Pre-Market Global Review - 3/11/14 - China Woes Wards Off the Bulls

Good Morning Traders,  
 
 As of this writing 5:05 AM EST, here’s what we see:
 
                  
US Dollar –Up at 79.970, the US Dollar is up 76 ticks and is trading at 79.970.                          
Energies – April Oil is up at 101.42.       
Financials – The June 30 year bond is currently is down 3 ticks and trading at 131.03.      
Indices – The March S&P 500 emini ES contract is down 6 ticks and trading at 1875.75. 
Gold – The April gold contract is trading up at 1347.00 and is up 55 ticks from its close.   
           
 
Initial Conclusion: This is not a correlated market.  The dollar is up+ and oil is up+ which is not 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 higher and the US dollar is trading up which is not 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. 
               
Asia traded mainly higher with the exception of the Indian Sensex exchange which traded lower.  As of this writing Europe is trading mainly mixed with about half the exchanges higher and the other half lower.    Please note: whereas the US markets are currently on Daylight Savings Time, this does not occur in Europe until March 30th.  Instead of opening at 3 AM EST, for the next 3 weeks Europe doesn't open until an hour later at 4 AM EST.
 
  Possible challenges to traders today is the following:
                                           
1.  NFIB Small Business Index is out at 7:30 AM EST.  This is major.      
2.  JOLTS Job Openings is out at 10 AM EST.  This is major.
3.  Wholesale Inventories m/m is out at 10 AM EST.  This is not major.

 Currencies                    
Yesterday the Swiss Franc made it's move at around 9:10 AM EST with no economic news to speak of.  Look at the charts below and you'll see a pattern for both assets.  The USD hit a low at around that time and rose. In the meantime the Swiss Franc fell.  This was a shorting opportunity on the Swiss Franc.  The key to capitalizing on these trades is to watch the USD movement.  The USD rising only lent confirmation to the move.  As a trader you could have netted about 20 ticks on this trade, whereas this may not seem like much understand that each tick on the Swiss Franc is worth $12.50.  To expand the chart, right click and open in a new window.  Kindly view our special video to determine how to capitalize on these trades.  http://youtu.be/lOxBMe09X3Q
 
 Charts Courtesy of Trend Following Trades
 

Swiss Franc - March, 2014 - 3/10/14

  

USD - March, 2014 - 3/10/14

Bias


Yesterday we said our bias was to the upside as both the USD and Bonds were trading lower.  Usually this is a very bullish sign, however the markets had other ideas as the Dow dropped 34 points and the other indices lost ground ground as well although fractionally.  Today we are not dealing with a correlated market and our bias is neutral.  Why?  The futures aren't providing any sense of direction at this time. A neutral bias means the markets could go in any direction.       Could this change?  Of Course.  Remember anything can happen in a volatile market.
 

Yesterday we said our bias was to the upside as both the USD and Bonds were trading lower.  Whereas we didn't have economic news to speak of, we had plenty of headlines.  We learned that China's exports dropped by over 18%, margin debt was at all time highs and the FOMC is devising ways of using alternate methods other than direct tapering of Quantitative Easing.  I guess they're realizing that it might not be a good idea to taper.  In any case, it's another example of Manic Monday.  This is about the 3rd week in a row that we've seen this and it's almost becoming predictable.  Last week we had the Russian Crisis to deal with, the week before we had Bitcoins.  I can only wonder what next Monday will bring....

Each day in this newsletter we provide viewers a snapshot of the Swiss Franc versus the US dollar as a way and means of capitalizing on the inverse relationship between these two assets.  Futures Magazine recognized this correlation as well.  So much so that they printed a story on it in their December issue.  That story can be viewed at:

http://www.futuresmag.com/2013/11/25/correlated-opportunities-in-the-swiss-franc?ref=hp


Many of my readers have been asking me to spell out the rules of Market Correlation.  Recently 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 a follow up to the first article on Market Correlation, I've produced a second segment on this subject matter and Futures Magazine has elected to publish it.  It can be viewed at:

http://www.futuresmag.com/2013/08/16/how-to-exploit-and-profit-from-market-correlation?ref=hp


 
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.
  


