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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The Journey of a thousand miles begins
with the first step, and every step along the way is just as important as the
first. Remember that all your tiny steps
will add up to a tremendous achievement.
Always be moving forward, have no fear, and you will always achieve your
goals.

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

–
European peripheral yields improve hut region still encountering ‘economic
pain’

–
Greek PSI discussions in ‘final, final stage’

– US non-farm payroll
data the highlight of NY morning

–
European shares rose ahead of the US nonfarm payrolls data due out during the
NY morning. While macroeconomic data from both sides of the Atlantic have been
strong, further stalling of the Greek PSI deal talks may push the market lower.

Speakers:

–
China Premier Wen reiterated its stance to cooperate with Europe to deal with
the crisis but dids not have the ability or intention to ‘buy Europe’

–
IMF Dep Manager Shinohara commented that the IMF might need $2T to handle the
global issues at hand with a general consensus in G20 on extra IMF money but
was too early to say how much each nation would contribute. Emerging market
share of global economy needs to be reflected in IMF governance structure. On
Japan the JGB bonds were stable at this time but needed to watch the
correlation with US and European bonds and added that the current European debt
crisis could be a lesson for Japan. He believed that Japan should raise the consumption tax to 15%
(Note currently level is 5%) and that the BOJ should be prepared to expand
monetary stimulus. Lastly he did note that it was hard to greatly influence JPY
currency rate through intervention

–
Greece Fin Min Venizelos commented that discussions regarding the country’s
second bailout were ‘very difficult’. He noted that the Greek banking sector
had suffered from deposit outflows of $16B

–
Greece Govt was said to forecast its 2011 budget deficit between 9.1-9.4% of
GDP (Note the official target is 9.0% but was rumored to be 9.5-10.0% in the
December period)

–
Greece Govt spokesperson commented that the main debt swap parameters were
ready and that the Troika talks were also in its “final phase”

–
Germany Economy Adviser Bofinger (Wisemen) commented that the budget
consolidation program designed by the EU/IMF for Greece had made things
worse as the program disregard
fundamental economic principles.

–
German Econ Min Roesler commented in the financial press that close monitoring
of Greece’s budget reforms were legitimate. The minister again rejected ECB
involvement in Greek debt restructuring noting that the current discussion was
primarily about private sector involvement. European states and their taxpayers
had already made a massive contribution to Greece’s restructuring process
though their support efforts. He also reiterated rejection of any discussion of
expanding Europe’s firewall by increasing
the capacity of the European Stability Mechanism beyond the planned
€500B

–
Bank of Portugal’s Costa commented that Europe had been at the center of the
crisis for the past three years with important steps taken over the last few
months despite the initial slow start to the crisis. He noted that market
mechanism was needed to ensure that failure was not an option fpr the region.
He also noted that the Portuguese banks would meet solvency targets but also
had backstop facilities available. He also stated that Europe’s fundamentals
were stronger than those of the US

–
Belgium Budget Min commented that the country’s Parliament approved 2012 budget
and would commence a review process in February

–
Russia Central Bank commented after its rate decision that it saw slow
industrial production growth and that
the RUB currency appreciation in January would have a disinflationary effect.
It did note that the current interest rate corridor was at acceptable level for
coming months

–
Philippines Central Bank approves revisions in banks reserve requirements. To
merge statutory and liquidity reserves into one category and stop interest
payments on bank’s require reserves

–
Russia Econ Min Nabiullina commented that: 2012 inflation rate of 5% was
realistic

–
EU Steel Industry Association (EUROFER) commented that EU steel demand was seen
slightly lower in 2012; steel end-users show resilience amid recession concerns

Currencies:

–
Better European Services PMI data coupled with continued optimism that a Greek
bailout deal would occur soon boosted risk appetite in the session. Price
action was light ahead of the key US non-farm payroll data but the session saw
a softer USD and an easing in the peripheral bond yields.

The
EUR/USD remained in the upper end of the 1.31 handle but still unable to break
above the January highs of 1.3220. Short-covering might be the theme as weekend
shorts not desired in the pair in case the Greek PSI agreement does occur.
Markets seem posed to sell Euros after the fact.

