July 25, 2011

in Uncategorized by schooloftrade

Day Traders get back to business looking for market personality on Summer Monday

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The James’ Report: Professional Resources for Professional Traders

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– US debt ceiling negotiations continues to hit road blocks;

– Political parties remained split as deadline looms; Equity markets were trading defensively

– UK Business Sec Cable: BOE should consider more quantitative easing

– Japanese officials continued their verbal intervention on the JPY

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Talking Heads Overnight: (what they think they know)

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– Moody’s cut Greece sovereign rating by another three notches to “CA” from “CAA1”

– Bank of Korea official: Anticipates a breakthrough regarding US debt issue and the country was not considering a contingency plan for the US at this time. The BOK did note that it was uncertain how the US would reduce its fiscal deficit

– Japan Fin Min Noda: Reiterates need to closely watch the currency markets; JPY price movement has been one-sided

– Japan Business Lobby Keidanren: Strong JPY currency is not entirely bad as it aids in fighting inflationary effects from food and oil prices

– Fitch commented on India was cautious on country’s liquidity condition as liquidity demand was high in near-term. Fitch added it was also carefully monitoring the RBI’s anti-inflation policies. Fitch lowered India’s GDP view to 7.7% from 8.3% prior

– Moody’s comments on Basel Guidelines: Helps to identify globally systemically important banks is credit positive

– Bank of Portugal Gov Costa: Portuguese economy requires significant adjustment. EU members showed much difficulty in producing robust response to the crisis. He noted that access to ECB liquidity was still critical importance for Portugal banking sector but

sustainable in the long-run. Portugal financial system needed to guarantee regular and adequate financing. Overall the banks in Portugal had shown resilience to adverse shocks, have adequate capital levels

– BOE released its quarterly report Asset Purchase Facility. It noted that as at 30 June 2011, cumulative assets purchased totaled £200 billion (unchanged)

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Currencies:

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– The potential ‘debt bomb’ on both side of the Atlantic remained the prevalent topic as the week began and this aided the risk aversion theme. The gold market and CHF currency remained the primary benefactors with the JPY also exhibiting some firmness. The peripheral spreads were wider in the session while the US 5-year Credit Default Swap was at approx 57 bps, wider by almost 5bps

. Various fund managers and analyst noted that the US government may lose its AAA credit rating even if lawmakers reached a plan to avoid a default. Early Monday, Moody’s downgraded Greece’s debt rating by three notches, pushing it further into junk territory.

– The USD/CHF pair was flirting with fresh all-time lows as the pair tested 0.8040. EUR/CHF tested 1.1555 in early trading before consolidating its move.

– Ahead of its Tuesday GDP release the GBP was slightly weaker against the major pairs.

– The USD/JPY hit four month lows at 78.08

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In The Papers:

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– The Telegraph reported that economists have been cutting their forecasts for UK GDP data for the second quarter. The consensus forecast for Q2 GDP is at 0.2% q/q. Several economic experts are prepared for a negative reading, where the range of analyst estimates for Q2 GDP is -0.3% to +0.5%. UK Q2 GDP data is expected on Tuesday.

– According to the FT, European banks are indecisive on whether or not they should contribute to the Greek rescue. There is still no commitment by major bondholders. According to the FT numerous banks in Europe with significant exposure to Greece have not yet committed for private-sector bondholders to contribute €37B towards the Greek rescue. Senior bankers stated much uncertainty remained regarding details to Greek aid and its expected function.

– In a survey reported by the Independent, significant increases in UK companies are near insolvency. The survey entitled, Red Flag Alert Report, conducted by Begbies Traynor show that approximately 12% more businesses are near insolvency than they were three months ago, with nearly 5,200 companies facing ‘critical’ financial problems against the prior quarter of 4,620. The current data represents liabilities of nearly £60B.

– The Telegraph’s Ambrose Evans-Pritchard argued that the EU is moving closer to becoming a transfer union. The expanded powers for the EFSF will make the rescue facility similar to the TARP, which was used to recapitalize banks. The article also argued that the revised structure of the EFSF moves the EU closer to having its own Treasury. In order for stability to be maintained in the EU in the short-term there needs to be strong global growth and the willingness by the ECB to have easy monetary policy.

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Use this to make our cash today… (what day traders need to know today)

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Today’s Economic News:

Looking at today’s economic news for day traders we have a quiet summertime Monday morning. We expect traders to be getting back from long weekends and starting to get back into the ‘rhythm’ of the week starting this morning with minor 830am news from the Chicago Fed Index.

Monday’s are always the same, get back to the routine, get yourself back into the rhythm of price action, and we will be waiting patiently this morning for the market personality to enter so we can feel confident about taking trades.

You can see we dont have much to worry about today with news, the biggest concern then will be waiting for volume, new highs and lows, and then watching closely as the morning wraps up after 11am est. This is summertime trading so we do not expect a Golden Lunch, however, we will be waiting until 1130am and the European Markets closing to make our final exit from the markets today.

News for Day Traders

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Looking at Charts Today:

The US Dollar Index is clearly waiting (like the rest of us) for the news regarding debt around the world. Traders are looking for clues to where this whole ‘debt bomb’ thing is headed, and the supposed deadline of August first is coming sooner than we think. One thing is for sure, the dollar lacks personality as it waits, and we see the personality reflected on the faster 13range chart posted below.

You can see the 89range chart shows both price channels and wedges, with a sideways range that tells us to be patient this morning. The price wedge we cans see forming at the lows of this range tells us we may see rising price on the dollar back up to the BMT at 74.800 but that will have to be after it breaks from this narrow sideways range. The 89range doesn’t give much ‘color’ to this picture, so let’s use the faster timeframe to get the most information.

The faster timeframe 13range also confirms the sloppy sideways market this morning, and give us a better look at the ‘short term’ trend which is most important for day traders. Remember the dollar index correlation when using the faster timeframes on the dollar. rising prices to new highs today will give us selling opportunities, and vice versa.

US Dollar Index 89Range SLOW

US Dollar Index 13Range FAST

Crude Oil Futures continue to look for clues for long term direction this morning, chopping around the lows of the long term price wedge, and stalling just shy of the 100.00 big round number.

We know that crude oil is trying to decide if 100.00 is acceptable for long term prices, and the buyers and sellers are certainly arguing over this today. We will use this as a sign to stay away from the middle of this trading range, and stick to trading the highs and lows.

You can see the bullish trend channel drawn from recent higher lows, and this tells us that buying at support and buying pullbacks will be the higher percentage trades today.

Crude Oil BIG Picture 89Range

Crude Oil Zoomed In 89Range

Gold Futures are still pushing new all-time highs and the delays in the debt ceiling talks certainly aren’t helping to quiet the concerns causing gold to jump. Its no secret that fear is the cause for traders and investors alike to move money into the safe-haven of gold futures, and as day traders we always need to be very careful when emotions and trading collide at these highs like you are seeing right now. The best way to trade this market is to be very careful trying to sell the highs, don’t even try buying the highs, wait for a pullback at support levels such as 1607.3 and 83.3 for the best chances to get involved today and the coming week. Notice the new bullish trend channel in the red trend lines formed off new higher lows in price. this again confirms buying at support levels will be the higher % trade today.