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 April crude dropped to a low of 100.85 a barrel but maintained the $100 a barrel mark.  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 $100.77 a barrel and resistance at $102.53.  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.  

If trading today consider doing so after 10 AM EST when the markets gives better direction.  While we're on the subject of crude Futures Magazine has decided to print an article we produced on crude and how to trade it.  That article can viewed at:

 
http://www.futuresmag.com/2014/03/01/trading-crude-with-stocks-and-time
 
Last Wednesday crude oil inventory numbers was released and crude dropped dramatically.  As such I created a video to show how Market Correlation could be used in tandem with a crude trade.  The video can be viewed at:  http://youtu.be/eEnJ76nr9wM 


Future Challenges:
- Budget -  Yesterday it was revealed that the White House claimed that it expects the economy to accelerate.  Their proof?  They show a chart that showed household debt has fallen and is deleveraging.  Not GDP, not increased retail sales or any other measure of economic growth but household debt deleveraging.  In my mind this is borderline ridiculous.  It like saying "I have extra money, so I'm going to pay off some debt."  This is what he's basing his hope for economic growth?  I don't know what his agenda is or what the President is basing this on but if he's going to use this on the GOP for budgetary purposes, I don't think it's going to work.  They'll simply say fine then you don't need an increased budget.  And we thought Reaganomics was voodoo?.......

 
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 9 AM EST, 11 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.  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 editions.
 
Forex Crunch, a friend of Market Tea Leaves published an article on the Smart Money whereby we define who they are and what they do.  This article can be viewed at:  http://www.forexcrunch.com/who-are-the-smart-money-and-what-do-they-do/


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 - 3/10/14 - A "Good" Jobs Report?

Good Morning Traders,  
 
 As of this writing 5:05 AM EST, here’s what we see:
 
                  
US Dollar –Down at 79.835, the US Dollar is down 32 ticks and is trading at 79.835.                          Energies – April Oil is up at 101.37.       
Financials – The June 30 year bond is currently is down 1 tick and trading at 131.04.      
Indices – The March S&P 500 emini ES contract is down 8 ticks and trading at 1876.00. 
Gold – The April gold contract is trading down at 1332.50 and is down 57 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 lower and the US dollar is trading down 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 traded mainly lower with the exception of the Indian Sensex exchange which traded higher.  As of this writing Europe is trading mainly higher with the exception of the German DAX exchange which is fractionally lower.    Please note: whereas the US markets are currently on Daylight Savings Time, this does not occur in Europe until March 30th.  Instead of opening at 3 AM EST, for the next 3 weeks Europe doesn't open until an hour later at 4 AM EST.
 
  Possible challenges to traders today is the following:
                                           
1.  FOMC Member Plosser Speaks at 6:15 AM EST.  This is major.      
2.  Lack of major economic news.    


 Currencies                    
On Friday the Swiss Franc made it's move at around 8:35 AM EST immediately after the Non-Farm Payroll numbers came out.  Look at the charts below and you'll see a pattern for both assets.  The USD hit a low at around that time and rose. In the meantime the Swiss Franc fell.  This was a shorting opportunity on the Swiss Franc.  The key to capitalizing on these trades is to watch the USD movement.  The USD rising only lent confirmation to the move.  As a trader you could have netted 20-30 ticks on this trade, whereas this may not seem like much understand that each tick on the Swiss Franc is worth $12.50.  To expand the chart, right click and open in a new window.  Kindly view our special video to determine how to capitalize on these trades.  http://youtu.be/lOxBMe09X3Q
 
 Charts Courtesy of Trend Following Trades
 
  

Swiss Franc - 03/14 - 3/7/14

USD - 03/14 - 3/7/14

Bias


On Friday we said our bias was neutral as it was Jobs Friday and we always maintain a neutral bias on that day.  The Dow gained 31 points however the Nasdaq lost 16 and the S&P gained 1.  Today we are not dealing with a correlated market, however our bias is to the upside.  Why?  The USD and Bonds are trading lower, Europe is starting to trade higher and we don't have major economic news to drive the markets lower.        Could this change?  Of Course.  Remember anything can happen in a volatile market.
 
