Pre-Market Global Review - 8/9/13 - Binary Options Article on TraderPlanet

Good Morning Traders,
 
As of this writing 5:05 AM EST, here’s what we see:
 
US Dollar –Down at 81.025, the Sept US Dollar is down 2 ticks and is trading at 81.025.             
Energies – September Oil is up at 103.79.        
Financials – The September 30 year bond is down 2 ticks and is trading at 134.07.      
Indices – The September S&P 500 emini ES contract is down at 1689.25 and is down 17 ticks.  
Gold – The October gold contract is trading down at 1308.90 and is down 12 ticks from its close.
 
Initial Conclusion: This is not a correlated market.  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 down and the US dollar is trading lower which is not 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 mainly higher with the exception being the Aussie exchange which closed flat. As of this writing Europe is trading mainly lower with the exception of London which is fractionally higher. 
 
  Possible challenges to traders today is the following               
1.  No major economic news.        
2.  Lack of major economic news.    
3.  Wholesale Inventories are out at 10 AM EST.  This is not major.  
  
 Currencies          
As a follow up to what happened yesterday with the Canadian Dollar, it did not make a move at 10 AM EST.  It made its move at around 9 AM EST.  So what happened?  The Canadian NHPI (National Home Price Index) was released at 8:30 AM EST and it came in less than expected.  So what happens when something comes in less than expected?  The currency goes up, the market drops (by this we mean the home country's exchange).  Same thing happens with the US market.  In this case it made it's move at around 9 AM EST and didn't look back.
 

Chart Courtesy of Trend Following Trades

Yesterday we said our bias was to the upside as the USD was trading lower and Gold was trading higher.  The net result being that after a 3 day losing streak the Dow gained 27 points and the other indices gained as well.  Additionally we felt that Asia had closed mainly higher and Europe was trading higher as well.  But as readers of this newsletter, you knew that at 6 AM.  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.


Awhile ago we ran a story on Binary Options and the benefits thereof.  TraderPlanet has decided to publish that story in two parts, Part One was released late Thursday and Part Two will be released sometime next week.  Now you may or may not be familiar with TraderPlanet, but if you've been trading for any length of time, you are familiar with SFO (Stock, Futures & Options) magazine.  TraderPlanet bought SFO about a year ago.  The article can be viewed at:


 



 


http://www.traderplanet.com/articles/view/164634-dispelling-the-myths-on-binary-options/




I've also included the interview I did with Dan Cook, Director of Business Development for Nadex, it can be viewed at: http://youtu.be/ENRRbwH6A_o





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 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 102.22 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 $102 a barrel and resistance at 105.  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 late August/September 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 the 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.forexcrunch.com/leadership-or-lack-thereof-part-ii/ 
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 - 8/8/13 - Malaise.. and Wednesday Makes 3

Good Morning Traders,
 
As of this writing 4:35 AM EST, here’s what we see:
 
US Dollar –Down at 81.240, the Sept US Dollar is down 83 ticks and is trading at 81.240.             
Energies – September Oil is up at 104.52.        
Financials – The September 30 year bond is up 12 ticks and is trading at 134.09.      
Indices – The September S&P 500 emini ES contract is up at 1690.75 and is up 10 ticks.  
Gold – The August gold contract is trading up at 1290.10 and is up 46 ticks from its close.
 
Initial Conclusion: This is not a 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 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 mainly higher with the exception being the Japanese Nikkei and Shanghai which closed lower. As of this writing Europe is trading fractionally higher. 
 
  Possible challenges to traders today is the following               
1.  Unemployment Claims are out at 8:30 AM EST.  This is major.        
2.  Natural Gas Storage out at 10:30 AM EST.  This will move the Nat Gas market.    
3.  30 Year Bond Auction Starts at 1 PM EST.  
  
 Currencies        
As a follow up to what happened yesterday with the Canadian Dollar, like clockwork it did make a move at 10 AM EST.  Additionally a savvy trader could have placed a trade to go long at 9AM.  What happened?  Canada reported Building Permits at 8:30 AM EST that weren't too stellar.  When then happened is the CDN took a slight dive, hit a bottom and then went up.  The same situation occurs with the USD when the US has not too stellar economic news.  Want proof?  Take a look at a chart of the USD from last Friday's Jobs Report.  It dropped like a rock, hit bottom and then proceeded to advance...
 

Chart Courtesy of Trend Following Trades

Yesterday we said our bias was to the downside as the markets weren't correlated.  Why?  In this case both the USD and the Bonds were trading higher, which is not bullish for the markets or indices.  This plus Gold was trading lower, which isn't positive either.  The net result being that the Dow closed 48 points lower and the other indices lost ground as well.  Today we are not dealing with a correlated market however our bias is to the upside.   Could this change? Of Course.  Remember anything can happen in a volatile market.

It would appear as though we're in the midst of another worldwide sell off.  Each day this week thus far the Asian markets haven't advanced, Europe is trading lower and the US markets are following.  Unfortunately for the remainder of this week we don't have any major economic news to break the deadlock.  So it going to be up to the politicos or the Fed to do this.  Unfortunately the Fed still believes in the Democratic process and doesn't mandate singing out of the same hymn book, so to speak.  This is very different from Corporate America.  I wouldn't rely too much on the politicos either because from their point of view, everything is fine...

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 104.15 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 $104 a barrel and resistance at 107.  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 late August/September 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 the 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 - 8/7/13 - Malaise Turns Tuesday Session

Good Morning Traders,
 
As of this writing 4:45 AM EST, here’s what we see:
 
US Dollar –Up at 81.770, the Sept US Dollar is up 112 ticks and is trading at 81.770.             
Energies – September Oil is up at 105.36.        
Financials – The September 30 year bond is up 13 ticks and is trading at 133.18.      
Indices – The September S&P 500 emini ES contract is down at 1686.50 and is down 31 ticks.  
Gold – The August gold contract is trading down at 1279.40 and is down 32 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 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 down and the US dollar is trading higher which is 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 completely to the downside with every exchange closing lower. As of this writing Europe is trading lower.
 
  Possible challenges to traders today is the following               
1.  Lack of Major Economic Reports.        
2.  Crude Oil Inventories are out at 10:30 AM EST.  This will move the crude markets.  
3.  10 Year Bond Auction Starts at 1 PM EST.  
4.  Consumer Credit is out at 3 PM EST.  This is not major.  
  
 Currencies      
As a follow up to what happened yesterday with the Canadian Dollar, suffice it to say that the Loonie went up after the 10 AM economic reports.  The one aspect that I like about the CDN is it's consistency.  It usually moves around the 10 AM time frame after the market settles down and after any known reports  As we also mentioned yesterday the Canadian generally moves in 20 tick moves.  See the below chart for clarification:
 

Chart Courtesy of Trend Following Trades

Yesterday we said our bias was to the downside as the markets weren't correlated.  Why?  In this case Gold was the outlier as the USD and Bonds were both trading lower which usually is bullish for the markets.  The Dow closed down 93 points and the other indices lost ground as well.  Today we are not dealing with a correlated market however 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 markets extended its malaise from the weekend as it continued to move lower.  Some pundits have claimed "well that was because FOMC Member Evans said the Fed should taper sooner."  Well folks, he spoke at 1 PM EST and the markets were lower from the very open but as readers of Market Tea Leaves you knew that at 6 AM.  Clearly Evans comments didn't help the markets but it was already in a tailspin and it seems as though we're going back to the mode after the last FOMC meeting held in June whereby the market hangs on the comments of an FOMC member regardless of their stance or bias...

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 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 104.86 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 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 the 10:30 AM inventory report 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 - 8/6/13 - 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.