Dudley "dude rite" to the Rescue

Good Morning Traders,

As of this writing 4:10 AM EST, here’s what we see:

US Dollar: Up at 95.365 the US Dollar is up 234 ticks and trading at 95.365.

Energies: October Crude is up at 40.25.

Financials: The Sept 30 year bond is up 11 ticks and trading at 156.12.
Indices: The Sept S&P 500 emini ES contract is up 76 ticks and trading at 1957.00.

Gold: The October gold contract is trading up at 1125.90. Gold is 17 ticks higher than 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 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 Crude is trading up which is not correlated. Gold is trading up 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.

All of Asia traded higher with some exchanges in triple digit positive territory. As of this writing all of Europe is trading higher.

Possible Challenges To Traders Today

- Prelim GDP q/q is out at 8:30 AM EST. This is major.

- Prelim GDP Price Index q/q is out at 8:30 AM EST. This is major.

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

- Pending Home Sales m/m are out at 10 AM EST. This is major.

- Natural Gas Storage are out at 10:30 AM EST. This could move the Nat Gas markets.

Currencies

Yesterday the Swiss Franc made it’s move around 10:15 AM EST after the economic news was reported. 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 10:15 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 10:15 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 neutral as the markets didn’t give any sense of direction. The Dow gained 620 points and the other indices gained as well. Today we aren’t dealing with a correlated market and our bias is neutral. Please note: subscribers kindly check your market bias video for a detailed explanation

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

Commentary

Yesterday the markets finally experienced a rebound after 6 straight days of losses. The Durable Goods and Core Durable Goods numbers came in better than expected but what really got the market rolling? FOMC Member William Dudley stating that he didn’t think a September hike was as important a priority as a couple of weeks ago. This really got the markets moving. Mr. Dudley apparently has Janet Yellen’s ear and hopefully he can convince the Fed Chair to not hike in September. As we’ve been saying for awhile it wouldn’t be in the Fed’s best interest to do so as if the economy falters they will be blamed. Doing so would hurt consumer spending, auto sales, existing and new home sales and everything connected to it. The question now is will the markets make a run for 18,000 and recapture its crown or will the markets wander aimlessly?

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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.

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