The Rooster Call: Trading Tuesday After MLK Day

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

Good morning, traders! Well, how are we doing with our New Year’s resolutions, eh? I am happy to report I am keeping up with my resolution for increased cardio exercise. Hope your resolutions are going well for you.

This is Tuesday after a Monday holiday. Floor pivots are tighter than normal so assume R2 and S2 as your first line of resistance and support making R3 and S3 easier for touch today. Equity index futures need to feel out the morning seeking a direction without help from any USA economic reports. We could be in for quiet trading here.

The German ZEW Survey finds Current Conditions better than expected, yet Business Expectations are slightly worse than expected and below prior month reading. This is a market negative reflecting caution in the survey. No doubt, concern is mounting over China, one of Germany’s largest export market. This survey has a one day life as far as market reaction.

Chinese GDP expanded 7.7% in the fourth quarter year over year, down from 7.8% the previous quarter. Industrial production was up (Business Insider).

I have laid out the case for a rise in US Dollar and we have a cheap trade using options that will take advantage of an increase. US Dollar needs to overcome resistance. Separately, our Australian dollar trade as discussed in the Trader Weekly Review shows price at a significant support level. We expect support to hold only because it typically does. How’s that for logic? Take some profits on this educational trade and use runners tightening protective stop. What a wonderful trade! Fundamentals suggest continued downside action in my opinion, but a relief rally could occur at any moment.

Our March Corn trade is working for us, but the market is reluctant to drop as price is locked in side way market. What this market needs is a good pop from a soybean drop.

Fundamentals have created the perfect storm for March soybeans falling. Allendale reports the Commitment of Traders Report showed managed funds reducing short positions in corn, while increasing long positions in soybeans. The folks who manage funds are no more intelligent than you or I…never forget that. Perform your own due diligence and serve as your own market expert.

Today’s Reports and FED Activity

No economic reports or speeches today. Market action in stocks likely focused around earnings release reports.

Overnight/Pre-Market

  • USA Crude is really trading tight. We have a downward bias according to our indicators so look at daily chart price approaching our bench mark which might be a place to sell. Crude is higher. Why? Brent, of course.
  • Brent Crude zoomed perhaps on the German Zew report. Price broke the tight side way consolidation touching our bench mark. Indicator bias is for lower price so let’s just see how long this knee-jerk reaction lasts. Obviously a trend change can occur.
  • Natural gas fell, but is higher off lows. This one moves more on emotions surrounding the latest cold weather report.
  • Gold is taking the mile…inch by inch… trying for higher prices. The range is incredibly small inviting trouble for day traders. In a slow market, you can monitor on a 15 or 30 minute chart using peripheral vision if you are gold day trader. Be careful of false signals in a tight range market.
  • Monitor March Soybeans for day trading. I will send a separate email on beans.
  • Corn should fall in sympathy with beans…IF beans fall that is…
  • ES, NQ, TF YM are all higher. My gosh our seasonal option trades are working well as expected for the fourth year. ES resistance is 1845.75. Price is locked in side way action. Breaking resistance is an “event.”
  • DAX and STOXX 50 are higher with FTSE 100 lower.
  • Again, the market needs to sort out a direction with American trading starting.

Day Trader Bench Marks

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

R3: 1840.75
R2: 1837.75
R1: 1836

Main floor pivot: 1833

S1: 1831.25
S2: 1828.25
S3: 1826.50

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

R3: 1.3642
R2: 1.3605
R1: 1.3581

Main floor pivot: 1.3544

S1: 1.3520
S2: 1.3483
S3: 1.3459

Think About This…

ES broke through S3 serving as evidence how floor pivots after a USA holiday lose predictive ability.

Business Insider presents one of the most depressing slide shows of the future. While all points are cogent, my goodness…it makes you want to stay in bed and wait for the sky to fall. Here’s the link: Business Insider Slideshow

Have a great trading day!

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