The St. Patty's Day Rally

Good Morning Traders,

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

US Dollar: Up at 94.990 the US Dollar is up 194 ticks and trading at 94.990.
Energies: May Crude is down at 41.44.
Financials: The June 30 year bond is up 27 ticks and trading at 163.18.
Indices: The June S&P 500 emini ES contract is down 3 ticks and trading at 2029.50.
Gold: The April gold contract is trading down at 1260.90. Gold is 41 ticks lower 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 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.

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

Possible Challenges To Traders Today

- FOMC Member Dudley Speaks at 9 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.

- JOLTS Job Openings are out at 10 AM EST. This is major.

- FOMC Member Rosengren Speaks at 11 AM EST. This is major.

- FOMC Member Bullard Speaks at 2 PM EST. This is major.

Currencies

Yesterday the Swiss Franc made it’s move at around 8:40 AM EST after all 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 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 high at around 8:40 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 ticks plus 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.

Please note that the front months are now June, 2016.

Charts Courtesy of Trend Following Trades built on a Ninja Trader platform

Bias

Yesterday we maintained a neutral bias as the markets didn’t give us any sense of direction. The markets opened sideways trading into and out of positive territory until 10 AM when the markets remained in positive territory. The Dow closed 156 points higher and the other indices gained ground as well. Today we aren’t dealing with a correlated market and our bias is to the downside.

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

Commentary

Yesterday we gave the markets a neutral bias as the future didn’t have any sense of direction yesterday morning. That changed after 10 AM EST when all the economic reports came out and the markets fell into positive territory. The economic news reported gave credence to this as Philly Fed and JOLTS Job Openings came in better than expected. Today we have 3 Fed members speaking and we hope that they don’t say anything to disturb the rally. We applaud the Fed for having the foresight and wisdom to hold off on a rate hike, obviously this could change at the next go around but for the time being; we’ll take it.

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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.

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