Pre-Market Global Review - 2/13/14 - Yellen "Rally" Fizzles

Good Morning Traders,  
 
 As of this writing 5:45 AM EST, here’s what we see:
 
                     
 US Dollar –Down at 80.345, the US Dollar is down 386 ticks and is trading at 80.345.         
Energies – March Oil is down at 99.71.       
Financials – The March 30 year bond is up 32 ticks and trading at 132.24.      
Indices – The March S&P 500 emini ES contract is down 25 ticks and trading at 1810.25. 
Gold – The April gold contract is trading down at 1290.00 and is down 50 ticks from its close.   
           
 
Initial Conclusion: This is not a correlated market.  The dollar is down- and oil is down which is not 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 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. 
               
All of Asia traded lower with the exception of Singapore which traded fractionally higher.  As of this writing all of Europe is trading lower.   
 
  Possible challenges to traders today is the following:
                                           
1.  Core Retail Sales m/m is out at 8:30 AM EST.  This is major.   
2.  Retail Sales m/m is out at 8:30 AM EST.  This is major.    
3.  Unemployment Claims is out at 8:30 AM EST.  This is major.
4.  Business Inventories m/m is out at 10 AM EST.  This is not major.
5.  Natural Gas Storage is out at 10:30 AM EST.  This could move the Nat Gas market.
6.  30-y Bond Auction starts at 1 PM EST.  This could impact afternoon trading.
      Currencies                  

Yesterday the Swiss Franc made it's move at around 9:30 AM EST despite the fact that we had no real major economic news to speak of.  Look at the charts below and you'll see a pattern for both assets.  The USD fell at around that time and 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 drop only lent confirmation to the move.  As a trader you could have netted 20- 30 ticks on this trade.  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 - 2/12/14

USD - 03/14 - 2/12/14

Bias


Yesterday we said our bias was to the upside as the markets were nearly correlated to the upside.  The markets however had other plans as the Dow dropped 31 points as did the S&P.  The Nasdaq gained 10. Today we are not dealing with a correlated market therefore our bias is to the downside.         Could this change?  Of Course.  Remember anything can happen in a volatile market.
 
What a difference a day makes.  Janet Yellen's comments on Tuesday didn't do much for the markets on Wednesday as there was no major economic news to speak of and without this the markets meandered into negative territory.  Overnight Asia traded mainly lower and as I write this Europe is all trading to the downside.  Today we do have major economic news that are market movers.  We'll have to wait and see what that news is.  If trading today I would consider doing so after 10 AM EST when all the major economic news is reported before committing capital. 

 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 downside.  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.  Yesterday March crude dropped to a low of 100.04 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 $99.25 a barrel and resistance at $100.32.  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:
- Debt Ceiling - Well we could say it's official and that a "budget" has been passed by both houses of Congress but Obama still has yet to approve it.  If approved this would fund the government until September 30th and remove an uncertainty from the markets.  However Obama hasn't approved this yet and currently Secretary of the Treasury Jack Lew has already testified before Congress warning that our current debt ceiling will expire on February 7th and that the Treasury could do something to extend until the end of February but won't be able to go much beyond that.   Well the State of the Union come and gone yet to our knowledge Obama hasn't approved anything yet.  He meets with Apple, Walmart and others to discuss joblessness yet he does absolutely nothing for the long term unemployed except to talk about it.  Did anyone bother to tell that he could issue an Executive Order to extend?  Yes, it may lead to absolutely nothing but at least the American people will know where he stands.  His lack of leadership in this regard is deplorable...

As an update to this the Senate has voted to extend the Debt Ceiling limit until March, 2015.  This is a clean extension without any hindrances.  Obama has signed an Executive Order to increase the minimum wage of Federal workers.  Too bad he didn't do anything for the rest of us.
 
 
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.  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.





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 - 2/12/14 - Yellen Saves the Day

Good Morning Traders,  
 
 As of this writing 5:05 AM EST, here’s what we see:
 
US Dollar –Down at 80.645, the US Dollar is down 86 ticks and is trading at 80.645.                            Energies – March Oil is up at 100.55.       
Financials – The March 30 year bond is down 6 ticks and trading at 132.21.      
Indices – The March S&P 500 emini ES contract is up 18 ticks and trading at 1818.00. 
Gold – The April gold contract is trading down at 1286.10 and is down 37 ticks from its close.   
           
 
Initial Conclusion: This is a nearly a correlated market and correlated to the upside.  The dollar is down- and oil is up+ which is normal and the 30 year bond is trading lower.  The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice-versa.  The indices are higher and the US dollar is trading down 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. 
               
