The Rooster Call: Weak Expectations in Europe

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

Cotton trades at an 11-month low and we are short DEC Cotton. Our educational trade demonstrates technical analysis and trade management demonstrates making $3K on runners. Cotton is lower in overnight trading. We’ll tighten stops.

Harvest on corn is at a frenetic pace. We expect greater selling of DEC corn where we are managing a position…our third short for Corn. You learn by observing and doing.

Allendale reports large index funds are shorting DEC 2013, whilst buying December 2014 (Deutsche Bank) and March 2014 (Goldman Sachs). If true, this represents more downward pressure for December Corn.

We have a major USDA crop report on Friday. The report is expected to tell what is already heard from the fields…increased yield and a record USA corn crop. Trading may well be muted going into the Friday report.

Focus increases on the South American plantings and after harvest the USA corn futures will reflect weather market for the Southern Hemisphere crop growing regions. Since we had high soybean prices in the summer, everyone is expecting a massive record soybean crop will emerge. Weather is key.

Equity index futures remain muted…up Monday and lower this morning. They are non-directional in a “too afraid to buy…too afraid to sell” environment. We are forced to think continued UP direction based on technical analysis reviewed in your Trader Weekly Review.

Any pull back, according to our methodology, shall be short-lived and a reason to launch new ships. The market requires an “event” to force a pull back and for the life of me, I have no idea what that event shall be. Perhaps a surprise lower than expected US GDP reading on Thursday. Perhaps an unexpected increase in unemployment shown in Friday’s Employment Situation Report. Then again we have the ECB issuing a policy statement on Thursday.

The European Commission today forecasts a 1.1% economic growth rate for 2014. This is market negative. Experts are thinking ECB will provide stimulus in the face of such weak expectations.

Recently a lot of press coverage has gone into the idea US traders and funds are expanding European equity purchases. If the European Commission forecasts such a low growth number, how can we expect European equities will continue powering higher? The key for continued rise in European equities, in my opinion, is ECB lowering interest rates or providing some type of stimulus causing traders to kick the market higher as we have seen in the USA with the Federal Reserve stimulus announcements. An exodus out of European equities could spark a global equity pull back. Again, we expect any down move short-lived at this moment in time.

We see most global equity index futures overbought in a strong market and have the choice of sitting on the side lines or trading with trend. Last night I issued three new equity trades, including one based on Monday’s TF action. Are you going to trade the technicals or sit on the side lines? Our trades have risk known and we have additional “crash” hedge trades…as a safety net based on the over-bought situation.

Today’s Reports and FED Activity

10:00AM ET – ISM Non-Manufacturing Index – This report gains in importance due to continual outsourcing of USA manufacturing jobs. The USA is following the lead of Great Britain moving from a macro stand point away from manufacturing more toward service sectors. This is a very strong trend…like an undertow beneath the calm surface.
12:30PM ET – FED Lacker Speaks
5:10PM ET – FED Williams Speaks


Muted action across the board. My gut instinct says look for a surprise drop in copper based on fundamentals. Technically daily chart has a wedge and all wedges must break out.

Day Trader Bench Marks

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

R3: 1777.75
R2: 1770.75
R1: 1767

Main floor pivot: 1760

S1: 1756.25
S2: 1749.25
S3: 1745.50

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

R3: 1.3633
R2: 1.3579
R1: 1.3549

Main floor pivot: 1.3495

S1: 1.3465
S2: 1.3411
S3: 1.3381

Think About This…

Conservative traders will wait until the 10AM ET hour to decide on entering last night’s new trades. I know it is tough taking new trades in this environment. Hold your nose and follow the trading methodology or sit on the side lines with no regrets if the market powers higher. Every trader is entitled to a pause.

Have a great trading day!

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