Nasdaq Up, Dow Down

Good Morning Traders,

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

US Dollar: Down at 80.845, the US Dollar is down 70 ticks and is trading at 80.845.
Energies: September Crude is down at 102.83.
Financials: The Sept 30 year bond is down 13 ticks and trading at 138.05.
Indices: The Sept S&P 500 emini ES contract is up 12 ticks and trading at 1983.75.
Gold: The August gold contract is trading down at 1300.30 and is down 43 ticks from its close.

Initial Conclusion

This is not correlated market. The dollar is down- and oil is down- which is not normal and the 30 year bond is trading lower. The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice-versa. The indices are up and the US dollar is trading 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 except the Japanese Nikkei which traded down. As of this writing all of Europe is trading is trading higher.

Possible Challenges To Traders Today

1. Unemployment Claims are out at 8:30 AM EST. This is major.

2. Flash Manufacturing PMI is out at 9:45 AM EST. This is major.

3. New Home Sales is out at 10 AM EST. This is major.

4. Natural Gas Storage is out at 10:30 AM EST. This could move the Nat Gas market.

Currencies

Yesterday the Swiss Franc made it’s move at 10:10 AM EST with no economic news in sight. 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 10:10 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 10:10 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 shorting opportunity on the Swiss Franc, as a trader you could have netted 12-15 ticks on this trade. Remember each tick on the Swiss Franc is equal to $12.50 versus $10.00 that we usually see for currencies.

USD to Swiss Franc

Charts Courtesy of Trend Following Trades built on a NinjaTrader platform

Bias

Yesterday we said our bias was to the upside as Europe was trading higher and the Bonds were correlated to the upside. The Dow dropped 27 points but the Nasdaq and S&P both gained ground. Today we aren’t dealing with a correlated market however our bias is to the upside.

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

Commentary

Yesterday we said our bias was to the upside as Apple reported solid earnings on Tuesday evening. The markets however had other ideas as the Dow dropped from the opening bell to the close. However the Nasdaq and S&P both posted gains. So you might ask, what could cause this? Here’s a theory. Technology stocks have historically been Nasdaq related equities. Given that both Microsoft and Apple reported on the same day, this would emphasis on the Nasdaq as opposed to the Dow. Apple shares rose intraday to $97.88 which represents a 52 week high for the stock. The stock closed down 7 cents to $97.12 a share.