On Friday we said our bias is neutral as it was Jobs Friday.  Well the number came at 8:30 AM EST and it seems as though the US economy created 175,000 jobs versus 151,000 expected.  No sooner did this happen when the headlines read 175,000 Jobs Created.  What the headline failed to mention was the unemployment rate crept up to 6.7% versus 6.6% prior.  Their reasoning?  More people entered the workforce.  Now if this were June or July I might buy that argument, however it is not; therefore I don't.  My take: more people got laid off.  Want proof?

Week                                  Actual Claims                         Expectations            Net
Feb 27                                   348K                                        333K                     -15,000
Feb 20                                   336K                                        335K                     -1,000
Feb 13                                   339K                                        331K                     -8,000

Total =                                                                                                                  -24,000


Now what did they tell us the difference was on Friday between actual versus expectation?  24,000.  The fact is we aren't creating net new jobs.  We're laying people off and hiring new ones.  Perhaps the new ones will work for a lower wage or less benefits.  Of course and as usual this report completely ignores the U6 rate which is the unemployment rate for the long term unemployed.  That rate is 12.6%.  Now some who read this may say "those people don't want to work".  To which I would point and say that creating 175,000 jobs is fine but when about 12 million people need jobs, it doesn't do much nor does it go far enough.  We need to create 500,000 net new jobs a month for an extended period of time.

Friday was also a volatile day in that the markets zoomed higher in the morning, went into negative territory and had to fight for a gain to end the day 31 points higher.  A neutral bias also means an added level of volatility as the markets can't seem to make up it's mind in terms of direction......


Each day in this newsletter we provide viewers a snapshot of the Swiss Franc versus the US dollar as a way and means of capitalizing on the inverse relationship between these two assets.  Futures Magazine recognized this correlation as well.  So much so that they printed a story on it in their December issue.  That story can be viewed at:

http://www.futuresmag.com/2013/11/25/correlated-opportunities-in-the-swiss-franc?ref=hp


Many of my readers have been asking me to spell out the rules of Market Correlation.  Recently 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 a follow up to the first article on Market Correlation, I've produced a second segment on this subject matter and Futures Magazine has elected to publish it.  It can be viewed at:

http://www.futuresmag.com/2013/08/16/how-to-exploit-and-profit-from-market-correlation?ref=hp


 
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.
  


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.  On Friday April crude dropped to a low of 102.85 a barrel but maintained the $100 a barrel mark.  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 $100.72 a barrel and resistance at $103.03.  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.  

If trading today consider doing so after 10 AM EST when the markets gives better direction.  While we're on the subject of crude Futures Magazine has decided to print an article we produced on crude and how to trade it.  That article can viewed at:

 
http://www.futuresmag.com/2014/03/01/trading-crude-with-stocks-and-time
 
Last Wednesday crude oil inventory numbers was released and crude dropped dramatically.  As such I created a video to show how Market Correlation could be used in tandem with a crude trade.  The video can be viewed at:  http://youtu.be/eEnJ76nr9wM 


Future Challenges:
- Budget -  It was revealed that President Obama is proposing 56 Billion in spending above the agreed upon amount in the bipartisan budget deal and will pay for by eliminating tax breaks for high net worth individuals.  No doubt the GOP will combat this under the guise of "class warfare".  What they forget to mention is they've been waging class warfare for the past 30 years.  Trickle down doesn't trickle down, it pretty much stays where it is.  Obama is playing this fairly close to the vest as he only has 3 days to get a budget approved.  Does he think he can push it thru at the last minute or will he stonewall Congress into approving his version of a budget?  It seems funny to me that two months ago Emergency Unemployment Compensation ended, no one has made any issue of this as it died in Congress.  Did he sign an Executive Order?  No.  Yet everyone believes the rate is 6.7%, when in reality it's closer to 12.6%.  Time will tell how this all works out.....

 
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 9 AM EST, 11 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.  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 editions.
 
