Wednesday, February 5, 2014

Volatility is BACK! All eyes shift to Friday’s Report | Newsletter 02/05/14

“What we can or cannot do, what we consider possible or impossible, is rarely a function of our true capability. It is more likely a function of our beliefs about who we are.”

Reflections from Today:
·       Weak Employment, Bad Weather, Friday’s Non-Farm Payroll Report weighing on the markets today.
·       We expected a volatile session, which is exactly what we got
·       ADP Employment comes in lower-than-expected, Gold moves higher (+175k)
·       ISM Non-Manuf. comes in better-than-expected, but new orders still very weak, Crude Oil and Equities fall lower
·       Crude Oil Inventories; higher inventories & less demand, Crude Oil drops
·       Markets trading ‘in balance’ ahead of Friday’s Non-Farm Payroll report
·       Crude Oil went lower (-.45% @ 97.32)
·       Gold went higher (+.25% @ 1257.3)
·       Mini-Russell went lower (-.50% @ 1089.9)
·       ECB is rumored to be forced to cut rates in March; threat of deflation
·       Thursday;  Jobless Claims, International Trade, Productivity & Costs, all eyes on Friday’s Non-Farm Payroll
·       This day in history:  Feb 5th 1790 was the first Census is conducted in the US

Economic News for Tomorrow:
Thursday morning has a LOT of big news scheduled at the beginning of the session so we will need to be ready for trading opportunities starting at 8:00am EST.

News Worksheet
8:30am EST:             International Trade
8:30am EST:             Jobless Claims
8:30am EST:             Productivity & Costs
10:30am EST:          Natural Gas Inventories
Friday AM:               Non-Farm Payrolls

Day trading plan for Tomorrow:

Crude Oil:

VIP Chart:
Crude Oil VIP Chart
Crude Oil was very sloppy today because of the Inventory Report which came out at 10:30am EST and drove prices lower on higher inventories and lower demand.
Today we had a sideways range, in a very typical trading-range, and the closing-print was dead-centered in the middle of the range.

These three clues tell us that the market-sentiment is completely balanced right now, and we can assume traders are waiting for tomorrow’s Jobless Claims or Friday’s Non-Farm Payroll report. 

I am looking for buying opportunities above 98.14 tomorrow, and I will look to sell short below 96.78.

Anchor Chart:
Crude Oil 34 Anchor
The anchor chart of Crude Oil shows us a consolidating market-structure this evening.  We can see lower-highs and higher-lows on the (34) anchor chart and we are getting VERY close to the end of this price wedge, which tells us a breakout is likely just around the corner.

Crude Oil 13 Anchor
As we move closer on the anchor chart (13) we can see the very narrow price wedge with trend-lines at the highs and lows.  We can also see a short-term trend that is bearish, and with the moving-averages above us right now we can confidently sell short with a profit-target at the lows around 96.80 – 96.69.

I want to sell short at this time, however, we are in the middle of the price wedge so I know this will be a low-percentage trade.


VIP Chart:
Gold VIP Chart
Gold was FUN to trade today in our Live Trade Room.  We had some great volatility early in the session which allowed us to hit our daily goal before lunchtime. 

Today we had a bullish market-personality, a very wide trading-range, and a closing-print that went all the way back down into the lower-middle…almost where we began the session.

The VIP chart tells me that we have a ‘balanced’ market-sentiment going into Thursday.  I am buying with an opening-print above 1274.5, and selling with the opening-bell below 1251.8.
Anchor Chart:

Gold 34 Anchor Chart
The (34) anchor chart of Gold shows us that price-action is moving higher, but it keeps running into the sell-zone overhead at 1274.5 which is creating a bit of consolidation in the short term.

Gold 21 Anchor Chart
When you move to the (21) anchor chart you can see the bullish price channel has formed which tells us that BUYING at support (discounted price) will be the high-percentage-trade going into Thursday.  Ideally, I would like to buy the 1231.0 area if the price-action pulls back, and I want to take profit at the resistance above around 1274.5.

Gold 13 Anchor Chart
Watch out!  The (13) anchor shows us a very similar market-structure as Crude Oil this evening.  We can see price-action is in the middle of this short term price wedge, and with a short-term trend that is bearish we can confidently sell short as long as we see the proper entry pattern.  

If I sell short this evening my profit-target is down at 1245.7, but we know that when price-action is in the middle of a price wedge we should sit-on-hands because this trade is much lower-percentage than what we can get when we buy-the-lows at support and sell-the-highs at resistance.


VIP Chart: 
Russell VIP Chart
The Mini-Russell was another market that was FUN to trade this morning in our Live Trade Room.  The VIP chart doesn't make it LOOK as volatile as it really was in real-time.  We sold right at the opening-bell this morning and then bought the fake-out breakout at the PLOD around 1086.0 for a nice profit selling, then buying back into the range.

Tomorrow I am selling below 1078.0, and buying above the 1096.7.  Keep in mind, if we get long above 96.7 we have a big range to move into all the way up to a profit-target at the highs around 1127.7.
Anchor Chart:

Russell 34 Anchor Chart
The (34) anchor chart shows us that price-action is trying to break through a massive support zone this evening around the 1090.5 down to 1069.1.  This tells us that selling short MAY be a rocky ride lower overnight and into tomorrow, and we may even see a price-reversal back to the 1100.0 big-round-number.

Russell 21 Anchor Chart
The (21) anchor chart shows us a strong bearish price channel in both the short and long term trends.  When we see a bearish market-sentiment like this we know our job is to sell when price is at a premium. 

Russell 13 Anchor Chart
The (13) anchor chart shows us trading higher into some major sell-zones overhead that will make for a PERFECT selling opportunity this evening and into tomorrow.  I want to sell short at 1091.5 and also up at 1099.1 to keep trading lower in this bearish trend.

If I can get into a short trade tonight my profit-targets are going to be 1081.7, 1078.0 and then 1068.3 as the runner profit-target.

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