It's A Mad Mad World

Sorry for not writing this week, it was a good week to kick back and just observe the madness. Please go back and read my last post which was written exactly one week ago on Thursday evening during the Asian trading session. Shortly after that post was written the airstrikes started in Iraq, the S&P 500 crashed through 1900 all the way down to 1890 and the Dow Jones futures traded down to 16200. Take a look at what the markets have done since, here are the daily charts of the both major US stock indices

The Dow has rallied almost 500 points and the S&P 500 has surged over 60 points in one week. While this rally has ensued, other key markets tell a different story. If you have been reading me since last year, you have seen me refer to OIL and Copper as indicators for economic growth. Also I have been saying how the fall in OIL over the past 6 weeks may be telling us a story of slow demand. Take a look at the daily chart on OIL, it has broken down to the 9550 area now, I find this fall very interesting with all that is going in this world currently.

Next band of support in OIL prices should be the 92-93 dollar level. Next let's notice how Copper is not buying into this equity rally at least for this week. Take a look at this daily chart and notice how we are approaching the major support area of the $3 level.

Copper has been down every day this week! Oil and Copper along with the US 10 Year Note are telling a complete different story than what the equity markets are showing. Maybe it's just summer doldrums and the markets are just drifting along or maybe it's just that I am looking into things a little too much. Only time will tell, summer has only got 3 more weeks, I am looking forward to the markets picking up in volume soon, it has been a long long summer for most of us especially the currency crowd.

One last chart I want to show is the daily of the 10 Year Note, please notice how I showed this last week and pointed out how I thought the chart and price was saying FEAR.

With the surprising rally in stocks this week, this chart should look different than the way it is currently set up! Last week the rate was 2.41%, today the close was 2.40%. So while the stock gurus tout US stocks are the only game in town and that all is swell with the economy, other major markets are telling you something else! Stay tuned.

Sorry not to talk much about currencies or the metals but really, what is there to talk about? Gold has held $1300 all week making a high of 1325 or so and that's it. The US dollar closed today above 8160 again but has not traded higher than 8178. I mentioned last week that we may trade in a range until the 22nd of the month when we will hear from Janet Yellen in Wyoming, the dollar has been in a range from 8135 to 8175 all week and I have a feeling that's the range until next Friday. Sorry but I just cannot get excited about Gold until we take out 1335 to the upside and hold that level for at least 2 days and as far as the US dollar is concerned, I am looking for it to start rolling over in the near future as I just do not see the FED raising rates any time soon!

Enjoy your weekend, I'll have more on Gold and the currencies in the coming days. Thanks for reading.

TraderMartin

All Out Fearful Friday

You mean it's just not Putin the world has to worry about? Iraq is back in the news and making headlines. Take a few minutes and read through this NY Times piece http://www.nytimes.com/2014/08/08/world/middleeast/obama-weighs-military-strikes-to-aid-trapped-iraqis-officials-say.html?_r=0

The ECB has come and gone(non-event), Australia has its worst unemployment in a decade @ 6.4% and the US jobless claims are the lowest in 8 and half years. The Aussie dropped a full 100 points since the job number yesterday, the Euro tested just shy of 134 at the highs and just below 13350 at the lows of the day, the US Dollar gained and did stay above support and finished above 8160. It is quite possible to trade sideways until the 22nd of this month, this should be the currency markets next big event, the Jackson Whole symposium, where the world anticipates Janet Yellen's outlook.

With all the news from geopolitics Gold was propelled higher today making a high of $1316 while staying above the 1300 throughout the entire day. Silver traded on both sides of $20, I am concerned with Silver because if the equity markets keep headed south, Silver, due to its industrial uses, may set back even deeper.

Here is what needs to be watched on Friday for the close of the week. Here is a daily chart of the US 10 Year Note, look at the move that is taking place, the rate closed at 2.41% today and if the equity markets keep tumbling, rates should keep heading lower as investors are buying bonds out of fear due to the global events. This chart just says FEAR

Last, let's finish with a look at the weekly chart on the S&P 500. We are getting close to the even 1900 handle. If this should break to finish the week, stocks should be in for more of a hurting. Being that we are just down a little more than 4% in US equities so far, one just has to see, that we very well could see another 100 point drop in the S&P and it would just be a normal 10% correction. Let's see how the week finishes out! Here's your chart

Have a safe Friday, if trading protect yourself!

