Tuesday, January 28, 2014

When Bad is Good News for the Markets; Nightly-Newsletter 01/28/14; SchoolOfTrade.com

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 “Success is not measured by the position someone has reached in life, or the paycheck they cash every other Friday.  

We measure our success by the obstacles we have overcome to get to where we are today.”

Reflections from Today:
·       Markets rebound after 3 days of losses, ending today in the green
·       Bad news = Good News = Markets rally on “No Taper” by the Fed
·       More bearish economic news in the US
·       Durable Goods Orders drop sharply
·       Consumer Confidence continues to rise
·       Gold ended flat after rebounding from losses (-0.06% @ 1255.6)
·       Mini-Russell stayed inside yesterday’s range, higher (+1.75% @ 1141.6)
·       Crude Oil traded up to weekly highs (+1.60% @ 97.17)
·       APPLE down today 7.3% as consumer ease off the iPhone
·       FORD reported earnings today +90% year-to-year
·       FOMC day is tomorrow, Wednesday 29th @ 2pm EST
·       Gold contract rollover on Friday 31st
·       Chinese New Year on Friday 31st
·       President Obama to issue the ‘State of the Union Address’ tonight 8pm EST

Economic News for Tomorrow:

Will the Fed make any changes to their ‘taper-talk’ from end of 2013?  Will the Fed use the last week of poor economic news as an excuse to postpone the threat of tapering in tomorrow’s FOMC announcement?  Traders around the world will be watching closely to see what happens tomorrow afternoon at 2:00pm EST.

Tomorrow is known as ‘FOMC Day’ or ‘FED Day’ for day traders because the end of the 2-day meeting culminates with a big announcement on Wednesday which will outline the monetary policy of the US Federal Reserve Bank.
Remember, this event only happens 8 times every year in Washington with all the Fed Governors from the 12 Federal Reserve District Banks around the country which makes this one of the most important days of the YEAR.

Tomorrow morning we have Crude Oil inventories at 1030am EST which is going to be tough on Crude Oil traders because we typically see sloppy price-action on Wednesdays ahead of the inventory release, and then after 1030am we usually get some great trading opportunities. Tomorrow we will be very careful trading Crude Oil before the 1030am news is released, and then after 1030am we are going to have to see how the market-personality looks going into the 2:00pm EST release of the FOMC Announcement.

10:30am EST:     Crude Oil Inventories
2:00pm EST:       FOMC Meeting Announcement (Red-Star news)

Day trading plan for Tomorrow:

Crude Oil:

VIP Chart:
Crude Oil VIP Chart
Crude Oil traded higher today almost up to last week’s high at 97.84.  We see a bullish 2-day relationship, a wide trading-range, and a very bullish closing-print.

If we open tomorrow above the 97.84 weekly highs we are very bullish and we will be focused on buying.

If we open tomorrow below the 96.21 we are bearish and will sell short down to a profit-target at 95.21 and then 94.47.

If we open tomorrow inside today’s range we will then buy the lows at 96.21, sell the highs at 97.84, and avoid trading in the middle around 96.80-97.00.

Anchor Chart:
Crude Oil Anchor Chart 1
Crude Oil is moving higher on the anchor chart this evening, but I am waiting for price to pull back and give me an opportunity to buy this at a discount before I get into the position long.  

I have identified some key buying opportunities at 96.44, 96.15, 95.75 and 95.25 if we can get price to come down a little before going higher.
Crude Oil Anchor Chart 2

Assuming I can get into a trade long on a pullback, I will use the resistance levels overhead as easy profit-targets at 98.82, 99.46, 99.78, 100.59, 102.01, and 103.67.


VIP Chart:

Gold VIP Chart
Gold pushed lower today, although on very light volume ahead of tomorrow’s FOMC report.  Remember, Gold (and the dollar-index) will be the most-affected markets by FOMC, so it’s no surprise to see Gold has been challenging to predict over the last few days.

We see a bearish 2-day relationship, a typical trading-range, and a very bearish closing-print near the lows of the session.  These clues tell us to be looking for selling opportunities going into this evening and tomorrow and the GAP below us from 1248.2 don to 1242.8 is looking mighty inviting to be filled with a short trade this evening or tomorrow morning.

If we open below 1248.2 I am selling short down to profit-targets at 1242.8, 1238.1, and 1235.1.

If we open above the 1262.3 I am buying long up to profit-targets at 1265.8, 1270.4 and possibly even higher if the market-personality is very bullish and strong.

I will expect tomorrow morning to be challenging for day trading Gold because all eyes will be focused on 2pm EST and the FOMC announcement.

Anchor Chart:
Gold Anchor Chart
The anchor chart of Gold is VERY bearish this evening and we have a strong bearish price channel with a red cloud and almost below all the key moving-averages.  All of these clues tell us that we have the green light to get SHORT whenever we see the next entry pattern to get us into the trade.

My goal is to sell at a premium (resistance) so I am looking for selling opportunities at overhead resistance levels starting with 1255.3, 1259.3 1264.0 and even 1273.0.

If I can get into a short position this evening or tomorrow morning I will use the support levels below me as profit-targets at 1248.0, 1244.2, 1239.2, and then all the way down to the previous week lows at 1230.8


VIP Chart:
Mini Russell VIP Chart
Don’t let this narrow trading-range on the Mini-Russell fool you this evening on the VIP Chart because this market was a very easy to make profit today if you knew which patterns to look for.  We had an incredible day of trading this market in our Live Trade Room.

We see a consolidating 2-day relationship, a very narrow trading-range, and a very bullish closing-print at the highs of today’s range.  These three clues suggest that tomorrow will be a BIG RANGE day, but we may get stuck on this previous week low at 1238.0 before we see it go anywhere.

If we open above the 1144.5 I am buying long with profit-targets above me 1163.5, 1174.1, and the previous week highs at 1180.1

If we open below the 1117.5 (Monday’s low) I am selling short and using the support levels below as profit-targets at 1105.3, 1095.8, 1091.1, 1074.0

Anchor Chart:
Mini Russell Anchor Chart 1
The anchor chart of the Mini-Russell is an excellent example of a market is overbought and priced at a ‘premium’.  We are clearly bullish with higher-highs and higher-lows as well as being above the key moving-averages on this anchor chart.  The only concern we have right now is that we NEED to see this price pull back off these highs before we try to buy it this evening or tomorrow morning.

The ideal location to get long on the Mini-Russell is at the lows of this price channel around 1134.0 – 1136.0.  It’s hard to say exactly where the lows of the price channel will be tomorrow morning, but you can assume that if we push higher we are going to be waiting for a pullback so that we can buy this market at a DISCOUNT rather than at a PREMIUM. 

Mini Russell Anchor Chart 2
We have plenty of resistance levels overhead to use as profit-targets if we can get into the trade long, just remember NOT to buy directly into any of these levels overhead because then you are buying at a premium.  Be patient and wait for this price-action to come off these highs, and then when it regroups and pushes higher again you have it exactly where you want it.

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