Comrade Putin's Rating Soar

Good Morning Traders,

As of this writing 5:45 AM EST, here’s what we see:

US Dollar: Up at 80.625, the US Dollar is up 30 ticks and is trading at 80.625.
Energies: September Crude is up at 102.00.
Financials: The Sept 30 year bond is up 3 ticks and trading at 138.05.
Indices: The Sept S&P 500 emini ES contract is down 10 ticks and trading at 1969.00.
Gold: The August gold contract is trading up at 1314.10 and is up 45 ticks from its close.

Initial Conclusion

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

Asia traded mixed with half the exchanges higher and the other half lower. Please note the Japanese Nikkei was closed for a bank holiday. As of this writing all of Europe is trading is trading lower.

Possible Challenges To Traders Today

1. No Major Economic News.

2. Lack of major economic news.

Currencies

On Friday the Swiss Franc made its move at 8:40 AM EST before any economic news was released. The USD hit a low at around that time and the Swiss Franc hit a high. If you look at the charts below the USD gave a signal at 8:40 AM EST, while the Swiss Franc also gave a signal at just about the same time. Look at the charts below and you’ll see a pattern for both assets. The USD hit a low at 8:40 AM EST and the Swiss Franc hit a high. I’ve changed the charts to reflect a 5 minute time frame and added a Darvas Box to make it more clear. This represented a long opportunity on the Swiss Franc, as a trader you could have netted 15-20 ticks or more on that trade. Remember each tick on the Swiss Franc is equal to $12.50 versus $10.00 that we usually see for currencies.

Charts Courtesy of Trend Following Trades built on a NinjaTrader platform

Bias

On Friday we said our bias was neutral as Europe was trading lower and the futures gave no sense of direction. The Dow gained 123 points and the other indices gained ground as well. Today we aren’t dealing with a correlated market and our bias is to the downside.

Could this change? Of Course. Remember anything can happen in a volatile market.

Commentary

What a difference a day makes. On Thursday Wall Street is in mourning and on Friday the attitude seems to be “lets forget it ever happened”. One has to wonder how that occurred and the answer is the Smart Money lost capital on Thursday but wanted to make sure they would gain on Friday. And this was an options expiration day. The news regarding the tragedy is mixed as Russia is blaming the Ukraine stating that the incident occurred over Ukrainian airspace and the Ukraine is blaming pro-Russian rebels stating they were coerced by Russia. So what we see is the blame game at it’s best. We’ve heard that translated dialogue amongst the rebels seem to blame the commercial jet for flying over a “war zone”. The US has sent an investigator to the scene in the Ukraine who was treated with hostility. This is very suspicious behavior as it would seem as though the guilty party wants to cover up any evidence. Already the site has been contaminated with people moving items around and that shouldn’t happen in this type of investigation.

It appears as though Comrade Putin will come out of this OK as his approval rating has soared to 83% which for him is a 6 year high. After all Putin is the “strong man” who has restored Russia’s prestige. Really? Is that why their stock market has dropped for 5 days in a row? Is that why they’re perturbed from being cut off to US capital markets? They may talk Mother Russia but guess what? All of their officials have assets and bank accounts in other countries because they don’t trust their own markets. Putin is borrowing a page from Nazi Germany’s playbook with these “bloodless” victories. Hey, it worked for Germany in 1938, let’s try it today. Germany did it because they didn’t like the loss of their empire after WWI, Russia is doing it because they don’t like the loss of the Russian Empire. They used to own the Ukraine and now they don’t. But as in all things, time will tell how it all works out.