The Greeks Have Their Day

Good Morning Traders,

As of this writing 4:40 AM EST, here’s what we see:

US Dollar: Down at 94.930, the US Dollar is down 185 ticks and is trading at 94.930.
Energies: March Crude is down at 45.07.
Financials: The Mar 30 year bond is up 5 ticks and trading at 149.24.
Indices: The Mar S&P 500 emini ES contract is down 26 ticks and trading at 2047.25.
Gold: The February gold contract is trading up at 1281.20 and is up 18 ticks from its close.

Initial Conclusion

This is not a correlated market. The dollar is down- and oil is down- which is not 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 down which is not correlated. Gold is trading higher which is correlated with the US dollar trading down. 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 Shanghai and Hang Seng exchanges which traded lower. As of this writing all Europe is trading lower.

Possible Challenges To Traders Today

Core Durable Goods Orders m/m is out at 8:30 AM EST. This is major.

Durable Goods Orders m/m is out at 8:30 AM EST. This is major.

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

Flash Services PMI is out at 9:45 AM EST. This is not major.

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

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

Richmond Manufacturing Index is out at 10AM EST. This is major.

Currencies

Yesterday the Swiss Franc made it’s move at around 8:45 AM EST with no economic news in sight. 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 8:45 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 low at 8:45 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 plus ticks 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 $10.00 that we usually see for currencies.

Charts Courtesy of Trend Following Trades built on a NinjaTrader platform

Bias

Yesterday we said our bias was to the downside as the markets were nearly correlated in that direction. The Dow gained a paltry 6 points and the other indices gained fractionally as well. 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 we said our bias was to the downside and up until the final two minutes of the session we were correct. But then within the last two minutes the Dow jumped up to gain 6 points and the other indices gained as well although fractionally. The S&P gained 5 and the Nasdaq 14. Well it looks as though the Greeks had quite a celebration yesterday with the far left winning the election. The far left has promised higher tax revenues, and end to austerity and a renegotiation of the deal consummated in 2010. How will they achieve all this? Tax the rich. What they seem to have forgotten is that the rich are highly mobile and can pretty much live where they choose, so if they decide to become citizens of a domicile that won’t tax them so much? Oh well, I guess the Greek government won’t be getting any of that tax revenue. Oh yes, I forgot Syriza has also promised to beef up tax revenues by more stringent investigations. This is a government that never had a handle on tax revenues to begin with. This is just another example of promise them anything and deliver later…