–
The USD/JPY remained in the lower portion of the 76 handle with dealers
pondering whether the looming end of fiscal year in March had Japanese corporate springing into its repatriating mode.

Political/
In the Papers:

–
The National Institute of Economic Social Research (NIESR) said the UK risks a
recession in the first half of the year which is forecasting 2012 GDP at -0.1%
compared to the government’s Office for Budget Responsibility (OBR) forecast of
+0.7%.

–
The financial press commented that any use of CACs collective-action clauses by
Greece in order to make the PSI talks appear voluntary carries contagion risk.
It could be difficult for Greece to apply CACs to bonds which are not governed
by Greek law. Amid the concerns about CACs, Greek bonds, which are governed by
international law, have been in more demand than Greek bonds due to Greek law.
Note that CACs are used to enable a supermajority of bondholders to agree on a
debt restructuring that is legally binding for all debt holders.

–
Research conducted by Fitch revealed that the use of risky debt in a key US
funding market has returned to pre-crisis 2008 levels, raising concerns the
shadow banking system is becoming riskier. Approximately 20% of collateral
employed to secure the transactions currently comes from structured
finance/repackaged loans. The ratings agency did, however, state that the
reason behind the resurgence is difficult to pinpoint. The research by Fitch is
based on repo data from the ten largest US money market funds (approximately
$90B in repo transactions).

–
Former government Economist Jonathan Portes criticized the UK’s focus on
austerity measures, expecting the unemployment to rise in the UK. He supports a
short-term boost to support the economy. Portes previously worked in Gordon
Brown’s Cabinet Office, and is currently employed as the director of the
National Institute of Economic and Social Research (NIESR).

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Today’s Economic News:

Our
day trading
strategies today will depend on the news, and this morning we
have the grand-daddy of all news events ready to kick off the end of our
trading week.

We
begin the day with 830am EST Non Farm Payrolls, which illustrates the change in
the number of employed people during the previous month, excluding the farming
industry, hence the name Non-Farm Payrolls.
Job creation is an important leading indicator of consumer spending,
which is the most important aspect of our economy, therefore this report this
morning is on almost EVERY trader’s mind today.

How
do we trade Non Farm Payrolls? Very
carefully because this news release will take 1 of 2 forms after its
released. If the news comes out
as-expected you can assume traders have already ‘priced it in’ so the markets
will likely stay flat and sloppy. If the
news come out above or below expectations than we will see a violent reaction
from the markets as traders dive into the news and try to make sense of it
all. Either way you slice it, we won’t
be trading directly after 830am EST this morning, we will be either waiting for
the markets to speed up, or on the flip side, slow down.

Non Farm Payroll Data

After
930am EST US markets open we then move to 1000am when we have 2 very important
news reports scheduled. First, ISM
Non-Manufacturing which is the survey of 400 purchasing managers for various
companies asking them about the conditions of their business, excluding
manufacturing of course. This is a
leading indicator of economic health and a reading above 50.0 will indicate
this sector of the economy to be expanding, and below 50 is considered a
contracting sector of the economy.

ISM Non-Manufacturing Data

Our
final news of the week comes from Factory Orders, which is another one of those
hidden clues we use as crude oil day traders to interpret other news events
that are released during the week/month.
This is the change in the value of new purchase orders placed with
manufacturers. This report includes a
revised version of the Durable Goods orders report we saw last week, and also
adds on non-durable goods to the equation.

How
do we trade Factory Orders? Think about
it…if factories are getting more business…they need to hire more people…more
jobs will mean more income, which creates spending, and investing. People will have more demand for crude oil so
prices will rise. People in the US will
have more investment capital, so equities will rise, pushing down the bonds,
the list goes on.

Factory Orders news

Today
is a Friday, so we must remember one vital thing: get in early, be selective, and then get out
of the market early so you don’t get left holding the bag when the volume drops
after 1130am EST. I always say you need
to have a great reason to trade after 1100am EST on a Friday, so today we will
go right to an open Q&A Webinar once the markets slow down, most likely
shortly after 1100am EST.