in Market Correlation?  Want to learn more?  Signup and receive Market Tea Leaves each day prior to market open.  As a subscriber, you’ll also receive our daily Market Bias video that is only available to subscribers.

Pre-Market Global Review - 8/5/13 - Sitzkreig Jobs Report

Good Morning Traders,
 
As of this writing 4:20 AM EST, here’s what we see:
 
US Dollar –Down at 81.835, the Sept US Dollar is down 143 ticks and is trading at 81.835.             
Energies – September Oil is up at 107.50.        
Financials – The September 30 year bond is down 2 ticks and is trading at 133.20.      
Indices – The September S&P 500 emini ES contract is up at 1704.50 and is up 2 ticks.  
Gold – The August gold contract is trading up at 1215.50 and is up 52 ticks from its close.
 
Initial Conclusion: Finally a correlated market and on poised 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 is correlated 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. 
 
Asia closed  higher mainly higher with the exception of the Nikkei and Singapore which closed lower. As of this writing Europe is trading higher.
 
  Possible challenges to traders today is the following            
1.  ISM non-Manufacturing PMI is out at 10 AM.  This is major.        
2.  Lack of other major economic news.   
  
 Currencies    
As a follow up to what happened Friday with the Aussie Dollar.  We said that a move would occur probably around 9 AM EST as we had numerous major reports around the  8:30 AM EST time frame.  A move did occur at exactly 8:30 AM (see chart below) immediately after the Jobs numbers came out.  The Aussie dollar wasn't the only currency that experienced this as the Canadian dollar did as well.  What happened was everyone heard the Unemployment rate dropped to 7.4% and perceiving this as positive news, the USD dropped like a rock and other currencies shot up, although momentarily...  This week we will be expanding coverage on the Canadian dollar as there are some nuances with the CDN that traders should be aware of .. 

Chart Courtesy of Trend Following Trades

On Friday we said our bias was neutral as it was Jobs Friday and as such anything can happen.  Well the report came out and momentarily the currencies took off and when the markets opened they remained down most of the day until 3:45 PM EST when the Dow closed up 30 points.  Today the markets are correlated to the upside therefore bias is to the upside.   Could this change? Of Course.  Remember anything can happen in a volatile market.

In my opinion this report was bogus at best.  How is it possible for the Unemployment Rate to drop to 7.4% when 162,000 jobs were created and according to the Labor Department 37,000 people dropped out of the workforce?  Even if that were true (which I seriously doubt) the method used to determine the rate is a household survey which is not based on real numbers.  Some entity (or entities) wants that rate to drop as the closer we get to 6.5% they know the Fed will start to taper and those entities want that to happen sooner as opposed to later.  On Friday FOMC Member Bullard reiterated to the press what the Fed has been saying all along and that is they can't judge based on one month's data but need to measure over a period of time.  I suspect we won't see tapering until 2014 at the earliest but again time will tell...

Many of my readers have been asking me to spell out the rules of Market Correlation.  Today Futures Magazine has elected to print a story on the subject matter and I must say I'm proud of the fact that they did  as I'm Author of that article.  I encourage all viewers to read that piece as it spells out the rules of market correlation and provides charts that show how it works in action. The article is entitled "How to Exploit and Profit from Market Correlation" and can be viewed at: 


http://www.futuresmag.com/2013/08/01/how-to-exploit-and-profit-from-market-correlation
 
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 our bias is to the upside.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.
  
In May, I spoke with John Karnas, CEO of Trend Following Trades.  John has an interesting background as he was a trader for a number of years prior to buying Trend Following Trades.  John is a believer in Trading Plans and has a very precise method of developing aspiring traders.  To download the article I've written,  go to:
https://markettealeaves.sharefile.com/d/s0e8e37fe5944fc79

My discussion with John can be viewed at: http://youtu.be/uVwHpMq1604

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 September crude dropped to a low of 106.45 a barrel and held.  We'll have to monitor and see if crude either goes lower or holds at the present level.   It would appear at the present time that crude has support at $105 a barrel and resistance at 110.  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:
- Budget Battle - ongoing.
- Debt Ceiling in the August time frame.      
- Asian Contagion - happening now 


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.  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.

Recently Published Articles:  
http://www.barchart.com/headlines/story/10598425/when-perception-becomes-reality

http://www.forexcrunch.com/the-sitzkrieg-jobs-report/

http://www.traderslog.com/john-karnas/

 



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 editions.
 

Nick Mastrandrea is the author of Market Tea Leaves. Market Tea Leaves is a free, daily newsletter that discuses and teaches market correlation. Market Tea Leaves is published daily, pre-market in the United States and can be viewed at www.markettealeaves.com  Interested in Market Correlation?  Want to learn more?  Signup and receive Market Tea Leaves each day prior to market open.  As a subscriber, you’ll also receive our daily Market Bias video that is only available to subscribers.

