Super Tuesday Was

Good Morning Traders,

As of this writing 5:15 AM EST, here’s what we see:

US Dollar: Up at 98.425 the US Dollar is up 60 ticks and trading at 98.425.

Energies: April Crude is down at 33.74.

Financials: The Mar 30 year bond is down 3 ticks and trading at 163.19.
Indices: The Mar S&P 500 emini ES contract is down 19 ticks and trading at 1973.25.

Gold: The April gold contract is trading down at 1230.70. Gold is 1 tick 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 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.

All of Asia traded higher with some exchanges in positive triple digit territory. As of this writing all of Europe is trading higher.

Possible Challenges To Traders Today

- ADP Non-Farm Employment Change is out at 8:15 AM EST. This is major.

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

- Beige Book is out at 2 PM EST. This is major.

Currencies

Yesterday the Swiss Franc made it’s move at around 10 AM EST after the economic news was released. 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 10 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 10 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 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.

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

Bias

Yesterday we gave the markets a neutral bias as we didn’t see much to suggest an upside yesterday morning. A neutral bias means the markets could go in any direction. The Dow gained 349 points and the other indices gained ground as well. Today we are dealing a market that has no sense of direction therefore our bias is neutral.

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

Commentary

Yesterday we gave the markets a neutral bias as we didn’t see overwhelming evidence to suggest an upside bias. The economic news came out and they all beat expectation. The markets in turn opened higher and remained there for the rest of the session. You could say it was a market that made sense as it went up based on good economic news. Of particular interest was Total Vehicle Sales which went up last month. Now you might be thinking “how could that be when the Fed hiked rates in December”? This is very similar to what happened in the late 1970′s, early 1980′s when the US had a 13% inflation rate and the Fed was constantly raising rates to stem the inflation tide. The mindset was “buy today, buy now or pay more for it tomorrow.” That helped a lot of salespeople to sell stuff and the same adage applies today.

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