Happy Labor Day

Good Morning Traders,
As of this writing 4:10 AM EST, here’s what we see:
US Dollar: Down at 96.240 the US Dollar is down 183 ticks and trading at 96.240.
Energies: October Crude is down at 46.20.
Financials: The Sept 30 year bond is up 22 ticks and trading at 156.21.
Indices: The Sept S&P 500 emini ES contract is down 44 ticks and trading at 1935.00.
Gold: The October gold contract is trading down at 1123.80. Gold is 2 ticks lower than its close.

Initial Conclusion

This is not a correlated market. The dollar is down- and oil is down- 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 down and Crude is trading down which is not correlated. Gold is trading down 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 lower. Please note the China exchanges are closed for a bank holiday. As of this writing all of Europe is trading lower.

Possible Challenges To Traders Today

- FOMC Member Lacker Speaks at 8:10 AM EST. This is major.

- Average Hourly Earnings m/m is out at 8:30 AM EST. This is major.

- Non-Farm Employment Change is out at 8:30 AM EST. This is major.

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

Currencies

Yesterday the Swiss Franc made it’s move at around 9:45 AM EST after the Unemployment Claims numbers came out. 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 9:45 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 around 9:45 AM EST and the Swiss Franc hit a high. 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 shorting 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 Ninja Trader platform

Bias

Yesterday we said our bias was neutral as the Financials were all trading higher. The markets meandered into and out of positive territory all session long but the Dow closed higher by 24 points however the Nasdaq dropped by 17, the S&P climbed by 2. Given that today is Jobs Friday our bias is neutral.

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

Commentary

Yesterday we said our bias was neutral as the Financials (USD and Bonds) were all trading higher and usually that’s not a good sign for an upside day. What we didn’t see was follow thru on the part of the indices hence the neutral bias. Given that today is Jobs Friday we will maintain a neutral bias as we always do for Jobs Friday. Why? Because the markets have never shown any sense of normalcy on Jobs Friday or FOMC Day hence the neutral bias. Yesterday’s Unemployment Claims came in higher than expected at 282,000 versus 273,000 expected. Time will tell if this has any effect on Non-Farm Payrolls….
On a personal note it’s a given in the United States that we work hard for whatever we have; we should take time to enjoy the fruits of our labor. Happy Labor Day!!!!

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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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