The Rooster Call: The Power of Working Trend and Momentum

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

Good morning, traders! Market risk is “on” and rippling through most markets. Yesterday’s Yellen testimony started the action and the House vote increasing the USA debt limit is another market positive. Overnight we had market positive reports out of China surprising quite a few “experts.”

Our bets placed late Thursday calling for a rise in the S&P 500 as well as Russell 2000 proved yet again the power of working trend and momentum. In Monday’s quiet market we placed a rash of new trades expecting higher prices Tuesday using options and one non-directional.

The key to continued positive movement is ES moving above Tuesday’s high. Your video last night provided target ES expectations. I would not be surprised to see a little pull-back, but then again, USA traders have not weighed in on positive economic news from China. China reports exports and imports rose 10% each in year over year terms. Copper received a life-line thanks to Chinese data. Overnight action in ES is a yawn. Why the yawn? Euro of course.

Euro zone industrial output fell by -0.7% exceeding expectations of -0.3% drop. However, the real reason for the Euro drop is an ECB official saying the ECB is seriously considering negative interest rates. This is a game changer for Euro if negative rates come to pass. This inflammatory remark is likely designed to “talk down” the Euro.

We hold the Euro in high esteem as a partner in risk acceptance on world stage of trading. Any efforts of talking down the Euro have potential for an immediate repercussion for risk acceptance. Just be aware.

Pound is in a dilemma. Economic data points suggest pulling back stimulus and raising interest rates. However, the Bank of England does not want to disengage from the currency war. Bank of England states they will keep rates at record low of 0.5% even as they forecast economic growth of 3.4% in 2014. Pound rose on the forecast.

Soybeans rose and I admit I am somewhat married to the strong fundamentals…intoxicated by the fundamentals, if you will, suggesting lower prices. Why? It’s the perfect storm.

The current rise in soybeans should pass even as the market focuses on Argentine farmers refusing to export product out of fear of inflation. The Argentine government is pushing desperate for tax revenues and farmers are pushing back. This dispute will keep bean bulls pushing against the tsunami wave of beans as the world moves from shortage to surplus. I discussed this in your video last night. Today there is an article on same topic in the Financial Times.

Meanwhile, Brazilian beans are priced $1.00 lower than USA beans after an absolutely picture perfect growing season. All rallies are selling opportunities. Timing is the key here. Meanwhile, day traders should focus on markets with range and soybeans fit the bill. LaSalle Street (where commodities are traded in Chicago) are bracing for order soybean cancellations as hedgers relinquish USA product orders in favor of buying South American product.

Corn looking lower. Another day trading instrument in my opinion. Brazil’s corn crop expectations are 5 million metric tonnes over USDA estimates (Allendale). That’s more supply.

US crude experienced two “no never mind” days and is higher incrementally on overnight trading. Attribute the rise to Brent, higher incrementally.

Today’s Reports and FED Activity

08:35AM ET – FED Bullard Speaks
10:30AM ET – EIA Crude Report
14:00PM ET – Treasury Budget


A nothing special overnight with exception of Gold creeping higher, a pop in Cocoa, and coffee potentially gearing up for another run higher. Bonds are lower. Watch that Euro today along with beans, corn, and crude. Euro could tug on ES and we need USA traders to keep pushing ES higher based on market positives cited.

Day Trader Bench Marks

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

R3: 1849
R2: 1834.25
R1: 1823.75

Main floor pivot: 1809

S1: 1798.50
S2: 1783.75
S3: 1773.25

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

R3: 1.3724
R2: 1.3704
R1: 1.3670

Main floor pivot: 1.3650

S1: 1.3616
S2: 1.3596
S3: 1.3562

Think About This…

We are riding this rally that looks to restart the trend as we discussed in last night’s video. However, we will play trades close to the vest rather than gush with enthusiasm. The short-term trader converts to cash quickly. This is why I sent a note on IWM, which made a 65% ROI using options from last Thursday. I am a believer in taking profits along the way to pay for your overhead trading expenses. Pay the light bill and reduce risk. Runners can have you basking in the glory if price continues moving higher on our directional trades.

Have a great trading day!

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