All of Asia traded higher with the Hang Seng trading in triple digit territory.  As of this writing all of Europe is trading higher.   
 
  Possible challenges to traders today is the following:
                                           
1.  Crude Oil Inventories is out at 10:30 AM EST.  This could move the crude market.  
2.  10-y Bond Auction starts at 1 PM EST.  This could effect afternoon trading.  
3.  Federal Budget Balance is out at 2 PM EST.  This is major.

      Currencies                 Yesterday the Swiss Franc made it's move at around 9:30 AM EST while still awaiting Janet Yellen's testimony before Congress.  Look at the charts below and you'll see a pattern for both assets.  The USD fell at around that time and 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 drop only lent confirmation to the move.  As a trader you could have netted 20- 30 ticks on this trade.  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 - 2/11/14

USD - 03/14 - 2/11/14

Bias


Yesterday we said our bias was to the upside as the markets were completely correlated to the upside.  The Dow gained 193 points and the other indices gained as well. Today we are dealing with a nearly correlated market to the upside, if Gold were trading higher I would say it completely correlated.         Could this change?  Of Course.  Remember anything can happen in a volatile market.
 
Well Janet Yellen had her say yesterday and apparently the markets liked what they heard.  She has every intention of keeping a low interest rate environment regardless of the unemployment rate.  She's wise enough to know that despite the so-called improved employment numbers (which are basically bogus) isn't enough when millions are either out of work or working at part-menial jobs.  She's also wise enough to know that despite improved GDP numbers this "recovery" isn't really a recovery at all and certainly not one that the American people are used to.  Let's face it, we're used to a 5-6% growth rate and currently we're operating at about half that.  If the US wants meaningful growth, we'll have to do a lot better and she knows we aren't there yet.  Finally we have some leadership and intelligence in DC, which is certainly much better than we've seen recently. 

 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 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 March crude dropped to a low of 99.60 a barrel but exceeded 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 $99.97 a barrel and resistance at $101.51.  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:
- Debt Ceiling - Well we could say it's official and that a "budget" has been passed by both houses of Congress but Obama still has yet to approve it.  If approved this would fund the government until September 30th and remove an uncertainty from the markets.  However Obama hasn't approved this yet and currently Secretary of the Treasury Jack Lew has already testified before Congress warning that our current debt ceiling will expire on February 7th and that the Treasury could do something to extend until the end of February but won't be able to go much beyond that.   Well the State of the Union come and gone yet to our knowledge Obama hasn't approved anything yet.  He meets with Apple, Walmart and others to discuss joblessness yet he does absolutely nothing for the long term unemployed except to talk about it.  Did anyone bother to tell that he could issue an Executive Order to extend?  Yes, it may lead to absolutely nothing but at least the American people will know where he stands.  His lack of leadership in this regard is deplorable...

As an update to this the House or Representatives has voted to extend the Debt Ceiling limit until March, 2015.  This is a clean extension without any hindrances.  Of course the Senate will now have to vote on the measure.
 
 
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.  If you feel compelled to trade consider doing so after 10:30 AM when the inventory numbers are released and the markets give us better direction.  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.
 






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 - 2/11/14 - No News is Good News

Good Morning Traders,  
 
 As of this writing 5:10 AM EST, here’s what we see:
 
US Dollar –Down at 80.615, the US Dollar is down 112 ticks and is trading at 80.615.                            Energies – March Oil is up at 100.30.       
Financials – The March 30 year bond is down 8 ticks and trading at 133.01.      
Indices – The March S&P 500 emini ES contract is up 32 ticks and trading at 1802.75. 
Gold – The April gold contract is trading up at 1283.30 and is up 85 ticks from its close.   
           
 
Initial Conclusion: Finally a correlated market and correlated to the upside.  The dollar is down- and oil is up+ which is normal and the 30 year bond is trading lower.  The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice-versa.  The indices are higher and the US dollar is trading down 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. 
               
All of Asia traded higher with some exchanges in triple digit territory.  As of this writing all of Europe is trading higher.   
 
  Possible challenges to traders today is the following:
                                           
1.  NFIB Small Business Index is out at 7:30 AM EST.  This is not major.
2.  FOMC Member Plosser Speaks at 9 AM EST.  This is major.
3.  Fed Chair Yellen Testifies at 10 AM EST.  This is major.
4.  JOLTS Job Openings is out at 10 AM EST.  This is major.
5.  Wholesale Inventories m/m is out at 10 AM EST.  This is not major.    

