Jobs Friday

Good Morning Traders,

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

US Dollar: Up at 97.645 the US Dollar is up 44 ticks and trading at 97.645.
Energies: April Crude is down at 34.54.
Financials: The Mar 30 year bond is up 6 ticks and trading at 165.00.
Indices: The Mar S&P 500 emini ES contract is down 7 ticks and trading at 1988.75.
Gold: The April gold contract is trading up at 1273.70. Gold is 155 ticks higher than its close.

Initial Conclusion

This is not a correlated market. The dollar is up+ and crude is down- which is 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 down and Crude is trading lower 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 higher with the exception of the Sensex exchange which traded lower. As of this writing Europe is trading mixed with half the exchanges higher and the other half lower.

Possible Challenges To Traders Today

- Average Hourly Earnings m/m is out at 8:30 AM EST. This is major.

- Non-Farm Employment Change is out at 8:30 AM EST. This is major.

- Trade Balance is out at 8:30 AM EST. This is not major.

- Unemployment Rate is out at 8:30 AM EST. This is not major.

Currencies

Yesterday the Swiss Franc made it’s move at around 8:30 AM EST after the Unemployment Claims 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 8:30 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 8:30 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 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 a downside bias as the USD, Bonds and Gold were all trading up and this signaled a downside bias. The Dow gained 45 points and the other indices gained ground as well. Today being Jobs Friday we will adhere to a neutral bias.

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

Commentary

Well yesterday we would consider a Tsunami News day as we had about 9 economic reports, most of which were major. But regardless the news pretty much came in on the negative side as nothing really met or beat expectation. Unemployment Claims came in higher than expected, ISM Non-Manufacturing PMI and Factory Orders all came in below expectation and this had an impact on the markets yesterday. As many of you know already, given that this is Jobs Friday we will maintain a neutral bias as in our custom for this day. Why, you might ask? Because the markets historically speaking have never shown any sense of normalcy on this day. Could this change? Of course, but we expect the markets will decide after 8:30 AM EST when the numbers come out…

Share: Analysis feed

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.