Good Morning Traders,
As of this writing 4:45 AM EST, here’s what we see:
US Dollar: Down at 100.005 the US Dollar is down 205 ticks and trading at 100.005.
Energies: January Crude is up at 42.04.
Financials: The Dec 30 year bond is down 7 ticks and trading at 155.06.
Indices: The Dec S&P 500 emini ES contract is up 27 ticks and trading at 2086.50.
Gold: The December gold contract is trading down at 1070.40. Gold is 46 ticks higher than its close.
Initial Conclusion
This is a not a correlated market. The dollar is down- and crude is up+ which is normal and 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 higher which is not 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 mainly higher. As of this writing Europe is trading mainly higher with the exception of the German Dax and Paris exchanges which are trading fractionally lower.
Possible Challenges To Traders Today
- Final Manufacturing PMI is out at 9:45 AM EST. This is major.
- ISM Manufacturing PMI is out at 10 AM EST. This is major.
- Construction Spending m/m is out at 10 AM EST. This is major.
- ISM Manufacturing Prices is out at 10 AM EST. This is major.
- Total Vehicle Sales – All Day, this is major.
- FOMC Member Evans Speaks at 12:45 PM EST. This is major.
Currencies
Yesterday the Swiss Franc made it’s move at around 8:50 AM EST with no 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 8:50 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 high at around 8:50 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 the $10.00 that we usually see for currencies. Please note: This is Friday’s abbreviated session, not Wednesday’s session.
Charts Courtesy of Trend Following Trades built on a NinjaTrader platform
Bias
Yesterday we gave the markets an upside bias. The markets however had other ideas as the Dow dropped 78 points and the other indices lost ground as well. Today we aren’t dealing with a correlated market and our bias is to the upside.
Could this change? Of Course. Remember anything can happen in a volatile market.
Commentary
Today marks December 1st and as always at this time of year we’re wondering what Santa Claus is up to. Will we see a Santa Claus rally or will Mr. Grinch rear his ugly head? The key concern this year as opposed to years’ past is the whether or not the Fed will hike rates. Everyone out there in terms of the Smart Money and the analysts they pay are all virtually demanding that the Fed hikes. Our take on this is simple; the Fed will raise when they raise and not a moment sooner. We don’t think they’ll raise this month as they’ll want a full calendar years’ worth of data and they won’t get that until January at the earliest. Additionally we don’t think they’ll want to put a damper on holiday spending and the best way to do that is to hike. Not only will that effect consumer spending but Auto Buying as well. Ironically today we get Total Vehicle Sales. Could this change? Of course, anything is possible in a volatile market…
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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