      Currencies                
On Friday the Swiss Franc made it's move at around 10:45 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 fell at around that time and 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 drop only lent confirmation to the move.  As a trader you could have netted 20- 30 ticks on this trade.  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 - 2/10/14

USD - 03/14 - 2/10/14

Bias


Yesterday we said our bias was neutral as the markets weren't giving us any sense of direction.  The Dow gained 8 points and the other indices gained as well.  Today we're dealing with a correlated market (as of this writing) and it's correlated to the upside.  Hence or bias is to the upside.        Could this change?  Of Course.  Remember anything can happen in a volatile market.
 
Yesterday we said our bias was neutral as the futures weren't providing any sense of direction.  With no major economic news to speak of the Dow drifted in and out of positive territory all session long.  Today we have Janet Yellen testifying before Congress.  I have no doubt all ears will be glued on what she says as this is her testimony as Fed chief.  Clearly what she says will be a market mover but the bigger question is how will the House Finance Committee treat her?  Will they be gentle given that this is her first time doing this or will they attack her given that she was the Fed vice-chairperson?  Only time will tell...
 
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 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 March crude dropped to a low of 99.11 a barrel but exceeded 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 $99.55 a barrel and resistance at $100.72.  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:
- Debt Ceiling - Well we could say it's official and that a "budget" has been passed by both houses of Congress but Obama still has yet to approve it.  If approved this would fund the government until September 30th and remove an uncertainty from the markets.  However Obama hasn't approved this yet and currently Secretary of the Treasury Jack Lew has already testified before Congress warning that our current debt ceiling will expire on February 7th and that the Treasury could do something to extend until the end of February but won't be able to go much beyond that.   Well the State of the Union come and gone yet to our knowledge Obama hasn't approved anything yet.  He meets with Apple, Walmart and others to discuss joblessness yet he does absolutely nothing for the long term unemployed except to talk about it.  Did anyone bother to tell that he could issue an Executive Order to extend?  Yes, it may lead to absolutely nothing but at least the American people will know where he stands.  His lack of leadership in this regard is deplorable...

As an update to this the GOP controlled House will vote on the Debt Ceiling limit on Wednesday.
 
 
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.  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.





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 - 2/10/14 - Deadcat Bounce or Trend?

Good Morning Traders,  
 
 As of this writing 5:05 AM EST, here’s what we see:
 
US Dollar –Down at 80.730, the US Dollar is down 28 ticks and is trading at 80.730.                              Energies – March Oil is down at 99.46       
Financials – The March 30 year bond is down 1 tick and trading at 133.09.      
Indices – The March S&P 500 emini ES contract is down 15 ticks and trading at 1789.75. 
Gold – The April gold contract is trading up at 1273.00 and is up 101 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 higher and the US dollar is trading down 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 traded higher with the exception of the Hang Seng and Sensex exchanges.  As of this writing Europe is trading mainly higher.   
 
  Possible challenges to traders today is the following:
                                           
                       
1.  Lack of Major Economic News.    


      Currencies                

On Friday the Swiss Franc made it's move at around 10 AM EST after all the economic news was reported.  Look at the charts below and you'll see a pattern for both assets.  The USD fell at around that time and 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 drop only lent confirmation to the move.  As a trader you could have netted 20- 30 ticks on this trade.  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 - 2/7/14

USD - 03/14 - 2/7/14

Bias


On Friday we said our bias was neutral as it was Jobs Friday and historically speaking the markets have never shown any sense of normalcy on this day.  The Dow gained 165 points and the other indices gained as well.  Today we aren't dealing with a correlated market and our bias is neutral.  Why?  Crude is trading lower and teh US futures are pointing lower.  Europe as of this writing is trading mixed whichs means the markets could open in any direction.        Could this change?  Of Course.  Remember anything can happen in a volatile market.
 
Well The Jobs Report has come and gone.  113,000 jobs produced versus 185,000 expected and the Bureau of Labor Statistics claims that the Unemployment rate is 6.6 percent.  Interesting and incredible, the Jobs Report doesn't meet expectation yet the Unemployment Rate does down.  If you really want to know what the real rate is go to:  http://www.bls.gov/news.release/empsit.t15.htm     

This chart shows the U6 rate which is the real rate of unemployment as it shows the long term unemployed in the United States.  That real rate is 12.7 percent yet everyone ignores this and just goes with the "official" rate.  113,000 jobs produced when we need millions?  That doesn't seem right but in any case the markets went up based on this so the question is why?  There can only be two conclusions: either we're experiencing another deadcat bounce or we're at the beginning of a trend.  A trend, in my view is when the markets go up 3 consecutive days as it means that a rally has some legs to it.  For the past two trading days we've witnessed triple digit gains.  If in fact we have another such type day today then we can say that we have a trend and that trend is up.  As usual time will tell...... 
 