TraderMartin

Wild Wednesday

Wednesday certainly was a volatile day in the currency markets with the US Dollar making another high @ 8174 early before the US trading session only to reverse later in the day. The pullback in the Dollar saw the Euro, Yen, Aussie and Canadian Dollars come roaring back from their lows. Finding a valid reason for the whipsaw today, it really does not matter. What matters is what tomorrow will bring. This evening,

we will see if the Aussie can follow through with its strength from earlier as the Australian unemployment number is set to be released. Early Thursday morning we will have interest rates decisions, really just statements, from both the Bank of England and the ECB. Where do we go from here? It's all in this chart of the US Dollar index.

After making a high of 8174, the dollar fell back below the 8150 level and notice how it closed right at that level. As you can see, the dollar is sitting at that 8150 level which is resting right on the daily trend line, interesting to say the least. Sorry for not having much to say today but with the Central Banks meeting tomorrow, I believe the chart above shows where we stand. Quite simple, if the major currencies fall back tomorrow against the almighty dollar, then the dollar uptrend most likely will continue for the time being. If the up trend does break, look for the gains in GOLD to continue.

As far as Gold is concerned, pretty good day with it pushing above 1310 and holding those gains throughout the day. I would like to see it push through the 1330 level next, to really get speculators interested on the long side. Just keep in mind, Gold is in a range right now between 1280 and 1335, until one of these levels gives out, there really is nothing to get excited about. For now, Gold should be supported at 1295.

Lastly, the US equity markets look terrible and could not muster much a bounce today with the Dow closing up 14 points and the S&P closing flat @ the 1920 level. Even crude oil was rallying earlier above $98 only to fall all the way back and close below $97, not a good sign if you are looking for the markets to rally back to the upside. Again I reiterate waht I have been saying throughout the fall in the price of oil, DEMAND IS WEAK and that is not a good sign for the global economy. Let's see what Thursday brings, be safe out there!

Thanks for reading
TraderMartin

A wild day for the marketplace but a beautiful day for the South Fl beach!

Any Upside In Gold

So yesterday we looked at the downtrends in Gold and Silver, today we just may look for some upside follow through. We had another down day in US Stocks, the Euro, Oil and just about every other currency and commodity on the board. There is a mess with Russia and it is starting to impact all the markets even the raging bull US stock markets. The Dow Jones shed another 140 points today and the S&P 500 was down 18 points settling at 1920.

As for the precious metals, Silver did break below $20 early this morning but there did not appear to be a panic to take prices much lower, for now anyway. Silver seems to have found light buying support above the 1975 level. Gold did break lower this morning and traded as low as 1282, surprisingly, the 1280 level did not get touched. I was surprised by this, given the fact that the US dollar was strong across the board for the entire day. Lets look at the price action from today, Gold did not make a lower low, notice that the low today was a touch higher than the past low from this past Friday. Also notice that the surge in the price today stopped dead in its tracks at 1295 and then surrendered about half of the gains by the days end. The chart below is of the hourly time frame so you can see clearly what has developed in the price action from Tuesday during the US session.

With this price action from today, we want to see Gold take out 1295 and then 1300. With the developments or stories coming out of Russia and The Ukraine, Gold may be worth a look here, being that 1280 has held, for now. Gold does have several headwinds  currently and that is the US dollar strengthening and the fact that the perception is that the US will have to raise interest rates sooner than later. Notice how I used the word perception, these markets are all about perception and right now there certainly is a fear brewing about rising interest rates here in the US. Today the US data had another strong number with the Services ISM coming out at 58.7, this was the strongest release since 2005.

I am of the opinion that the US Dollar, long term, will fall and that the FED is in no hurry to raise interest rates. It does not matter what my opinion is to the market, right now the market, at least the currency market is thinking the FED is indeed going to be on a rate hiking trajectory and I am not here to argue with the market. For today I look for a bounce in GOLD above 1300 and Silver back above 20, if it does happen, we just may be on to something bigger. If the bounce does not
materialize, we know our risk, at least I would hope! Just be quick and nimble, pull the trigger!

