Happy Thanksgiving

Good Morning Traders,

As of this writing 5:10 AM EST, here’s what we see:

US Dollar: Up at 88.055, the US Dollar is up 93 ticks and is trading at 88.055.
Energies: January Crude is down at 74.03
Financials: The Dec 30 year bond is up 6 ticks and trading at 143.05.
Indices: The Dec S&P 500 emini ES contract is up 14 ticks and trading at 2071.00.
Gold: The December gold contract is trading down at 1195.40 and is down 18 ticks from its close.

Initial Conclusion

This is a correlated market. The dollar is up+ and oil is down- which is normal and the 30 year bond is trading up. 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 lower 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.

Asia traded mainly higher with the exception of the Nikkei exchange which traded fractionally lower. As of this writing all of Europe is trading higher.

Possible Challenges To Traders Today

Core Durable Goods Orders m/m is out at 8:30 AM EST. This is major.

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.

Durable Goods Orders m/m is out at 8:30 AM EST. This is major.

Personal Spending m/m is out 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.

Revised UoM Consumer Sentiment is out at 9:55 AM EST. This is not major.

Revised UoM Inflation Expectations is out at 9:55 AM EST. This is not major.

New Home Sales is out at 10 AM EST. This is major.

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

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

Natural Gas Storage is out at 12 PM EST. This could move the Nat Gas market.

Currencies

Yesterday the Swiss Franc made it’s move at around 8:35 AM EST after the GDP numbers were released. 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 8:35 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 8:35 AM EST and the Swiss Franc hit a low. I’ve changed the charts to reflect a 5 minute time frame and added a Darvas Box to make it more clear. This represented a long opportunity on the Swiss Franc, as a trader you could have netted 20 plus ticks on this trade. 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 which means the markets could go in any direction. The markets closed mixed as the Dow dropped 3 points, the S&P lost 2 and the Nasdaq gained 3. Today we are 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

Yesterday we called for a neutral bias as all the instruments we track were pointed higher. When everything is pointed either higher or lower then there is no correlation and therefore no direction which means the markets could go in any direction. The Dow was all over the map yesterday as first it dropped, then gained, then went into positive territory, then closed down fractionally. Think of it as a ship with no rudder. It can’t give you direction because it has no sense of itself. This occurred despite all the positive news we received yesterday. Once again rules of Market Correlation are telling you something.