Will Santa Stick Around?

Good Morning Traders,

As of this writing 4:50 AM EST, here’s what we see:

US Dollar: Down at 89.670 the US Dollar is down 171 ticks and is trading at 89.670.
Energies: February Crude is up at 57.63.
Financials: The Mar 30 year bond is up 9 ticks and trading at 144.19.
Indices: The Mar S&P 500 emini ES contract is up 24 ticks and trading at 2073.00

Gold: The February gold contract is trading up at 1197.30 and is up 13 ticks from its close. Please NOTE: The front month for crude is now February.

Initial Conclusion

This is not a correlated market. The dollar is down- and oil is up+ which is normal but 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 higher which is 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 higher. As of this writing all of Europe is trading higher.

Possible Challenges To Traders Today

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

Lack of other economic news.

Currencies

On Friday the Swiss Franc made it’s move at around 8:40 AM EST with no economic news in sight. 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 8:40 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 8:40 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. 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

On Friday we said the market was poised to go higher and it didn’t disappoint as all 3 indices closed in positive territory. Today we aren’t dealing with a correlated however our bias is to the upside.

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

Commentary

Well it’s that time of year again and everyone is wondering will the Santa Claus rally stick around? At first glance most traders would think that the Santa Claus rally already happened in the first week of December as the last two weeks weren’t stellar. That was before the FOMC meeting. Someone should put a Santa hat on Janet Yellen as the Fed meeting moved the Dow over 700 points in two days. Will this continue? After all we only have 6 and one half trading days left in 2014. Only time will tell in the meantime gauge market direction and keep your stops intact.

On another note, I feel compelled to address Obama’s press conference Friday afternoon. It must be great to sit back and throw stones at glass houses, you just have to careful that none of that glass falls on you. In regards to Obama’s comment on Sony Pictures not releasing the film “The Interview”; you know Mr. Prez Sony Pictures is a private, for profit business entity; they are NOT a government agency, corporation etc. They are very concerned about the well being of their employees and the viewing public. If an outside terrorist organization (either real or not) make a threat; they have to take this seriously as no one wants another Aurora on their hands. BTW – if such a thing occurred who will cover Sony’s interests or the interests of the movie going public? You? You couldn’t even defend retirees pensions as that latest 1.1 trillion dollar budget you just signed into law doesn’t protect a retiree’s pension. Up until the time that you signed this budget into law it was illegal for a corporation to reduce pension payments owed to retirees; now all a company to do is to exclaim what a bad year it’s been and how horrible business has been and guess what? They get a pass. The Retiree? No such pass. If this is your idea of defending the Middle Class, I”M NOT IMPRESSED.