The Rooster Call: Too Scared to Buy and Too Scared to Sell

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

Good morning, traders! We start the day with yet another look at quiet chart action signifying “too scared to buy and too scared to sell” in global equity index futures. Bias is obviously down, but the question on everyone’s mind is has this correction run its course?

We have ECB monetary policy statement and the Draghi press conference on Thursday. Currency markets will likely trade quiet into this report. Friday is the biggie…US Employment Situation Report. Keeping in mind the nature of US equity index players and algorithmic trading programs, we expect a knee-jerk reaction on Friday if the jobs report is better than expected or worse than expected. Markets are volatile waiting on pins and needles.

And what about the weather? Will a soft employment report blame the weather again? How long will this dog hunt?

This morning we have the ADP, a private sector employment change report. Previously ADP reported 238K new jobs. Then came the US government showing a mere 74K new jobs. Just remember the default accepted number is from the federal government. Those who place trades going into Friday’s report based on ADP are speculating as one cannot infer because of X that Y will result.

Grains popped yesterday thanks to the USDA lowering the wheat crop rating from previous “good to excellent” reading. Allendale suggests farmer selling picked up in corn and soybeans as prices rose. Without a clear catalyst, in my opinion, farmer selling will likely accelerate. Meanwhile speculators may read too much into price action caused by short-covering. Continue watching corn as we discussed in the video newsletter last night.

I am ignoring the upcoming US debt ceiling deadline, yet if this is a non-event in Washington, I think Wall Street will consider this a market positive event removing uncertainty.

Monday’s ISM Manufacturing number caused a fall-out. Today we have the ISM Services report. This is a potential market mover so day traders keep your eyes open.

In Euro zone news the services index for France, Italy, Spain, and Germany were in line with or better than consensus (BMO Capital Markets). UK Services index was slightly weaker than expected, yet remains robust.

Negotiations underway for yet another refinancing of Greek debt.

Business Insider reports “Today is a rare double POMO day in which the FED will conduct two open market operations.” The FED is expected to purchase between $3 and $4 billion dollars of US Treasury securities. Typically this action lifts equity markets. Keep the market supported…why stop now?

Today’s Reports and FED Activity

08:15AM ET – ADP Employment Report
10:00AM ET – ISM Non-Manufacturing Index
10:00AM ET – FED Tarullo Speaks
10:30AM ET – EIA Petroleum Status Report
12:30PM ET – FED Plosser Speaks
13:40PM ET – FED Lockhart Speaks

Overnight/Pre-Market

  • USA Equity Index Futures incrementally lower…ES, YM, NQ, TF
  • DAX, STOXX 50, and FTSE 100 incrementally higher perhaps on Services Index reports.
  • Brent consolidating, hat in hand looking like unsure of direction while peering over a cliff…our support line.
  • USA crude consolidating looking higher if we take out the high of January 30. Day traders mark level this on your charts.
  • Gold and silver incremental moves higher. These two may react on Thursday’s ECB policy statement, and typically move on the Employment Situation Report.
  • Bonds incrementally higher since ES is incrementally lower. Think of the see-saw you rode as a child. Friday is the big bond action day.
  • Coffee has cooled at a bench mark on daily chart. We took a speculative trade knowing the horse was out of the barn, yet fundamentals are compelling for additional move upward. Coffee is notorious for gyrations. Options limit risk. Time will tell. Our indicator typically rests after a surge then lifts again.
  • Cocoa consolidates.
  • Cotton looking tired even though seasonally strong period helps support.
  • Sugar higher on a raft of technical short-covering.
  • Corn has a classic rounding bottom daily chart. We have a plan and are awaiting confirmation.
  • Soybeans remain a wild card in side way motion.
  • Euro incrementally higher.
  • Yen rise momentarily stopped and that, my friends is good.
  • Australian dollar higher on comments from RBA suggesting the central bank is happy with present price levels.
  • US dollar is like watching paint dry. Set chart alarms for potential break out.
  • Pound is lower.
  • Canadian dollar incrementally higher.

Day Trader Bench Marks

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

R3: 1772.75
R2: 1763.25
R1: 1753.25

Main floor pivot: 1743.75

S1: 1733.75
S2: 1724.25
S3: 1714.25

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

R3: 1.3587
R2: 1.3563
R1: 1.3541

Main floor pivot: 1.3517

S1: 1.3495
S2: 1.3471
S3: 1.3449

Think About This…

I will have the Simplified Options Course recordings posted perhaps today or tomorrow to the Hit the Mark Trading website.

Have a great trading day!

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