Nick Mastrandrea
Market Tea Leaves
Good Morning Traders,
As of this writing 4:10 AM EST, here’s what we see:
US Dollar: Down at 94.125 the US Dollar is down 419 ticks and trading at 94.125.
Energies: October Crude is up at 39.33.
Financials: The Sept 30 year bond is up 28 ticks and trading at 158.19.
Indices: The Sept S&P 500 emini ES contract is up 71 ticks and trading at 1890.50.
Gold: The October gold contract is trading down at 1137.00. Gold is 9 ticks lower than its close.
Initial Conclusion
This is not a correlated market. The dollar is down- and oil is up+ which is normal but 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 up which is not correlated. Gold is trading down which is not 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 mixed with about half the exchanges lower and the other half higher. As of this writing all of Europe is trading lower.
Possible Challenges To Traders Today
- Durable Goods are out at 8:30 AM EST. This is major.
- Core Durable Goods is out at 8:30 AM EST. This is major.
- FOMC Member Dudley Speaks at 10 AM EST. This is major.
- Crude Oil Inventories are out at 10:30 AM EST. This could move the crude markets.
Currencies
Yesterday the Swiss Franc made it’s move around 9:35 AM EST after 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 9:35 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 9:35 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 upside however the markets had other ideas as the Dow dropped 205 points in the last few minutes of trading. The other indices fell 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 it looked as though the market would experience a rebound. The futures was up, Europe was up and it looked as though we would have an upside day. Ironically the markets opened higher and thru out most of the session it appeared as though this would happen. However in the last 10-15 minutes of trading all of that went by the wayside and the markets dropped by triple digits. Why? The economic news reported wasn’t stellar and it seemed as though the markets would rise in spite of that. However when you combine lousy eco news with a Fed that won’t give any indication as to their intent; that can spell trouble as the Smart Money isn’t too keen on speculation. So if they can’t gain by going long they will most certainly go short; which is pretty much what happened yesterday.
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.
Recommended Content
Editors’ Picks
AUD/USD extends gains due to improved risk appetite
The Australian Dollar maintained its winning streak for the fourth consecutive session on Monday, buoyed by a hawkish sentiment surrounding the Reserve Bank of Australia. This optimism bolsters the strength of the Aussie Dollar, providing support to the AUD/USD pair.
USD/JPY snaps three-day losing streak above 153.50, Yellen counsels caution on currency intervention
The USD/JPY pair snap a three-day losing streak during the Asian trading hours on Monday. The uptick of the pair is bolstered by the modest rebound of the US Dollar and US Treasury Secretary Janet Yellen’s comments on potential Japanese interventions last week.
Gold price rebounds on downbeat NFP data, softer US Dollar
Gold price snaps the two-day losing streak during the Asian session on Monday. The weaker-than-expected US employment reports have boosted the odds of a September rate cut from the US Federal Reserve. This, in turn, has dragged the US Dollar lower and lifted the USD-denominated gold.
Bitcoin Cash could become a Cardano partnerchain as 66% of 11.3K voters say “Aye”
Bitcoin Cash is the current mania in the Cardano ecosystem following a proposal by the network’s executive inviting the public to vote on X, about a possible integration.
Week ahead: BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.