The Rooster Call: Strength in US Dollar Still Fading

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

Good morning, traders! Strength in the US dollar faded in the overnight as 80.895 resistance holds. As mentioned in your nightly videos, daily chart pushes for a new up trend, whilst weekly chart fights for continuation of down trend. Price will resolve the issue.

Yesterday’s US dollar strength due to robust US economic data points. Additionally, nervousness over potential fuel for tapering by the FED of the $85 billion a month stimulus helped the dollar.

Let’s remember if the FED reduces monthly stimulus purchase of longer term securities, this means the FED reduces the printing press and in turn, US dollar should strengthen. We are already positioned cheaply with UUP and a futures trade with close protective stop just announced.

Reports on “Cyber Monday” show record sales conducted. This is market bullish. Retail sales at walk-in stores were down 2.9%.

As if on cue…as if sensing global markets require yet another injection of support, the Bank of Japan is rumored they are preparing a $53 billion dollar additional stimulus (Reuters). A falling Yen is another source of market support.

Brazil’s economy contracted in the third quarter worst than expected…a victim of global economic slow down causing reduced raw materials. Additionally, the farm sector suffered. Reuters reports Brazilian factories are “struggling to compete with foreign manufacturers.” We watch Brazil and the Real (currency) based on direct relationship to US corn and bean prices. A lower Real begets lower US crop prices in the futures markets as world buyers will purchase Brazilian product over US grain due to the currency differential.

The RBA kept it’s monetary policy steady, whilst saying the Australian dollar was over-valued. They are trying to talk the currency down again. We exited prior to the announcement with profit on runner for this educational trade $1560.00. Since the RBA did not announce any currency debasement, the Aussie has stabilized consolidating the recent drop we caught.

Amidst concern over FED taper, still high global unemployment, and a USA consumer refusing to expand credit, the Wall Street machine is calling 2014 a turning point in the global recovery. You have got to remember Wall Street always talks up the economy and outlook this time of year. Wall Street analysts will kick into high gear in December with their rosy outlook. This is designed for retail investors and folks positioning their retirement investment plans for the new year. Talking up the market is a major reason we see the best six months of market activity…if you repeat something long enough and loud enough, people will believe.

Bank of Montreal (BMO) cuts against the grain stating they are “less optimistic than we have been in the past few years” citing macro trends (Business Insider). Still, BMO calls for 1900 on the S&P 500 in 2014. This is called talking out of both sides of your mouth. If markets drop, they warned you. If markets rise, they made the call.

At this point in time, trend and momentum support the Wall Street machine talk…even if a pull-back occurs.

Today is Tuesday…also known as “turn around Tuesday.” We will see if equity index futures recover yesterday’s drop OR if a more pronounced pull-back is starting. So far, pull-back is winning.

Our V trade up 81%. This more than covers our $60.00 loss in AAPL. GLD trade working. BIDU trade working. IWM, you were advised last week to make trips to the bank on this wonderful trade. ROI now at 44%, but this will move lower with the open. Other trades are fine. New swing trade discussed in ES last night along with US dollar index futures trade. We have a hedge running in VXX…just in case…

Today’s Reports and FED Activity

There are no major economic reports today, however, throughout the day US automobile manufacturers will report sales. Tonight we have Japan reporting PMI at 6:15PM ET and China reporting PMI at 8:45PM ET. The mother of all economic reports is the USA Employment Situation Report issued Friday. We will hold UUP through this report.

Overnight/Pre-Market

  • Equity index futures are lower, but this means nothing until USA traders take a stand. Auto sales and good Cyber Monday sales might be the reason provided for a “turn around Tuesday,” if we see market move higher.
  • Brent moved higher yesterday as expected based on Euro zone PMI reports. Additionally rumors of OPEC cutting production might have factored into Brent. If Brent rises, this tends to pull USA crude or at least provide support.
  • CL futures are non-directional. $90.60 remains our target at this point in time.
  • Copper falling for retest of recent lows.
  • Gold incrementally catching it’s breath.
  • Soybeans testing resistance on weekly chart. If you trade soybeans as a day trader, you should expect a drop will take price to 1275 area, but first stop 1300.
  • Nothing else sparks an interest this morning. Euro non-directional like US dollar.
  • TF should provide good day trading range based on yesterday’s action and today’s floor pivots.

Day Trader Bench Marks

Intraday ES Floor Pivots – Using 24 hour electronic market hours 1800-1715 ET.

R3: 1818.75
R2: 1814
R1: 1806.75

Main floor pivot: 1802

S1: 1794.75
S2: 1790
S3: 1782.75

Intraday Euro Floor Pivot – Using 24 hour electronic market hours 1800-1700 ET.

R3: 1.3685
R2: 1.3651
R1: 1.3595

Main floor pivot: 1.3561

S1: 1.3505
S2: 1.3471
S3: 1.3415

Think About This…

March Corn trading well for day traders thanks to China cancelling orders based on genetically modified contamination (Allendale). In the unlikely, but possible event China starts cancelling soybean orders…yikes! and look out below.

Have a great trading day!

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