Good Morning Traders,

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

US Dollar: Down at 94.515, the US Dollar is down 807 ticks and is trading at 94.515.
Energies: June Crude is up at 59.18.

Financials: The June 30 year bond is down 24 ticks and trading at 159.04.
Indices: The June S&P 500 emini ES contract is down 29 ticks and trading at 2091.75.

Gold: The June gold contract is trading down at 1204.30. Gold is 57 ticks lower from its close.

Initial Conclusion

This is not a correlated market. The dollar is down- and oil is up+ which is normal and the 30 year bond is trading down. 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 Crude is trading up which is correlated. Gold is trading down 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. As of this writing Europe is trading lower as well.

Possible Challenges To Traders Today

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

- Core PCE Price Index m/m is out at 8:30 AM EST. This is major.

- Employment Cost Index q/q is out at 8:30 AM EST. This is not major.

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

- FOMC Member Tarullo Speaks at 8:30 AM EST. This is major.

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

- Chicago PMI is out at 9:45 AM EST. This is major.

- 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 around 9 AM EST immediately after the economic news numbers came out. 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 9 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 9 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

Pre-Market Global Review

Pre-Market Global Review

Bias

Yesterday we said our bias was neutral with no direction. The Dow dropped 74 points and the other indices lost ground as well. Today we aren’t dealing with a correlated market but 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 neutral given that it was FOMC Day and the markets don’t operate with any sense of normalcy on that day. The Fed did not raise the FFR (Federal Funds Rate or Overnight Rate) and thus interest rates were kept at bay but they also left the door open for a rate hike at any meeting. So they’re no longer committed to a calendar timeframe. Ironically enough GDP numbers were reported yesterday that showed anemic growth for the US economy. This plus a strong dollar can slow down growth. We don’t think the Fed will be raising rates anytime soon as they know all too well how fragile the economy is and they don’t want to be accused of tossing a monkey wrench into it. That’s why all FOMC voting members voted unilaterally not to raise rates 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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