January 12, 2011
- in Uncategorized by schooloftrade
Day Trading Crude Oil Inventories with Gold and Dollar Index Futures Correlation
8:20am est
I begin my day with the dollar index
– Trading sideways in the same range from Monday and Tuesday
– Tried to break new lows, but lack of confidence pulled the price back up into the range above it
– This lack of DOLLAR confidence will bleed over into lack of confidence for other markets we trade
– The average true range of the dollar index shows some serious signs of concerns
– We see ATR peaked at 620am EST today and has been DROPPING ever since
– Rising ATR = wider stronger and more profitable moves
– Falling ATR = narrower, weaker, and less profitable moves in the market
– We watch the the ATR on the Dollar to see when the rest of the markets will be traded the best.
– The speed of the dollar (pace of tape indicator) is very slow, which combined with the sideways range, low ATR, and now excessively slow speed we have some reasons to be careful today.
830am EST
– We have tim geithner speaking
– We have 830am news, import price index
– We have the dollar telling us to be very careful.
What needs to happen for us to feel more confident in this market’s personality?
– ATR begin to rise (price action is getting wider)
– Speed begin to rise (green and yellow on the pace of tape indicator)
– Dollar makes new highs or new lows
Im going to set the price alert indicator at the highs and lows of the dollar index, so I will be alerted to when the dollar moves, which will be the best time to be looking for patterns.
845am EST
– The news came out as expected at 830am est so nothing much has changed in the market personality
– We open the GOLD DAILY CHART with a continuous contract (GC ##-##)
– At the highs of the channel, and expecting the price to drop off the highs on the daily chart.
– Wedge pattern formed on the 55-range chart, so we know how trade a wedge:
– Buy the lows and sell the highs, avoid the middle
–
915am est
– We’ve been waiting patiently for a decent trade on crude oil this morning but the market is very slow and sloppy right now
– Selling the highs on crude was difficult because we have lots of support below the HOD keeping us from selling the HOD.
– We took the 2step short off the highs for a scratch
– We took a loss with a high risk wave pattern just off the HOD
1000am est
– The gold futures are showing us signs of concern
– Speed is very slow on the POT indicator
– Average true range is nothing to brag about, but its been rising all morning, so this is a glimmer of hope that this market may just be ready to start moving.
– Big concerns are the trigger lines
– All triggers are flat, all the same price, and this means the market is flat and has been for a while now.
1030am est
– Crude oil news comes out LOWER than expected, this will likely have a price jump behind it
– Inventories drop = higher demand (usually)
– The naked eye will assume this means to buy the crude oil, however, it’s not the simple
– What would happen if people were concerned about demand? They would lower the production of Crude oil = lower inventories
– Look at durable goods to see if the goods we are produing in the US are rising.
– If we are producing more goods each week than the need for crude oil should be rising as well.
– If durable goods are rising, and crude inventories come out lower than expected, we can assume the price will rise.
– Always remember, don’t trade what you think, trade what you see.
1115am est
– Transition into lunch after 11am est
– The markets have been slow and sluggish all day today
– Most likely waiting for news tomorrow (Thursday)
– Right now we’re trying to decide…should we keep trading?
– We took our last winner on the crude oil and we have 80 ticks earned for profit, so plenty of money to give back, so lets be careful.
– What do we see at 11am?
– Falling average true range
– Falling speed of the tape
– Flat trigger lines
– On gold, all the triggers are the SAME PRICE! Beware!
– Dollar is dropping, but the way the dollar is moving makes our job more difficult
– 5 ticks down, 7 ticks back up
– 10 ticks down, 8 ticks back up
– This causes the correlated markets to do the same.
Questions:
– Price Alert Indicator, add it on your charts
– Dollar charts: Daily/34/21/13/Tape/Speed
– Do we look at the Momentum on the daily charts?
– What is speed and how do we use it?
– Range charts:
– PATTERNS LOOK THE SAME
– PATTERNS ARE CLEAN
– EASY TO DETERMINE RISK
– How do we know who controls the price?
o Size and speed
o BIG BUYERS AND Increasing speed = buyers are in control
o BIG BUYERS but falling speed, the buyers are not in control.
o
– Which markets would you trade if only 3?
o CL, Gold, Euro (Russell)
o Add DAX if you’re experienced
– When are the transitional weeks in the market?
– When should we be concerned about low volume and seeing the markets out of the ordinary
– Last 2 weeks of the year
– Everyone comes back to their desks the 2nd week of the new year
– We don’t have any news until Thursday/friday
– End of first quarter (first week of April)(quad witching. 3rd Friday of march)
– End of summer (1st week of sept, labor day holiday)
