The Rooster Call: State of the ES

Hit the Mark Trading’s Brief Review of Overnight Market Action Setting the Tone for the Trading Day

Good Morning Traders! I want to start Rooster Call with a summary of ES trading, which I sent to nightly video clients last night…

ES barely budged today, which tells you a lot about the mind-set of the professional trader…they are not trading it. We see price at the wedge apex so a break out is definitely coming. Price cannot continue moving in a tighter and tighter range indefinitely. The big fundamental event potentially moving the market is Friday’s Employment Situation report.

VIX is telling us professionals are completely complacent. Professionals are not buying…but the have no intention of selling. Dangerous until a break out occurs. Professionals look for continued side-way motion with upward bias. Now extend this logic to NQ, TF, and YM.

Day traders should recognize this challenging price action with respect to using runners on multiple contracts. Often, it is better just trading "all-in / all-out." Then again, when in doubt…stay out.

Overnight

Swiss annual inflation has registered deflation for 25 consecutive months and today’s report continues this long-term trend.

Germany is the economic powerhouse of Europe. Therefore, today’s news of factory orders expanding 1% in August over July, is a market positive. Annualized the rate is 2.1%.

OPEC continues "talking" up crude production freeze with Algeria’s Energy Minister, Nouredine Bouterfa, telling a local television interview it is possible OPEC could go 1% further than production freeze quotas discussed last month. He suggested this additional cut would be discussed at the November OPEC meeting.

"We will evaluate the market in Vienna by the end of November and if 700,000 barrels are not enough, we will go up. Now that OPEC is unified and speaks in one voice everything is much easier and if we need to cut by 1 percent, we will cut by 1 percent," said Nouredine Bouterfa. He also mentioned an informal OPEC meeting shall take place next week, October 8-13 to discuss how OPEC shall implement a production freeze. This is all warning shots for large crude shorts.

OPEC producers agreed in Algiers in September to reduce output by around 700,000 barrels per day to a range of 32.5-33.0 million barrels per day, its first cut since 2008. OPEC estimates its current output at 33.24 million bpd (Reuters). Crude higher in overnight trading. I can only imagine US traders will have a field day over this news report.

Separately, Alaska’s crude reserves may have grown 80%, see here from Bloomberg. Field could one day produce as much as 200,000 barrels a day.

Speculators rushing into Deutsche Bank stock may feel unease on the news of a new indictment for colluding with Banca Monte dei Paschi di Siena SpA to conceal the Italian lender’s losses. Let us pause a moment and reflect upon the comforting immortal words of the Deutsche Bank CEO, John Cryan…“In banking, trust is the basis of everything."

Excellent article on gold from Bloomberg showing "there is an extremely high correlation between the price of gold and changes in long-term interest rates. As the 10-year yield moves higher, gold moves lower."

Economic Events

Challenger Job-Cut Report 7:30 AM ET

Jobless Claims – Today’s top economic report 8:30 AM ET

Gallup Good Jobs Rate 8:30 AM ET

Bloomberg Consumer Comfort Index 9:45 AM ET

EIA Natural Gas Report 10:30 AM ET

4-Week Bill Announcement 11:00 AM ET

3-Month Bill Announcement 11:00 AM ET

6-Month Bill Announcement 11:00 AM ET

52-Week Bill Announcement 11:00 AM ET

3-Yr Note Announcement 11:00 AM ET

10-Yr Note Announcement 11:00 AM ET

30-Yr Bond Announcement 11:00 AM ET

Fed Balance Sheet 4:30 PM ET

Money Supply 4:30 PM ET

Markets are consumed with the USA Employment Situation report released Friday at 8:30AM ET. Since we economics are best viewed in the macro, here is a chart from Econoday.com showing the civilian unemployment rate.

Civilian Unemployment Rate

This graph shows the widely reported 4.9% "politician’s number. However, the so- called "real unemployment rate" the FED is thought to focus upon is "U6" explained here. The U6 rate equals 9.7% unemployment.

For a general rule, bonds thrive in a low employment rate environment. The FED keeps interest rates low in order to foster cheap money for businesses to access and hopefully use for investment in creating new jobs. This theory is out-dated now that the US economy has only 11% of it’s economy in manufacturing and the service economy thrives with part time workers; those working less than 40 hours per week.

The FED should be commended for working privately with U6, however, the FED is too politically correct by failing to mention U6 in any media event, speech, or Congressional testimony. The rule here is "tell ’em what they want to know."

Markets

Crude approaches 2016 highs. CL closing over $54.00, should be considered a major chart event. We saw $50 dollar area tested within pennies and fall back. Today might see USA traders pop price over the psychologically important $50.00, with the comments from OPEC.

I would not trust crude having an impact on ES until you see the price wedge break on daily chart.

USA equity index futures as my opening comments suggest, are on verge of a break out trading in tighter and tighter range. Break out is imminent.

Globally all equity index futures we follow are incrementally red in un-trade-able range, in my opinion. Up to USA traders to change this reading. Up to an ES breakout that will reverberate around the globe.

US dollar continues climbing. Euro lower (not helped by German economic data). Climbing US dollar as a very general rule tends to hurt commodities priced in US dollars. Crude currently immune from this thinking.

Euro excellent choice today for day trading. If currencies go quiet, we blame this on apprehension in front of Friday US Employment Situation report.

Higher US dollar means metals are trading lower across the board. Our strong gold support comes in at 1253. Using this, we saw a real time trade in Silver show simulated profits as high as $500.00 as a day trade yesterday, demonstrating techniques taught in the Just Day Trade! course.

Using this, we saw a real time trade in Silver show simulated profits as high as $500.00 as a day trade yesterday, demonstrating techniques taught in the Just Day Trade! course. Trailing stop utilized moving from a $1400 protective stop to breakeven protective stop. What the trade showed was those who held following trailing stop only would have broke even on the trade after seeing a run as high as $500.00. "Entries are easy…exits are more difficult."

Nightly video clients are potentially long Natural Gas. Considering the natural gas inventory report, anyone holding natural gas should consider moving conservative taking profits or tightening stops. All trades called are educational in nature and not an offer to buy or sell anything. You learn from paper trading building an internal confidence.

Grains are incrementally lower thanks to US dollar AND the idea hurricane Matthew will not move inland into crop areas of the Southeast. We discussed a short set-up earlier this week in November Soybeans in the nightly video newsletter. Strong support is at hand so traders monitoring this trade idea should exercise conservative caution.

Softs are all lower incrementally perhaps on US dollar strength.

Bonds move higher as traders reflect on the ECB story attributed to "unnamed sources" shook global debt markets. I discussed that report in yesterday’s Rooster Call. Bonds will fluctuate on Friday’s USA Employment Situation report.

All currencies lower against US dollar. Australian dollar resistance held once again. Yen marks end of daily chart up trend potentially today.

Think About This!

Investors Business Daily offers free access to their premium sites for the next few days. They sent an email blast and here is the link. Good resource, especially for stock traders. Consider this a public service announcement. Go to their lists and note the momentum stocks.

To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.