Pre-Market Global Review - 8/2/13 - Jobs Friday

Good Morning Traders,
 
As of this writing 5:15 AM EST, here’s what we see:
 
US Dollar –Up at 82.445, the Sept US Dollar is up 18 ticks and is trading at 82.445.             
Energies – September Oil is down at 107.85.        
Financials – The September 30 year bond is up 2 ticks and is trading at 132.03.      
Indices – The September S&P 500 emini ES contract is up at 1701.50 and is up 5 ticks.  
Gold – The August gold contract is trading down at 1287.30 and is down 237 ticks from its close.
 
Initial Conclusion: This is not a correlated market.  The dollar is up+ and oil is down- which is  normal and 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 higher which is not correlated.  Gold is trading lower which is correlated 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. 
 
Asia closed  higher mainly higher with the exception of the Indian Sensex which closed lower. As of this writing Europe is trading mixed.
 
  Possible challenges to traders today is the following            
1.  Non-Farm Employment Change is out at 8:30 AM.  This is major.        
2.  Unemployment Rate is out at 8:30 AM EST.    This  is major.    
3.  Average Hourly Earnings is out at 8:30 AM EST.  This is not major.    
4.  Core PCE Price Index is out at 8:30 AM EST.  This is not major.    
5.  Personal Income is out at 8:30 AM EST.  This is major.    
6.  Personal Spending is out at 8:30 AM EST.  This is major.    
7.  Factory Orders are out at 10 AM EST.  This is major.   
8.  FOMC Bullard Speaks at 12:15 PM EST.  This is major.
 
 Currencies   As a follow up to what happened yesterday on the Aussie Dollar.  We said that a move would occur probably around 9 AM EST as we had numerous major reports around the  8:30 AM EST time frame.  A move did occur around that time frame in fact it was at 9:10 AM (see chart below).  Today we have major news out at 8:30 AM EST so the same rule applies.  We believe the AUD will make a move (either long or short) probably around 9 AM EST.  Time will tell if we are correct in this regard and as usual we'll have to monitor and see.

 

 
                 
Yesterday we said our bias was to the upside as the Bonds were lower, Gold was trading higher and both Asia and Europe were trading higher.  The net result?  The Dow jumped 128 points and the S&P breached the 1700 mark for the first time ever.   Today the markets aren't correlated but it is Jobs Friday and as my followers already know my bias is neutral as historically speaking the market doesn't act with any sense of normalcy on this day. Could this change? Of Course.  Remember anything can happen in a volatile market.

Today we'll get our first insight as to what the Fed is thinking as FOMC Member Bullard speaks at 12:15 PM EST.  Remember the Fed did not conduct a press conference after the FOMC statement on Wednesday so this could potentially reveal some clues....

Many of my readers have been asking me to spell out the rules of Market Correlation.  Today Futures Magazine has elected to print a story on the subject matter and I must say I'm proud of the fact that they did  as I'm Author of that article.  I encourage all viewers to read that piece as it spells out the rules of market correlation and provides charts that show how it works in action. The article is entitled "How to Exploit and Profit from Market Correlation" and can be viewed at: 


http://www.futuresmag.com/2013/08/01/how-to-exploit-and-profit-from-market-correlation
 
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 our bias is neutral.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.
  
In May, I spoke with John Karnas, CEO of Trend Following Trades.  John has an interesting background as he was a trader for a number of years prior to buying Trend Following Trades.  John is a believer in Trading Plans and has a very precise method of developing aspiring traders.  To download the article I've written,  go to:
https://markettealeaves.sharefile.com/d/s0e8e37fe5944fc79

My discussion with John can be viewed at: http://youtu.be/uVwHpMq1604

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 September crude dropped to a low of 105.32 a barrel and held.  We'll have to monitor and see if crude either goes lower or holds at the present level.   It would appear at the present time that crude has support at $105 a barrel and resistance at 110.  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:
- Budget Battle - ongoing.
- Debt Ceiling in the August time frame.      
- Asian Contagion - happening now 


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.  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.

Recently Published Articles:  
http://www.barchart.com/headlines/story/10598425/when-perception-becomes-reality
http://www.forexcrunch.com/the-taper-caper/
http://www.traderslog.com/john-karnas/



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 editions.

Nick Mastrandrea is the author of Market Tea Leaves. Market Tea Leaves is a free, daily newsletter that discuses and teaches market correlation. Market Tea Leaves is published daily, pre-market in the United States and can be viewed at www.markettealeaves.com  Interested in Market Correlation?  Want to learn more?  Signup and receive Market Tea Leaves each day prior to market open.  As a subscriber, you’ll also receive our daily Market Bias video that is only available to subscribers.