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 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 March crude dropped to a low of 97.11 a barrel but exceeded 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 $98.78 a barrel and resistance at $101.50.  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:
- Debt Ceiling - Well we could say it's official and that a "budget" has been passed by both houses of Congress but Obama still has yet to approve it.  If approved this would fund the government until September 30th and remove an uncertainty from the markets.  However Obama hasn't approved this yet and currently Secretary of the Treasury Jack Lew has already testified before Congress warning that our current debt ceiling will expire on February 7th and that the Treasury could do something to extend until the end of February but won't be able to go much beyond that.   Well the State of the Union come and gone yet to our knowledge Obama hasn't approved anything yet.  He meets with Apple, Walmart and others to discuss joblessness yet he does absolutely nothing for the long term unemployed except to talk about it.  Did anyone bother to tell that he could issue an Executive Order to extend?  Yes, it may lead to absolutely nothing but at least the American people will know where he stands.  His lack of leadership in this regard is deplorable...
 
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.  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.





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 - 2/7/14 - Jobs Friday

Good Morning Traders,  
 
 As of this writing 5:05 AM EST, here’s what we see:
 
US Dollar –Up at 81.060, the US Dollar is up 58 ticks and is trading at 81.060.                              Energies – March Oil is down at 97.42       
Financials – The March 30 year bond is up 5 ticks and trading at 133.06.      
Indices – The March S&P 500 emini ES contract is up 25 ticks and trading at 1772.75. 
Gold – The April gold contract is trading up at 1260.30 and is up 32 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 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. 
               
All of Asia traded higher.  As of this writing all of Europe is trading higher.   
 
  Possible challenges to traders today is the following:
                                           
1.  Non-Farm Employment Change is out at 8:30 AM EST.  This is major.                               2.  Unemployment Rate is out at 8:30 AM EST.  This is major.    
3.  Average Hourly Earnings m/m is out at 8:30 AM EST.  This is major.    
4.  Consumer Credit m/m is out at 3 PM EST.  This could affect afternoon trading.  
   
      Currencies              
Yesterday the Swiss Franc made it's move at around 9:20 AM EST after the Unemployment Claims number was released.  Look at the charts below and you'll see a pattern for both assets.  The USD rose at around that time and 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 rise only lent confirmation to the move.  As a trader you could have netted 20 ticks on this trade.  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 - 2/6/14

USD - 03/14 - 2/6/14

Bias


Yesterday we said our bias was to the upside as the Bonds were trading lower, crude and Gold were trading higher and Europe was trading higher.  The Dow gained 189 points and the other indices gained as well.  Today given that it is Jobs Friday our bias is neutral.      Could this change?  Of Course.  Remember anything can happen in a volatile market.
 
Yesterday we said our bias was to the upside as the markets were pointing in that direction and the market didn't disappoint.  Improved numbers in terms of Unemployment Claims led the way as they came in at 331,000 versus 337,000 expected.  This was the only report that exceeded expectation, all of the rest did not.  Today given that it is Jobs Friday our bias is neutral.  Any of my subscribers who've been with me for a while know that 2 days in the month, we'll maintain a neutral bias.  One is the FOMC Meeting and the other is Jobs Friday.  Why?  The markets have shown any sense of normalcy on these days and could go in any direction.  Hence the neutral bias.  On another note and somewhat related the Senate did not pass an extension of Unemployment Benefits and this bill was shot down by one vote.  Whoever that Senator was I hope they sleep well knowing that their vote could have helped 1.3 million people who need it.  Many of whom have families to feed...


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 March crude dropped to a low of 97.44 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 $96.74 a barrel and resistance at $98.78.  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:
- Debt Ceiling - Well we could say it's official and that a "budget" has been passed by both houses of Congress but Obama still has yet to approve it.  If approved this would fund the government until September 30th and remove an uncertainty from the markets.  However Obama hasn't approved this yet and currently Secretary of the Treasury Jack Lew has already testified before Congress warning that our current debt ceiling will expire on February 7th and that the Treasury could do something to extend until the end of February but won't be able to go much beyond that.   Well the State of the Union come and gone yet to our knowledge Obama hasn't approved anything yet.  He meets with Apple, Walmart and others to discuss joblessness yet he does absolutely nothing for the long term unemployed except to talk about it.  Did anyone bother to tell that he could issue an Executive Order to extend?  Yes, it may lead to absolutely nothing but at least the American people will know where he stands.  His lack of leadership in this regard is deplorable...
 
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.  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.





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.