Good Morning Traders,

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

US Dollar: Up at 95.880 the US Dollar is up 236 ticks and trading at 95.880.

Energies: May Crude is down at 41.11.

Financials: The June 30 year bond is down 8 ticks and trading at 161.21.
Indices: The June S&P 500 emini ES contract is up 5 ticks and trading at 2043.75.

Gold: The April gold contract is trading down at 1234.40. Gold is 142 ticks lower than its close.

Initial Conclusion

This is not a correlated market. The dollar is up+ and crude is down- which is 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.

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

Possible Challenges To Traders Today

- New Home Sales is out at 10 AM EST. This is major.

- Crude Oil Inventories are out at 10:30 AM EST. This is major.

Currencies

Yesterday the Swiss Franc made it’s move at around 8:30 AM EST before the economic 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 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 low at around 8:30 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 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 NinjaTrader platform

Pre-Market Global Review

Pre-Market Global Review

Bias

Yesterday we gave the markets a downside bias as the USD, Bonds and Gold were all trading higher and this does not bode well for an upside day. The Dow closed 41 points lower, the Nasdaq closed 13 points higher and the S&P is down 2. Today we aren’t dealing with a correlated market and our bias is to the upside.

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

Commentary

Yesterday morning started out strange as all the instruments we track were trading to the upside and it appeared as though the markets were correlated (albeit to the downside). Gold all of a sudden leaped seemingly out of nowhere. Then we realized that Brussels had been hit by a terrorist attack where more 30 people had perished and scores other were wounded. The markets however seemed to handle this quite well as Europe closed higher (with the exception of the Spanish IBEX exchange which traded lower). I must admit that this alone was quite impressive as a just a few short years ago the selloff would have been far more dramatic. However as mentioned earlier the incident in Brussels drove down the US markets somewhat (although it could have been far worse) and the Asian markets fell overnight. Today we have New Home Sales which is a major market mover and Crude Oil inventories and we’ll have to monitor market action to judge accordingly.

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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