Nick Mastrandrea
Market Tea Leaves
Good Morning Traders,
As of this writing 4:55 AM EST, here’s what we see:
US Dollar: Up at 99.255 the US Dollar is up 231 ticks and trading at 99.255.
Energies: February Crude is up at 31.28.
Financials: The Mar 30 year bond is down 21 ticks and trading at 156.29.
Indices: The Mar S&P 500 emini ES contract is up 70 ticks and trading at 1942.50.
Gold: The Feb gold contract is trading down at 1080.90. Gold is 43 ticks lower than its close.
Initial Conclusion
This is not a correlated market. The dollar is up+ and crude is up+ which is not 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 lower 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 with the exception of the Shanghai exchange which traded fractionally lower. As this writing all of Europe is trading higher.
Possible Challenges To Traders Today
- Crude Oil Inventory is out at 10:30 AM EST. This is major.
- 10 Year Bond Auction Starts at 1 PM EST. This could impact PM trading.
- Fed Beige Book is out at 2 PM EST. This is major.
- Federal Budget Balance is out at 2 PM. This could impact PM trading.
Currencies
Yesterday the Swiss Franc made it’s move at around 10 AM EST after the Jolts Job Opening number came out. 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 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 high at around 10 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 about 20 plus ticks per contract 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
Bias
Yesterday we gave the markets an upside bias as Crude, the Bonds and Gold were all trading down and usually this is a good indication for an upside day. The Dow gained 117 points and the other indices gained ground as well. 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
Last night President Obama gave his State of the Union address to Congress to inform all of us just how marvelous the US economy is doing and to defend his legacy. The issue that I always see with this President is that he gets it in half truths all the time. Yes, the US created more jobs but the jobs being created aren’t living wage jobs and most don’t offer benefits. Whereas he may know this privately (and probably does), he’ll never admit this publicly. But as the old saying goes “you can’t fool all the people all the time”…..
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.
Recommended Content
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold holds around $2,330 after dismal US data
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.