No Hillary Rally

Good Morning Traders,

As of this writing 4:30 AM EST, here’s what we see:

US Dollar: Up at 99.880, the US Dollar is up 112 ticks and is trading at 99.880.
Energies: May Crude is up at 52.50.

Financials: The June 30 year bond is up 18 ticks and trading at 164.01.
Indices: The June S&P 500 emini ES contract is up 20 ticks and trading at 2091.50.

Gold: The April gold contract is trading down at 1192.90. Gold is 64 ticks lower from its close.

Initial Conclusion

This is not a correlated market. The dollar is up+ and oil is up+ which is not normal and the 30 year bond is trading up. 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 Crude is trading up which is not correlated. Gold is trading down 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.

Asia traded mainly higher with the exception of the Aussie and Hang Seng exchanges which traded fractionally lower. As of this writing all of Europe is trading lower with the exception of the London exchange which is fractionally higher.

Possible Challenges To Traders Today

- Core Retail Sales m/m is out at 8:30 AM EST. This is major.

- Retail Sales m/m is out at 8:30 AM EST. This is major.

- PPI m/m is out at 8:30 AM EST. This is major.

- Core PPI m/m is out at 8:30 AM EST. This is major.

- NFIB Small Business Index is out at 9 AM EST. This is not major.

- Business Inventories m/m is out at 10 AM EST. This is not major.

Currencies

On Friday the Swiss Franc made it’s move around 10 AM EST with no real economic news in sight. The USD hit a high at around that time and the Swiss Franc hit a low. If you look at the charts below the USD gave a signal at around 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 high at around 8 AM EST and the Swiss Franc hit a low. These charts represent the latest version of Trend Following Trades and I’ve changed the timeframe to a Renko chart to display better. This represented a long opportunity on the Swiss Franc, as a trader you could have netted 20 plus ticks on this trade. We added a Donchian Channel to the charts to show the signals more clearly. 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 and the markets did not disappoint. The Dow dropped 81 points and the other indices lost 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

Yesterday the markets were higher most of the session and we thought that perhaps the Clinton announcement might spark a rally. Our bias was to the downside as the USD and Crude were both trading higher and this does not bode well for an upside day. By the afternoon it became apparent that there was no rally in sight and in fact the indices traded lower. Today we have Retail Sales and PPI which are certain to move the markets…

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