The Rooster Call: Welcoming Post-Labor Day Trading

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

Good Morning Traders! I hope everyone in the USA is relaxed from the Labor Day holiday. We welcome September with open arms looking for greater range day trading in equity index futures. Why? Well, everyone is back to work, vacations for the most part are over and the kids are back in school.

Monday’s USA holiday caused the typical tight trading range day in ES. This means the intraday floor pivots are artificially too tight today. The day after a USA holiday, when the rest of the world trades, I think it is a good idea to throw out S1 and R1. Just start with S2 and R2 with knowledge today is easier for S3 and R3 touch.

Crude shot up Monday on news of a "historic" agreement of cooperation between Saudi Arabia and Russia designed to freeze crude production. Instantly, a 5% pop in price. This is part of the danger for position traders I have mentioned time after time…all it takes is one speech, one comment, one rumor, one financial news story attributed to "un-named sources," talking about a "possible" production freeze and crude goes bonkers.

October Crude rose to our line in the sand area of 46.54 (hit 46.53) on Monday and then fell back. It is this knee-jerk that kicks out the position trader unless using a large protective stop OR trading with options.

Crude remains a day trading instrument until further notice, but position traders know holding overnight is a mine-field and ANYTHING can happen.

Keep the $44.60 line on your charts. We use this line in determining bullish or bearish bias. This means if crude moves over $44.60, we are likely moving higher. If $44.60 is tested and does not hold, then we are likely moving lower.

Report from ft.com says Iran cautiously supports production freeze. This action does not actually need to occur …the mere "talk" can move US traders into buying crude.

November Soybean trade update: We were profitably knocked out of our short with a $2000 profit per contract on the runners. Wonderful. Recall, some took initial profit at $1000 based on the attitude that a quick twenty cent move in the grains is a gift.

Any pull-back to the upside in November Soybeans is an opportunity for new shorts in my opinion. Note the minor correlation between crude and soybeans (bio-diesel). Crude was higher Friday…Soybeans higher on Friday. Crude lower today, Soybeans lower today. Just be aware.

I rarely discuss G20 meetings since nothing substantial is discussed. Even if something substantial IS discussed, we rarely see any follow-through. Same goes for this past weekend’s meeting. Nothing special for traders.

This morning at 5AM ET, the Eurozone released the third estimate for GDP, reported at an anemic 0.3%. Recall first quarter GDP reported at 0.5%. So all the stimulus from the ECB is like all the kings men trying to put Humpty Dumpty back together again. In other words…situation normal…central bank policy not working. Inflation target still un-met after 4 years.

We have ECB monetary policy statement on Thursday at 7:45AM ET. This is a potential market moving event. Let’s get ready for Count Draghi to say, "we will do whatever it takes!" So far, ECB QE efforts have purchased 1 trillion Euro worth of bonds.

Monday the UK reported the sharpest one month rise in Services PMI in history coming in at 52.9 over last month’s 47.4 reading. So much for the negative Brexit fall-out. Pound strengthened and is higher today.

Switzerland moves out of deflation for the first time in 20 months…consumer prices did not gain…they simply stopped contracting…that’s progress!

US dollar is lower thanks to last Friday’s weak Employment Situation report rendering an opinion the FED will not raise interest rates in September. Gold naturally rises as US dollar falls. I think the market is still figuring out a posture for US dollar now testing one of our bench mark support areas.

Economic Events – BUSY WEEK for DATA

from econoday.com

Gallup US Consumer Spending Measure 8:30 AM ET

PMI Services Index 9:45 AM ET

ISM Non-Mfg Index 10:00 AM ET

Labor Market Conditions Index 10:00 AM ET

4-Week Bill Auction 11:30 AM ET

3-Month Bill Auction 11:30 AM ET

6-Month Bill Auction 11:30 AM ET

TD Ameritrade IMX 12:30 PM ET

Gallup US ECI 2:00 PM ET

John Williams Speaks 8:30 PM ET

Markets

Equity index futures are higher yet remain in tight range. Wednesday’s volume expected higher than today’s volume. Monitor crude as potential reason for ES support today.

Bonds are higher as the market thinks FED shall not raise rates.

VIX lower as complacency returns.

Crude lower as the Russian/Saudi talk is discounted.

Metals higher on lower US dollar. As well, China "talks" up the market saying they will work beyond central bank measures to stimulate their economy. It’s talk.

We don’t follow meats, but they all took a hit lower.

Grains lower incrementally.

Softs mixed. Coffee struggles at intraday highs met with selling.

All currencies higher against US dollar, but Euro seems vulnerable for a drop.

Think About This!

Monday’s USA holiday caused the typical tight trading range day in ES. This means the intraday floor pivots are artificially too tight today. The day after a USA holiday, when the rest of the world trades, I think it is a good idea to throw out S1 and R1. Just start with S2 and R2 with knowledge today is easier for S3 and R3 touch.

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