Forex Crunch, a friend of Market Tea Leaves published an article on the Smart Money whereby we define who they are and what they do.  This article can be viewed at:  http://www.forexcrunch.com/who-are-the-smart-money-and-what-do-they-do/


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 - 3/7/14 - Jobs Friday

Good Morning Traders,  
 
 As of this writing 5:15 AM EST, here’s what we see:
 
                  
US Dollar –Down at 79.745, the US Dollar is down 75 ticks and is trading at 79.745.                         
Energies – April Oil is up at 101.77.       
Financials – The June 30 year bond is up 5 ticks and trading at 131.29.      
Indices – The March S&P 500 emini ES contract is up 4 ticks and trading at 1877.25. 
Gold – The April gold contract is trading down at 1348.80 and is down 30 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 higher and the US dollar is trading down 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 traded mainly higher with the exception Hang Seng and Shanghai exchanges which traded lower.  As of this writing all of Europe is trading lower.   
 
  Possible challenges to traders today is the following:
                                           
1.  Non-Farm Employment Change is out at 8:30 AM EST.  This is major.    
2.  Trade Balance is out at  8:30 AM EST.  This is major.    
3.  Unemployment Rate is out at 8:30 AM EST.  This is major.    
4.  Average Hourly Earnings m/m is out at 8:30 AM EST.  This is major.    
5.  FOMC Member Dudley Speaks at 12 PM EST.  This is major.
6.  Consumer Credit m/m is out at 3 PM EST.  This could effect afternoon trading.      
      
 Currencies                    

Yesterday the Swiss Franc made it's move at around 8:35 AM EST immediately after the Unemployment Claims numbers came out.  Look at the charts below and you'll see a pattern for both assets.  The USD hit a high at around that time and dropped. In the meantime the Swiss Franc rose.  This was a long opportunity on the Swiss Franc.  The key to capitalizing on these trades is to watch the USD movement.  The USD fall only lent confirmation to the move.  As a trader you could have netted 20-30 ticks on this trade, whereas this may not seem like much understand that each tick on the Swiss Franc is worth $12.50.  To expand the chart, right click and open in a new window.  Kindly view our special video to determine how to capitalize on these trades.  http://youtu.be/lOxBMe09X3Q
 
 Charts Courtesy of Trend Following Trades
 
  

Swiss Franc - 03/14 - 3/6/14

USD - 03/14 - 3/6/14

Bias


Yesterday we said our bias was neutral as the futures markets weren't correlated.  The Dow gained 62 points, the Nasdaq lost 6 and the S&P gained 3.  Given that today is Jobs Friday we are keeping a neutral bias.  A neutral bias means the markets could go in any direction.     Could this change?  Of Course.  Remember anything can happen in a volatile market.
 
Yesterday morning the futures weren't correlated and in fact looked correlated to the upside.  The European markets were trading up but we felt most of what happened was going to depend on economic news.  Unemployment claims came in better than expected and we suspect that this was a major reason for market gains.  Today is Jobs Friday and as my subscribers know I always keep a neutral bias on this day.  A neutral bias means the markets could go in any direction.  Historically speaking the markets have never shown us any sense normalcy on this day.  The expectation is for 151,000 net new jobs created and the unemployment rate to remain at 6.6%.  But we also know that the analysts and pundits will dissect these numbers to the umpteenth degree and possibly a news headline will provide some misinformation.  Believe me, we've seen this movie before.




Each day in this newsletter we provide viewers a snapshot of the Swiss Franc versus the US dollar as a way and means of capitalizing on the inverse relationship between these two assets.  Futures Magazine recognized this correlation as well.  So much so that they printed a story on it in their December issue.  That story can be viewed at:

http://www.futuresmag.com/2013/11/25/correlated-opportunities-in-the-swiss-franc?ref=hp


Many of my readers have been asking me to spell out the rules of Market Correlation.  Recently 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 a follow up to the first article on Market Correlation, I've produced a second segment on this subject matter and Futures Magazine has elected to publish it.  It can be viewed at:

http://www.futuresmag.com/2013/08/16/how-to-exploit-and-profit-from-market-correlation?ref=hp


 
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.
  


