Day Trading Strategies for Dollar Index , Euro, Crude, Russell and Gold futures

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The James’ Report: Day Trading Strategies for Professional Traders

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A wise trader greets the market every
day without preconceptions. If we fail
to do this, we will fail to fully-develop as traders because our opinions and
beliefs will blind us to what the market may really be trying to tell us. Some experienced traders need to ‘unlearn’
bad habits, and new traders need to remember that NO trader knows it all, we
are all students of the markets every day we trade.

***Notes/Observations from around the
world***

–
Euro Zone dismisses Greek budget deal under austerity passed

–
Greece is faced with the decision to stay in the eurozone or not; Decision must
be made by Feb 15th

–
Germany to hold special lower house (Bundestag) meeting regarding Greece on Feb
27th

–
China Trade surplus surges 3x over expectations due to ‘seasonal distortions’

–
RBA sees scope for further rate cuts on inflation outlook

–
European shares declined after EU finance ministers failed to approve the €3.3B
austerity package upon which the Greek government had agreed. Aside from demanding further cuts in the
amount of €325M, the EU leaders also want political commitment to implement
those measures after April election. Yesterday Greek Deputy labor minister
resigned over austerity deal and there were rumors that the Greek coalition
head may pull his party out of the austerity talk.

Speakers:

–
ECB’s Noyer commented on French radio that the Greek situation must be resolved
and the ball was in Greece’s court to help itself. He noted that other
countries have made great efforts for Greece. France was not in recession but
growth was flat. He did see signs of a recovery ahead and the ECB was doing
everything to increase bank lending. Lastly he noted that the Bank of France
held 2,500 tons of Gold and it would not cut its gold reserves further

–
German to hold special lower house (Bundestag) meeting regarding Greece on
Monday, 27th Feb with one German lawmaker convinced that Greek aid to find
parliamentary majority. Left Party
official Ernst commented that Germany to provide €35B in temporary security
during Greek write down phase while CDU Party official Fuchs stated that the
Lower house to support Greek aid if terms were met. German parliament was said
to plan to vote on Greek aid on Wed Feb 22nd in one package

–
German Fin Min Schaueble stated that it informed law officials that the
EU/IMF/ECB Troika demanded that Greek vows be maintained post-election. The
Troika also demanded oversight of Greece’s plans and bank capitalizations. The
plan for Greece would leave the country’s debt to GDP at 136%.

–
Japan Fin Min Azumi clarified earlier comments on intervention noting that he
not refer to any specific trigger level but MPF could intervene at any time
when deemed necessary (Reminder: Earlier in the Asian session Azumi commented
that he ordered last year’s intervention for USD/JPY at ¥75.63)

–
Belgium Planning Bureau forecasts 2012 GDP at 0.1%; faces a budget deficit up
to €2.5B in 2012

–
China sovereign wealth fund (CIC) said to have received $50B capital injection
from PBoC (as speculated) and had total assets equal to more than $300B.

–
Czech Central Bank released its minutes from its Feb 2nd rate decision. It
noted that inflation to hit target of 2.0% in 2013 and that inflationary risks
are balanced. Euro Zone risk outlook were substantially lower but good shape of
German economy would aid Czech exporters. Euro Zone risk outlook was
substantially lower but good shape of German economy would aid Czech exporters

– IEA Monthly Oil
Report cut its global demand growth forecast for 2012 by 250K to 800K bpd
and lowered 2012 Global oil demand by 200K to 89.9M bpd. It noted supply
concerns underpinning markets at this time; believes market has capacity to
make up for loss of Iranian supply. Oil demand growth outlook curtailed by
reduced global economic growth rate

Currencies:

–
The EUR/USD maintained its consolidating mode in the session as markets analyst
the next chess move in the Greek saga. Greece PM Papademos was said to be
holding a Cabinet Meeting later today which provided a basis for some rumors to
circulate with chatter that the Greek coalition chief might withdraw support
for austerity. There were also reports that a Greece Socialist lawmaker
resigned to protest austerity. The pair remained above the pivot support of
1.3230 area. China sovereign wealth fund (CIC) was said to have received $50B
capital injection from PBoC after the Lunar New Year holiday and might have helped
to stabilize the Euro as the region continued to find ways to possible lure
Chinese investment.

