Good Morning Traders,
As of this writing 5:10 AM EST, here’s what we see:
US Dollar: Down at 82.565, the US Dollar is down 114 ticks and is trading at 82.565.
Energies: October Crude is up at 94.11.
Financials: The Sept 30 year bond is up 8 ticks and trading at 140.25.
Indices: The Sept S&P 500 emini ES contract is up 3 ticks and trading at 1999.25.
Gold: The October gold contract is trading up at 1285.00 and is up 7 ticks from its close.
Initial Conclusion
This is not correlated market. The dollar is down- and oil is up+ which is normal but the 30 year bond is trading higher. The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice-versa. The indices are up and the US dollar is trading 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 mainly higher with the exception of the Hang Seng exchange which traded lower. As of this writing all of Europe is trading mixed with half the exchanges trading lower and the other half higher.
Possible Challenges To Traders Today
Crude Oil Inventories are out at 10:30 AM EST. This could move the crude markets.
Lack of economic news.
Currencies
Yesterday the Swiss Franc made it’s move at around 8:20 AM EST before any economic news was reported. 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 around 8:20 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 high at 8:30 AM EST and the Swiss Franc hit a low. 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 10-12 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.
Charts Courtesy of Trend Following Trades built on a NinjaTrader platform
Bias
Yesterday we said our bias was to the downside as the Bonds and Gold were trading much higher. The markets however had other ideas as the Dow gained 30 points and the other indices rose as well. 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 downside as Bonds were trading much higher, Gold was trading higher and we received news of the Russian-Ukraine situation. We also stated in our Market Bias video that this could change as the session was loaded with economic news, most of which were major and proven market movers. We stated that the best course of action would be to wait until the economic news was released, judge the market direction and then decide. Well the economic news was released and it didn’t disappoint. With the exception of Core Durable Goods, all the reports exceeded expectation. The good news is the markets aren’t retreating on good news and it seems (at the present time) that the fear factor of the Fed hiking rates is subsided for the time being. It is also good for traders as we expect the markets to move higher when good news is reported. The Russian-Ukraine situation did not have an impact on the markets yesterday.
Trading performance displayed herein is hypothetical. The following Commodity Futures Trading Commission (CFTC) disclaimer should be noted.
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight.
In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results.
There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.
Trading in the commodities markets involves substantial risk and YOU CAN LOSE A LOT OF MONEY, and thus is not appropriate for everyone. You should carefully consider your financial condition before trading in these markets, and only risk capital should be used.
In addition, these markets are often liquid, making it difficult to execute orders at desired prices. Also, during periods of extreme volatility, trading in these markets may be halted due to so-called “circuit breakers” put in place by the CME to alleviate such volatility. In the event of a trading halt, it may be difficult or impossible to exit a losing position.
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