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 April crude dropped to a low of 100.13 a barrel but maintained the $100 a barrel mark.  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 $101.10 a barrel and resistance at $102.61.  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.  

If trading today consider doing so after 10 AM EST when the markets gives better direction.  While we're on the subject of crude Futures Magazine has decided to print an article we produced on crude and how to trade it.  That article can viewed at:

 
http://www.futuresmag.com/2014/03/01/trading-crude-with-stocks-and-time
 
On Wednesday crude oil inventory numbers was released and crude dropped dramatically.  As such I created a video to show how Market Correlation could be used in tandem with a crude trade.  The video can be viewed at:  http://youtu.be/eEnJ76nr9wM 


Future Challenges:
- Budget -  It was revealed that President Obama is proposing 56 Billion in spending above the agreed upon amount in the bipartisan budget deal and will pay for by eliminating tax breaks for high net worth individuals.  No doubt the GOP will combat this under the guise of "class warfare".  What they forget to mention is they've been waging class warfare for the past 30 years.  Trickle down doesn't trickle down, it pretty much stays where it is.  Obama is playing this fairly close to the vest as he only has 3 days to get a budget approved.  Does he think he can push it thru at the last minute or will he stonewall Congress into approving his version of a budget?  It seems funny to me that two months ago Emergency Unemployment Compensation ended, no one has made any issue of this as it died in Congress.  Did he sign an Executive Order?  No.  Yet everyone believes the rate is 6.6%, when in reality it's closer to 12.3%.  Time will tell how this all works out.....

 
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 9 AM EST, 11 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.  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 editions.
 
Forex Crunch, a friend of Market Tea Leaves published an article on the Smart Money whereby we define who they are and what they do.  This article can be viewed at:  http://www.forexcrunch.com/who-are-the-smart-money-and-what-do-they-do/


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 - 3/6/14 - Uncorrelated Market = Down Day

Good Morning Traders,  
 
 As of this writing 5:30 AM EST, here’s what we see:
 
                  
US Dollar –Up at 80.150, the US Dollar is up 33 ticks and is trading at 80.150.                         Energies – April Oil is down at 101.36.       
Financials – The June 30 year bond is down 2 ticks and trading at 132.10.      
Indices – The March S&P 500 emini ES contract is up 13 ticks and trading at 1875.75 
Gold – The April gold contract is trading down at 1335.70 and is down 46 ticks from its close.   
           
 
Initial 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 higher and the US dollar is trading up 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. 
               
All of Asia traded higher.  As of this writing all of Europe is trading higher.   
 
  Possible challenges to traders today is the following:
                                           
1.  Challenger Job Cuts y/y is out at 7:30 AM EST.  This is not major.  
2.  FOMC Member Dudley Speaks at 8:15 AM EST.  This is major.  
3.  Unemployment Claims is out at 8:30 AM EST.  This is major.  
4.  Revised Nonfarm Productivity q/q is out at 8:30 AM EST.  This is not major.  
5.  Revised Unit Labor Costs q/q is out at 8:30 AM EST.  This is not major.
6.  Factory Orders m/m 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.  FOMC Member Plosser Speaks at 1 PM EST.  This is major.                         
      
 Currencies                  
Yesterday the Swiss Franc made it's move at around 9:50 AM EST at around the time the ISM numbers came out.  Look at the charts below and you'll see a pattern for both assets.  The USD hit a high at around that time and dropped. In the meantime the Swiss Franc rose.  This was a long opportunity on the Swiss Franc.  The key to capitalizing on these trades is to watch the USD movement.  The USD fall only lent confirmation to the move.  As a trader you could have netted 20-30 ticks on this trade, whereas this may not seem like much understand that each tick on the Swiss Franc is worth $12.50.  To expand the chart, right click and open in a new window.  Kindly view our special video to determine how to capitalize on these trades.  http://youtu.be/lOxBMe09X3Q
 
 Charts Courtesy of Trend Following Trades
 
  

Swiss Franc - 03/14 - 3/5/14

USD - 03/14 - 3/5/14

Bias


Yesterday we said our bias was to the downside as the markets weren't correlated.  The net result?  The Dow dropped 36 points, the Nasdaq gained 6 and the S&P was flat for the day.  Today we aren't dealing with a correlated market and our bias is neutral.  A neutral bias means the markets could go in any direction today.     Could this change?  Of Course.  Remember anything can happen in a volatile market.
 