Pre-Market Global Review - 8/1/13 - Dow Express Derailed

Good Morning Traders,
 
As of this writing 4:40 AM EST, here’s what we see:
 
US Dollar –Up at 82.150, the Sept US Dollar is up 611  ticks and is trading at 82.150.             
Energies – September Oil is up at 105.55.        
Financials – The September 30 year bond is down 6 ticks and is trading at 133.28.      
Indices – The September S&P 500 emini ES contract is up at 1689.00 and is up 36 ticks.  
Gold – The August gold contract is trading up at 1317.60 and is up 52 ticks from its close.
 
Initial Conclusion: This is not a correlated market.  The dollar is up+ and oil is up+ which is not 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 is not correlated 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 Europe is trading higher.
 
  Possible challenges to traders today is the following            
1.  Challenger Job Cuts is out at 7:30 AM.  This is major.        
2.  Unemployment Claims are out at 8:30 AM EST.    This  is major.  
3.  Final Manufacturing PMI is out at 9 AM EST.  This is not major.  
4.  ISM Manufacturing PMI is out at 10 AM EST.  This is major.  
5.  Construction Spending is out at 10 AM EST.  This is major.  
6.  ISM Manufacturing Prices are out at 10 AM EST.  This is major.  
7.  Natural Gas Storage is out at 10:30 AM EST.  This will move the Nat Gas market.  
8.  Total Vehicle Sales - All Day.
 
 Currencies   As a follow up to what happened yesterday on the Aussie Dollar.  We said that a move would occur probably around 9 AM EST as we had Advance GDP at 8:30 EST.  A move did occur around that time frame in fact it was at 8:30 AM (see chart below).  Today we have major news out at 8:30 AM EST so the same rule applies.  We believe the AUD will make a move (either long or short) probably around 9 AM EST.  Time will tell if we are correct in this regard and as usual we'll have to monitor and see.

Chart Courtesy of Trend Following Trades

 
                 
Yesterday we said our bias was neutral as we felt the market could go in any direction.  It was FOMC Day so historically speaking anything can happen which is why our bias was neutral.  After having spent most of the day in positive territory, the Dow dropped 21 points and the S&P came in flat.  Today we aren't dealing with a correlated market but bias is to the upside.  Why?  The Bonds are trading lower, Gold is trading higher, Asia closed higher and Europe is currently trading higher.  Could this change? Of Course.  Remember anything can happen in a volatile market.

As a follow up to yesterday's question: what will the Fed do?  The Fed didn't raise the FFR nor did they make any comment that would reek of controversy.  They basically stated what they've already stated and stayed the course, so to speak.  They aren't tapering at this time as they are spending the same amount of money on buybacks (85 Billion).  So, was the sell off yesterday due to normal market conditions?  Probably so....

Many of my readers have been asking me to spell out the rules of Market Correlation.  Today Futures Magazine has elected to print a story on the subject matter and I must say I'm proud of the fact that they did  as I'm Author of that article.  I encourage all viewers to read that piece as it spells out the rules of market correlation and provides charts that show how it works in action. The article is entitled "How to Exploit and Profit from Market Correlation" and can be viewed at: 


http://www.futuresmag.com/2013/08/01/how-to-exploit-and-profit-from-market-correlation
 
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 our bias is to the upside.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.
  
In May, I spoke with John Karnas, CEO of Trend Following Trades.  John has an interesting background as he was a trader for a number of years prior to buying Trend Following Trades.  John is a believer in Trading Plans and has a very precise method of developing aspiring traders.  To download the article I've written,  go to:
https://markettealeaves.sharefile.com/d/sdf8f77f6e2c4347a
 
My discussion with John can be viewed at: http://youtu.be/uVwHpMq1604

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 advancing.  This is not 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 September crude dropped to a low of 102.93 a barrel and held.  We'll have to monitor and see if crude either goes lower or holds at the present level.   It would appear at the present time that crude has support at $103 a barrel and resistance at 106.  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:
- Budget Battle - ongoing.
- Debt Ceiling in the August time frame.      
- Asian Contagion - happening now 


Crude oil is trading higher and the US Dollar is advancing.  This is not 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.  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.

Recently Published Articles:  
http://www.barchart.com/headlines/story/10598425/when-perception-becomes-reality
http://www.forexcrunch.com/the-taper-caper/
http://www.traderslog.com/john-karnas/



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 editions.

Nick Mastrandrea is the author of Market Tea Leaves. Market Tea Leaves is a free, daily newsletter that discuses and teaches market correlation. Market Tea Leaves is published daily, pre-market in the United States and can be viewed at www.markettealeaves.com  Interested in Market Correlation?  Want to learn more?  Signup and receive Market Tea Leaves each day prior to market open.  As a subscriber, you’ll also receive our daily Market Bias video that is only available to subscribers.