Good Morning Traders,
As of this writing 5 AM EST, here’s what we see:
US Dollar: Up at 97.510 the US Dollar is up 267 ticks and trading at 97.510.
Energies: December Crude is down at 47.80.
Financials: The Dec 30 year bond is up 4 ticks and trading at 154.24.
Indices: The Dec S&P 500 emini ES contract is up 7 ticks and trading at 2104.75.
Gold: The December gold contract is trading up at 1117.60. Gold is 35 ticks higher than its close.
This is a 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 down which is correlated. Gold is trading up which is not 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 mainly higher with the exception of the Indian Sensex exchange which is trading lower. As of this writing all of Europe is trading higher.
Possible Challenges To Traders Today
– FOMC Member Brainard Speaks at 5:30 AM EST. This is major.
– ADP Non-Farm Employment Change is out at 8:15 AM EST. This is major.
– Trade Balance is out at 8:30 AM EST. This is major.
– Final Services PMI is out at 9:45 AM EST. This is not major.
– Fed Chair Yellen Testifies at 10 AM EST. This is major.
– ISM Non-Manufacturing PMI is out at 10 AM EST. This is major.
– Crude Oil Inventories is out at 10:30 AM EST. This can move the crude markets.
– FOMC Member Dudley Speaks at 2:30 PM EST. This is major.
Yesterday the Swiss Franc made it’s move at around 10 AM EST after all 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 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 high at around 11 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 about 15 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 Ninja Trader platform
Yesterday we said our bias was to the downside as the USD and Bonds were trading higher and usually this is a good indication for a downside day. The markets had other ideas and the Dow went higher by 89 points and the other indices gained ground 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.
Yesterday the Auto Sales numbers came out that dwarfed expectations. The expectation was for 17.8M and the actual number was 18.2M. It appears that the Fed is wise enough not to hike rates as they’re all too aware that doing so will slow down economic growth. Ironically enough today Fed Chair Yellen addresses the House Financial Services Committee in DC where no doubt half the audience will demand higher rates and the other half will commend her on not hiking. Go figure but her speaking usually makes for a positive day in the markets.