Yesterday morning the futures weren't correlated and in fact looked correlated to the downside.  The European markets were trading down and it looked to us as though the Smart Money was looking to take capital off the table after the huge run up on Tuesday.  The headlines of some periodicals stated "Don't Short This Market" written by a supposed expert.  Well that may be the case for the next 6 months down the road but as day traders we need to know the here and now.  The economic news was not too stellar as none of the major reports exceeded expectation.  The ADP Non-Farm Employment change came in at 139,000 versus 159,000 expected.  Today we get Challenger Job Cuts at 7:30 AM EST.  We'll also have 8 economic reports today with about half of them considered major.  Lastly the ECB will determine the Minimum Bid Rate which is the equivalent of the Federal Funds Rate (aka Overnight Rate) in the United States.  They will also conduct a press conference at 8:30 AM EST.  I mention this because depending upon what they say it could drive the Euro in any direction which in turn will cause the USD to fluctuate either up or down.  This of course could have an impact on the US markets.  Just something to be mindful of......




Each day in this newsletter we provide viewers a snapshot of the Swiss Franc versus the US dollar as a way and means of capitalizing on the inverse relationship between these two assets.  Futures Magazine recognized this correlation as well.  So much so that they printed a story on it in their December issue.  That story can be viewed at:

http://www.futuresmag.com/2013/11/25/correlated-opportunities-in-the-swiss-franc?ref=hp


Many of my readers have been asking me to spell out the rules of Market Correlation.  Recently 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 a follow up to the first article on Market Correlation, I've produced a second segment on this subject matter and Futures Magazine has elected to publish it.  It can be viewed at:

http://www.futuresmag.com/2013/08/16/how-to-exploit-and-profit-from-market-correlation?ref=hp


 
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.
  


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 April crude dropped to a low of 100.85 a barrel but maintained the $100 a barrel mark.  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 $100.73 a barrel and resistance at $101.97.  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.  

If trading today consider doing so after 10 AM EST when the markets gives better direction.  While we're on the subject of crude Futures Magazine has decided to print an article we produced on crude and how to trade it.  That article can viewed at:

 
http://www.futuresmag.com/2014/03/01/trading-crude-with-stocks-and-time
 
Yesterday the Wednesday crude oil inventory numbers was released and crude dropped dramatically.  As such I created a video to show how Market Correlation could be used in tandem with a crude trade.  The video can be viewed at:  http://youtu.be/eEnJ76nr9wM 


Future Challenges:
- Budget -  It was revealed that President Obama is proposing 56 Billion in spending above the agreed upon amount in the bipartisan budget deal and will pay for by eliminating tax breaks for high net worth individuals.  No doubt the GOP will combat this under the guise of "class warfare".  What they forget to mention is they've been waging class warfare for the past 30 years.  Trickle down doesn't trickle down, it pretty much stays where it is.  Obama is playing this fairly close to the vest as he only has 3 days to get a budget approved.  Does he think he can push it thru at the last minute or will he stonewall Congress into approving his version of a budget?  It seems funny to me that two months ago Emergency Unemployment Compensation ended, no one has made any issue of this as it died in Congress.  Did he sign an Executive Order?  No.  Yet everyone believes the rate is 6.6%, when in reality it's closer to 12.3%.  Time will tell how this all works out.....

 
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 9 AM EST, 11 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.  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 editions.
 
Forex Crunch, a friend of Market Tea Leaves published an article on the Smart Money whereby we define who they are and what they do.  This article can be viewed at:  http://www.forexcrunch.com/who-are-the-smart-money-and-what-do-they-do/


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.