Eco News Moves Markets

Good Morning Traders,

As of this writing 4:45 AM EST, here’s what we see:

US Dollar: Down at 96.730 the US Dollar is down 70 ticks and trading at 96.730.

Energies: April Crude is up at 33.45.

Financials: The Mar 30 year bond is up 4 ticks and trading at 164.22.
Indices: The Mar S&P 500 emini ES contract is up 3 ticks and trading at 1923.50.

Gold: The Feb gold contract is trading down at 1206.80. Gold is 46 ticks lower than its close.

Initial Conclusion

This is not a correlated market. The dollar is down- and crude 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 higher which is not correlated. Gold is trading down 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.

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

Possible Challenges To Traders Today

- Philly Fed Manufacturing Index is out at 8:30 AM EST. This is major.

- Unemployment Claims are out at 8:30 AM EST. This is major.

- Mortgage Delinquencies. This is not major.

- CB Leading Index m/m is out at 10 AM EST. This is major.

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

- Crude Oil Inventories is out at 11 AM EST. This is major.

Currencies

Yesterday the Swiss Franc made it’s move at around 9:15 AM EST after the economic news was reported. 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 9:15 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 9:15 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 Ninja Trader platform

Bias

Yesterday we gave the markets a neutral bias as we didn’t see any sense of direction for the markets. The Dow rose 258 points and the other indices gained ground as well. Today we aren’t dealing with a correlated market but will maintain our neutral bias.

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

Commentary

Yesterday we gave a neutral bias as it appeared to us that the markets didn’t have sense of direction with all instruments wanting to go higher. When you see a situation whereby all markets want to go either completely higher or lower, there is no correlation which means the markets could go in any direction. Hence the neutral bias. The Dow went positive right from the opening bell and didn’t look back. This despite ok (not stellar) eco news. Building Permits and Housing Starts were off fractionally from expectation but seemingly this didn’t stop a market that wanted to go higher and did. The Fed Meeting Minutes put no damper on the markets as they increased their gains. Today we have Weekly Unemployment Claims which may shed a clue on how the job market is actually doing.

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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.