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No News is Good News


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No News is Good News

Good Morning Traders,

As of this writing 5:10 AM EST, heres what we see:

US Dollar: March USD is Down at 98.705.

Energies: March'20 Crude Up at 50.33.

Financials: The Mar'20 30 year bond is Down 26 ticks and trading at 162.14.

Indices: The March S&P 500 emini ES contract is 28 ticks Higher and trading at 3360.00.

Gold: The April '20 Gold contract is trading Down at 1571.80. Gold is 76 ticks Lower than its close.

Initial Conclusion

This is not a correlated market. The dollar is Down- and Crude is Up+ which is 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 S&P is Higher and Crude is trading Higher which is not correlated. Gold is trading Lower 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.

At this time all of Asia is trading Higher with the exception of the Nikkei exchange which is Lower. Currently all of Europe is trading Higher as well.

Possible Challenges To Traders Today:

  • NFIB Small Business Index is out at 6 AM EST. This is Major.
  • Fed Chair Powell Testifies at 10 AM EST. This is Major.
  • JOLTS Job Openings is out at 10 AM EST. This is Major.
  • Mortgage Delinquencies are out at 10 AM EST. This is Major.
  • FOMC Member Quarles Speaks at 12:15 PM. This is Major.
  • FOMC Member Kashkari Speaks at 2:15 PM EST. This is Major.

Bias

Yesterday we gave the markets a Neutral bias as we didn't see much in the way of market correlation Monday morning, hence the Neutral bias. The Dow gained 174 points and the other indices rose as well. Today we aren't dealing with a correlated market and our bias is to the Upside.

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

Commentary

Yesterday the markets rose with virtually no news to speak of. This can be viewed as refreshing as last week was loaded with news both economic and geopolitical and the markets were all over the place. Today we have more in terms of economic than we did yesterday so time will tell how it will effect the markets, if at all.

On Thursday, April 5th (2018) we had the honor and privilege to be interviewed by David Lincoln on his You Tube channel. David is a floor trader for the options markets. If you listen to this interview, you will enjoy it. To view the interview go to:

ttps://youtu.be/U7gh9oanjIE

Just so you understand, Market Correlation is Market Direction. It attempts to determine the market direction for that day and it does so by using a unique set of tools. In fact TradersLog published an article on this subject that can be viewed at: http://www.traderslog.com/market-correlation-is-market-direction/

As readers are probably aware I don't trade equities. While we're on this discussion, let's define what is meant by a good earnings report. A company must exceed their prior quarter's earnings per share and must provide excellent forward guidance. Any falloff between earning per share or forward guidance will not bode well for the company's shares. This is one of the reasons I don't trade equities but prefer futures. There is no earnings reports with futures and we don't have to be concerned about lawsuits, scandals, malfeasance, etc. Anytime the market isn't correlated it's giving you a clue that something isn't right and you should proceed with caution. Today our bias is to the Upside. Could this change? Of course. In a volatile market anything can happen. We'll have to monitor and see.

As I write this the crude markets are Higher and the S&P is Higher. This is not normal. Crude and the markets are now reverse correlated such that when the markets are rising, crude drops and vice-versa. Yesterday March crude dropped to a low of $49.42. It would appear at the present time that crude has support at $49.50 a barrel and resistance at $52.50. Remember that crude is the only commodity that is reflected immediately at the gas pump. Please note that the front month for crude is now March. Both Russia and Saudi Arabia have agreed to keep production cuts in place for the next 6 - 9 months. This will artificially increase the price of crude at the pump by keeping supply low.

If trading crude today consider doing so after 10 AM EST when the markets give us better direction.

Crude Oil Is Trading Lower

Crude oil is trading Lower and the S&P is Lower. This is not normal. Crude typically makes 3 major moves (long or short) during the course of any trading day: around 9 AM EST, 11 AM EST and 2 PM EST when the crude market closes. If crude makes major moves around those time frames, then this would suggest normal trending, if not it would suggest that something is not quite right. As always watch and monitor your order flow as anything can happen in this market. This is why monitoring order flow in today's market is crucial. We as traders are faced with numerous challenges that we didn't have a few short years ago. High Frequency Trading is one of them. I'm not an advocate of scalping however in a market as volatile as this scalping is an alternative to trend trading. Remember that without knowledge of order flow we as traders are risking our hard earned capital and the Smart Money will have no issue taking it from us. Regardless of whatever platform you use for trading purposes you need to make sure it's monitoring order flow. To fully capitalize on this newsletter it is important that the reader understand how the various markets correlate. More on this in subsequent edition

Nick Mastrandrea is the author of Market Tea Leaves. Market Tea Leaves is a daily newsletter that is dedicated to your trading success. We teach and discuss market correlation. Market Tea Leaves is published daily, pre-market in the United States and can be viewed at www.markettealeaves.com. Interested in Market Correlation? Want to learn more? Signup and receive Market Tea Leaves each day prior to market open. As a subscriber, youll also receive our daily Market Bias video that is only available to subscribers.



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About the author


Nick Mastrandrea is the author of Market Tea Leaves. Market Tea Leaves is a free, daily newsletter that discuses and teaches market correlation. Market Tea Leaves is published daily, pre-market in the United States and can be viewed at www.markettealeaves.com Feel free to visit and subscribe.

Nick has traded various financial instruments in his career but is currently  focused on the Futures markets. At one time Nick held a NASD Series 7 license and currently holds a Life, Health and Variable Authority.  He resides in the Princeton area of New Jersey and can be reached at nmastran@verizon.net or Skype: nmastran

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