Good Morning Traders,

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

US Dollar: Up at 96.160 the US Dollar is up 160 ticks and trading at 96.160.
Energies: May Crude is down at 38.92.
Financials: The June 30 year bond is up 5 ticks and trading at 163.22.
Indices: The June S&P 500 emini ES contract is up 8 ticks and trading at 2030.00.
Gold: The April gold contract is trading down at 1219.40. Gold is 7 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 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 Hang Seng exchange which traded higher. As of this writing all of Europe is trading higher.

Possible Challenges To Traders Today

- S&P/CS Composite-20 HPI y/y is out at 9 AM EST. This is major.

- CB Consumer Confidence is out at 10 AM EST. This is major.

- Fed Chair Yellen Speaks at 11 AM EST. This is major.

Currencies

Yesterday the Swiss Franc made it’s move at around 7:45 AM EST before 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 7:45 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 7:45 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.

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 an upside bias as the Bonds and Gold were trading lower. The Dow gained 20 points, the S&P gained 1 and the Nasdaq lost 7. Today we aren’t dealing with a correlated market and our bias is neutral.

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

Commentary

Yesterday morning you could sense the markets wanted to move higher as the US markets was closed last Friday. As was almost as if we were viewing a horse race whereby all animals were chomping at the bit to run. No sooner did the markets open when this was realized. The Dow leapt into positive territory and remained there for the rest of the session. The Dow gained 20 points and this was without a European footprint as Europe was closed for trading yesterday. Today we have Home Price Index as well as Janet Yellen making a speech so we’ll have to monitor 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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