Good Morning Traders,

As of this writing 4:30 AM EST, here’s what we see:

US Dollar: Up at 98.915 the US Dollar is up 203 ticks and trading at 98.915.
Energies:
December Crude is up at 41.89.
Financials:
The Dec 30 year bond is up 11 ticks and trading at 153.06.
Indices:
The Dec S&P 500 emini ES contract is up 7 ticks and trading at 2042.25.
Gold:
The December gold contract is trading up at 1082.80. Gold is 18 ticks higher than its close.

Initial Conclusion

This is a not a correlated market. The dollar is up+ and crude is up+ 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 up and Crude is trading up which is not correlated. Gold is trading up 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. As of this writing all of Europe is trading mainly lower with the exception of the Milan exchange which is fractionally higher.

Possible Challenges To Traders Today

- Core Retail Sales m/m is out at 8:30 AM EST – This is major.

- Retail Sales m/m is out at 8:30 AM EST. This is major.

- PPI m/m is out at 8:30 AM EST. This is major.

- Core PPI is out at 8:30 AM EST. This is major.

- Prelim UoM Consumer Sentiment is out at 10 AM EST. This is major.

- Prelim UoM Inflation Expectations is out at 10 AM EST. This is major.

- Mortgage Delinquencies. This is major.

- Business Inventories m/m is out at 10 AM EST. This is not major.

- Natural Gas Storage is out at 10:30 AM EST.

Currencies

Yesterday the Swiss Franc made it’s move at around 10 AM EST after the 8:30 news was reported. 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 10 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 10 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 the $10.00 that we usually see for currencies.

Charts Courtesy of Trend Following Trades built on a NinjaTrader platform

Pre-Market Global Review

Pre-Market Global Review

Bias

Yesterday we said our bias was neutral. For those of you who are new to us a neutral bias means the markets could go in any direction. The Dow dropped 254 points and the other indices dropped as well. Today we aren’t dealing with a correlated market and we will maintain a neutral bias.

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

Commentary

Yesterday we had a virtual tsunami of economic reports however they did little if anything to inspire the markets. The JOLTS Job numbers came in at 5.53 million which represented an all time high but the Unemployment Claims came in higher at 276,000 versus 270,000 expected. The question is if the jobs are doing so well then why are the Unemployment Claims higher? Last week it was the same scenario with the claims coming in higher than expected. I just hope the Fed reviews these facts and figures prior to doing anything drastic…..

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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