Political/
In the Papers:

–
The Telegraph Evans-Pritchard commented on how ECB President Draghi lowered
expectations for additional rate cuts, despite the signs of a credit crunch.
According to Mr. Draghi, the ECB did not discuss possible rate cuts over the
coming months. He argued that the ECB’s lending operations have primarily been
supportive to banks as corporate and household credit in the EU continues to
contract.

Similarly,
in a separate article it was said that German Bundesbank president Weidmann
indicated concerns over the lowering of credit standards. Mr. Draghi admitted
that the decision by the council to allow central banks to expand assets that
can be used as collateral for additional liquidity was not unanimous. The
concerns are reported to be significant, as Draghi has attempted to mend the
damage created by conflicts with skeptical German policymakers over the euro
zone crisis measures under the previous ECB president Trichet.

–
Fitch’s Global Sovereigns Managing Director Stringer discussed various European
nations and their possible outcomes. He was concerned with Portugal’s ability
to make the necessary adjustments as it faces the prospects of a very serious
recession this year, although he did add that it would not require another
bailout. Similar sentiments were placed on Spain. Even though Spain could see
more stabilization of a rating outlook if deficit comes under control, placing deficit
under control is ‘big if’ due to growth prospects. On Greece, he said that it
must secure an agreement to cut its debt burden in the next few days to prevent
a ‘disorderly’ default.

–
The British Chancellor of the Exchequer decided not to set lending targets as
reported in the FT. Mr. Osborn e has decided to drop fixed lending targets
agreed with the five main banks last year under the deal known as ‘Project
Merlin’. Officials are looking for government guarantees of up to £20B in bank
funding, if savings are passed on to small businesses, and the median loan cost
to small companies come down from their current level of approximately 4.5%.

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Today’s Economic News:

Our
day trading
strategies today will depend on the news, and this morning we
begin with the idea that Friday’s are much different than other days of the
week. We can certainly trade Fridays
safely, but we need to remember to get in early, stay patient for the ‘windows
of opportunity’ that come and go, and then watch the clock because its getting
sloppy after 1100am EST and we need a really good reason to be trading after
1100am EST.

We
begin our day with important news regarding trade balance, International Trade
is a major news event and when this number is positive it means we exported
more goods and services than were imported.
As you can see from the chart below the US hasn’t been a positive in
this report for over 10 years, and that trend appears to be getting stronger as
time moves ahead. We are certainly
turning into a nation of consumers and we will see what today’s news has to say
about that. How do you trade this news
at 830am today? A higher reading will be
good for the dollar index because demand for exports and demands for the
currency are ultimately the same because someone outside the US must first get
US dollars and then purchase these goods and services. We can then use the dollar index correlation
to make an educated decision on how to trade the reaction to this news.

At
930am EST we have the US markets opening, so we will sit on hands from
915-935am EST while the big money pushes things around for a few minutes at the
open.

At
955am EST this morning we have our final news of the week and another major
news report regarding Consumer Sentiment.
Consumer confidence is directly tied to spending, and spending is the
fuel for a recovery or growing economy, which is why many traders will be
watching this new report carefully. You
can see from the chart below that consumer sentiment tumbled at the end of 2011
(along with everything else) and now has been making a strong recovery in 2012
as we have seen great Non Farm Payrolls, lower Jobless Claims reports, and an
overall increase in equities in the US.
Will this trend continue today?
How do we trade this news report?
First, its late for a Friday, so don’t feel forced to trade this news,
it may not be much worth it if personality is slow ahead of the weekend. Higher readings will be good for the dollar
index but higher reading will also signal strength in demand for crude oil so
prices should rise. Think about the many
ways we can use the dollar index correlation and you will think of ways to use
this news report.