TraderMartin

Well Defined DownTrends

Well it is the Monday after the big job report. By now I am sure I do not have to get much into the report other than the fact that it did not live up to expectations, coming in at 209,000 and the unemployment rate did pop up a notch coming in at 6.2%. Did the markets react the way I thought they were going to, yes but not much punch. The only market that I was surprised with was the stock markets, one would think that the bulls would have came back in with a full head of steam especially with the headline that this was the first time in 16 years that the US has had job growth of over 200,000 in 6 consecutive months.

As far the US stock markets go, we started the week with a rebound of 75 points up in the Dow and 14 points in the S&P. A dead cat bounce or are we ready to rally right back up to new highs, like we have seen so many times in the past couple of years. We shall have a better feel in the days ahead.

There are a few markets that have been trending lower over the past few weeks, OIL-Euro-Stocks and yes the METALS- GOLD and SILVER. First a few words and then a look at the daily charts on Gold and Silver. I have been mentioning or bringing to your attention the support level in Gold at 1280 and that if it does indeed break, there could be a larger move to the downside, possibly down to the double bottom near 1180. Being that the job number was not enough to propel Gold above 1300, that was disappointing to me, especially that we did not even touch the round number. Take a look at the 2 charts below and you can see what is developing on the daily charts by the lines drawn. We have been making a series of lower highs and lower lows ever since 1330 in Gold and 2150 in Silver.

I don't know about you, but these markets do not look good if you are long and looking for upside. A drop below 1280, 1240 may be next and Silver could see $19 or lower if the $20 level gives way.

As for the US Dollar, it did set back on Friday after the report but did not follow through to the downside and it consolidated today around the 8140 level. This action leads me to believe that if we get back above the 8150 level, we could be in store for a larger dollar rally in the near future and that would not be a good thing for Gold and Silver. Time will tell!

One last thing I want to leave you all with is a view of the US 10 Year Note. The lines drawn on the chart show the reaction from the job report. With all the hoopla about rising rates here in the US, the 10 Year was back below 2.50% after the report and looks to be challenging the lows of the year at 2.44% real soon.

I have been saying this for weeks, "something is going on that none of us know about". Be careful out there.

TraderMartin

Panic Sets In

So the world is a dangerous place and we do not live in a perfect world, at least that is what the market says today. The worst day for US stocks since February the 3rd, the Dow Jones closing down 317 points and the S&P down 39 points and sits just above 1930, it was just a few days ago where 2000 looked imminent. Last week I got a laugh from an analyst response to why the stock market was reversing its 1% losses from the previous day, "it's real simple folks, this market just does not want to go down". I wonder how this guy feels today, please see what he did with $1,000,000 just yesterday
http://www.cnbc.com/id/101880192

Hey, one day does not make a trend, all he needs is a little help from the FED and his trade will be just fine. How about watching all of the summers gains go down the tubes in just one day! With the action today July actually put in the first losing month in the US stock markets in 6 months. I have been warning that when this thing ends it will not be pretty, hey maybe this is not the end but today should serve as a warning shot!

We can come up with 100 different reasons for all the chaos but I would like to focus on tomorrow and the non-farm payroll number. Yes the media always hypes up this number each month but tomorrow's number is the biggest number we have had in years. The number is expected to show 232,000 jobs were created for the month, last months number was 288,000 and that was a huge upside surprise and the unemployment rate dropped to 6.1%. With the headline number at 288,000, it started to get the markets thinking that the FED is going to have to raise rates much sooner than what they had been leading on to. Notice I use the word HEADLINE, there are other details that were not so strong, such as the labor participation rate being at the worst levels in almost 40 years, hourly earnings, wage increases and more people are working part time jobs. Like Janet Yellen is quick to remind us, there is still slack in the labor force that needs to be watched closely.

As for the number on Friday morning, if it comes in better than expected or the unemployment rate should drop below 6%, the US Dollar and the 10 Year Note will indeed have more to gain on the upside. I am going to post a chart on the US Dollar today and you will see where it is as far as resistance is concerned.

