The Return of Window Dressing??

Good Morning Traders,

As of this writing 4:20 AM EST, here’s what we see:

US Dollar: Up at 96.180 the US Dollar is up 187 ticks and trading at 96.180.

Energies: October Crude is down at 44.93.

Financials: The Dec 30 year bond is down 20 ticks and trading at 157.09.
Indices: The Dec S&P 500 emini ES contract is up 58 ticks and trading at 1889.00.

Gold: The October gold contract is trading down at 1126.00. Gold is 11 ticks lower than its close.

Initial Conclusion

This is not a correlated market. The dollar is up+ and crude is down- which is normal but the 30 year bond is trading lower. 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 down which is 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.

All of Asia traded higher. As of this writing all of Europe is trading higher.

Possible Challenges To Traders Today

- FOMC Member Dudley Speaks at 8 AM EST. This is major.

- ADP Non-Farm Employment Change is out at 8:15 AM EST. This is major.

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

- Crude Oil Inventories is out at 10:30 AM EST. This could move the crude markets.

- Fed Chair Yellen Speaks at 3 PM EST. This is major.

Currencies

Yesterday the Swiss Franc made its move at around 9:50 AM EST before the Consumer Confidence numbers came out. The USD hit a low 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 9:50 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 9:50 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 NinjaTrader platform

Bias

Yesterday we said our bias was neutral as the markets yesterday morning gave us no sense of direction. Yesterday the markets were all over the map but the Dow gained 47 points. The Nasdaq dropped by 27 and the S&P gained 2 points. 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 promised to be a lackluster day as the markets were all over the map with no trend or sense of direction. Today given that it is the end of the 3rd calendar quarter, it begs us to ask the question: will we see window dressing today? Window dressing (for those who aren’t aware) if the situation where the markets and stocks are propped up to look as attractive as possible. This isn’t a situation where the individual trader can make a difference in price but certainly the Smart Money has the ammo to do this. Unfortunately it is a temporary phenomenon that doesn’t last. Fund Managers do this to make their portfolio look as positive as they can but this has been a challenging quarter to say the least. Three months ago we all came into the markets thinking that this time it might be different. Instead we were greeted with one disaster after another. The Greek Crisis, the China Meltdown and Fed malaise. We still aren’t over it yet as the markets are boo-hooing the Fed for NOT raising rates. I would have thought the exact opposite would have been true but apparently the Smart Money all thought the Fed would raise and made plans for this to happen. When it didn’t they had to unwind all that they planned. I sincerely hope the Fed sticks by their guns and allow cooler heads to prevail.

Share: Analysis feed

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.