Easter Monday

Good Morning Traders,

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

US Dollar: Up at 96.250 the US Dollar is up 77 ticks and trading at 96.250.
Energies: May Crude is up at 40.11.
Financials: The June 30 year bond is down 11 ticks and trading at 162.22.
Indices: The June S&P 500 emini ES contract is up 43 ticks and trading at 2039.25.
Gold: The April gold contract is trading down at 1216.40. Gold is 52 ticks lower than its close.

Initial Conclusion

This is not a correlated market. The dollar is up+ and crude is up+ which is not normal and 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 higher 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.

Asia traded mainly lower with the exception the Aussie and Nikkei exchanges which traded higher. As of this writing all of Europe is closed for trading due to Easter Monday.

Possible Challenges To Traders Today

- Core PCE Price Index m/m is out at 8:30 AM EST. This is major.

- Goods Trade Balance is out at 8:30 AM EST. This is not major.

- Personal Spending m/m is out at 8:30 AM EST. This is major.

- Personal Income m/m is out at 8:30 AM EST. This is major.

- Pending Home Sales m/m is out at 9:45 AM EST. This is major.

Currencies

On Thursday the Swiss Franc made it’s move at around 8 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 8 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 8 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 just about 20 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 Ninja Trader platform

Bias

On Thursday we gave the markets a downside bias and the markets remained in negative territory up until the last 20 minutes of the session when it meandered into positive territory. The Dow closed up 13 points, the Nasdaq gained 5 and the S&P dropped by 1. All in all a very mixed day for the markets. Today we aren’t dealing with a correlated market however our bias is to the upside.

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

Commentary

Last Thursday the markets wandered into negative territory and remained there for the bulk of the trading session. None of the indices seemed to have any sense of direction or conviction and this could be said for the bulk of trading last week. This was because of the events of Brussels last week as that seemed to dominate the news and trading mindset globally. This week we do have Non-Farm Payrolls on Friday as well as 10 economic reports will be released. Today given that it is Easter Monday (yes, that’s a holiday in some countries) I wouldn’t expect much from this market.

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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.

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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.

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