Notice that on a day like today with equities plunging, the dollar basically took the day off from trading. Not really, currencies trade 24 hours a day, yesterday the dollar closed at 8149 just below major resistance, today we closed slightly above at 8153. Currency and bond traders will wait for the job number for the next major move. The dollar will fail here with a weaker job number or it will simply plow through resistance and it may be the start of a true rally in the US currency.

Same goes for the 10 Year Note, and this is the market that everyone will be keying in on. A big reason for stocks to be in panic mode is the fact that the rate on the 10 Year was just 2.45% Wednesday morning and traded above 2.60% this morning settling at 2.55% to end the day. A breakout above 2.63% and rates should be headed higher for US bond markets. I have written about this market not too long ago and showed how confident I was that the trend line on the weekly chart would not be broken to the downside and I have been proven correct for the time being! Remember, falling bond prices indicates rising rates and rising prices means that rates are falling. Here is what the  weekly chart looks like now with the trend line in tact, for now!

Both of these charts should look completely different after the close of business Friday afternoon. Again, DO NOT try and guess what this number will be, smart traders will wait for the number and give the markets a bit of time to digest all the details of the number. I personally have learned it is best to wait almost 20-30 minutes before taking a trade after the release of this major report.

As for Gold, currently we sit above major support at 1280 trading at 1284. Good jobs, stronger dollar and higher rates will be bad for Gold. A weaker number will send the US dollar lower, rates lower and we could have a great buy in Gold. Your guess is as good as mine!

Lastly, Oil did get crushed for more than $2 today, trading below 98, currently at 9795 as I finish this post. Again, if demand is weak and the economy is not what the value of the stock market has been telling us, Oil may indeed be heading much lower.  The next levels to watch for support would be 9750 and then 96.

Traders, be smarter than the next guy or gal, don't try to be a hero. Someone said this and it stuck with me " there is a whole loaf of bread down there, all I want is a few crumbs". That is a good approach to take when trading these markets, its all about discipline!

Thanks for reading
TraderMartin

Dollar Rally Sustainable?

So the busy day has concluded with the FED and I have gotta say, I did not see anything that leads me to believe that rates will be on the rise any time soon. The Fed  made two noticeable changes to their statement, they took out unemployment remains elevated and they said that odds of inflation remaining persistently below 2% has "somewhat diminished". Of course we did have one dissenter out of the FED, Charles Plosser, who feels rates rising sooner should be more up for a debate. Bottom line is that they made it clear that monetary policy will remain highly accommodative  and rates will remain low for some time. The stock market came well off of its lows for the day rallying 100 points before fading a bit into the close. Here is an hourly chart of the Dow Jones

The 10 Year Note rose 10 basis points today and settled at 2.55%. The jump in rates for the bond market was from the strong and surprising 4% GDP number for the US. All the dollar gains were pretty much from the GDP as well, after the FED statement the Dollar did give back some of its earlier gains and failed to close above the 8150 resistance. Take a look at the price action in the Dollar below

Closed at 8149, now we have to see how traders digest what they got from the FED today and the 4% GDP growth. Yes that is a strong headline number and you can build a case that no other major economy other China is coming close to this type of growth especially not Europe, UK, or Japan. Based on that alone, it is compelling to buy the US Dollar, almost sounds too easy and trading these markets is anything but easy my friends. The US debt plays a very large part in the value of its currency so don't go running with the headlines here. Be careful and watch to see what the big money will do. Tomorrow may be slow as we will have the US unemployment number released Friday morning so be patient. A strong number on Friday can have huge implications on where markets are headed in the near future and a weaker number will calm the markets from worrying about any rates rising any time soon.

Last thing I want to talk about is OIL. OIL broke below $100 this afternoon and does not look very good at the moment. I have been saying that falling prices are a sign of a weak economy or weak demand, we have chaos all over the Libya, Russia and the Middle East. If equities keep falling, who knows how low OIL can go. Watch the $99 level now to see what happens.
Here is a look at the OIL market at the close of Wednesday's trade