We expected to see some extra volatility coming into today’s trade after yesterday’s shenanigans.  But news that was mixed left the S&P having a whipsaw reaction.  Patient traders who made it through the first couple of minutes on the trade were rewarded.

Dawn-Renée's Non-Farm Payroll Trade 05-07-10

Leading up the the announcement, you can see the S&P move up (yellow arrow moving up on the left side of the graphic) in anticipation of the move.  I don’t normally put orders in prior to the announcement, but the movement up made me expect that we would be likely to see immediate movement downward on the announcement.  So I sold short at 1131.25, expecting the market to move downward.  Instead, it started wicking (the skinny green section of the candle) up.  I drug my stop loss farther up once, expecting that it would go back down because even though the market added 90,000 more jobs than expected, most of those were temporary government census jobs and unemployment actually went up .2%!  I tried to drag my stop loss up a second time, but didn’t make it and it filled me at 1134, causing me to lose 3 points.  However, true to my Market Mover Trading education, I didn’t panic and instead focused on the news.  Sure enough, there was a correction downward as the market realized that the Non Farm Payroll news wasn’t actually good news!  I made 4 trades on the downward movement (see yellow arrow down in the middle of the graphic) using MMT’s proprietary Prediction Points for 6.50 points of profit. (S@1132, B@1129.75; S@1129.75, B@1128.75; S@1129.5, B@1127.75; S@1128.25, B@1126.75).  Then, using a MMT strategy, I suspected we would see similar movement (as the initial news), so I bought long and made an additional point.

So, for the day, even with the initial 3 point loss, I was up 4.5 points, which is 45% and $225 on one $500 contract.  I was 7/8 trades for the week and up 70%! Woo-hoo!  If I can learn and succeed at this without much brain damage, anyone can.  I spend WAAYYY more time blogging about this than I ever do actually setting up to trade and trading.

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Riding The Tax Credit Roller Coaster…

Pending home sales surprised to the upside for a second straight month in March. Follow through for April existing home sales (up 6.8% in Mar) should be expected. Pending sales (contract signings) lead existing sales (closings) by a month or two.

The homebuyers’ tax credit has generated big swings in pending sales: +40% from Jan 2009 to Oct 2009; -20% from Oct 2009 to Jan 2010 (after original expiration); +14% from Jan 2010 to Mar 2010 (ahead of current expiration).

Apr 30 Deadline

Buyers need a contract in place by Apr 30 to qualify for the tax credit. Further upside for pending sales is likely next month.

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There were several trades today, including Chicage PMI and GDP, but we are going to focus on the last trade of the morning.  So, UMich CC is the only news item we don’t get instantly on our server.  It’s normally delayed about 15 seconds, but we can still get in and make money.

Dawn-Renée's UMich Consumer Confidence Trade 4-30-10

Consumer Confidence was down; under expectations.  So, since the market was reacting negatively to this news, using Market Mover Trading strategies, I sold one contract short at 1202.5.  At first, it looked like a good move, but then the market started moving up (bad for my trade).  We were smack dab between two of Market Mover Trading’s proprietary Prediction Points.  The rest of the UMich CC numbers had come out (in addition to the main number, there are numbers for Current Conditions, Expectations Index and 6 month Outlook) over the previous few minutes, and all the numbers were lower than expected.  So I drug my profit target down (remember, this is a sell short, so moving my profit target down means I was trying to *increase* my profit!) to the next lowest prediction point, as I felt the market should turn around and the positive movement was not reaching or breaking through the next highest Prediction Point.  One minute of patience paid off, as the market moved down to the lower prediction point and filled my profit target and I made 1.5 points, or 15%/$75.  At that point, I had to pack up and leave to make a meeting and MMT class, or I might have pulled my profit target down again, as the market was plummeting.  The ride down in response to UMich CC ended up being 6 points, or 60%.  On one contract, that would have translated to $300.  But as long as I am on the upside, I am a happy camper!  The higher profits will come with experience; the point of MMT for me is to trade without emotion or greed.  Remember, until a few months ago, ALL of this stuff was Greek to me, and via Market Mover Trading’s fabulous educational tools, I have easily learned these tools and strategies.

Jody's UMich Consumer Confidence Trade 4-30-10

So, here’s Jody’s UMich Consumer Confidence Trade.  He went short with 3 contracts at 1202.50.  Then, on the same upward (bad for a short trade) movement that I decided to hold fast on, he panicked a bit and flattened (bought all three contracts) out for a profit of .25 points, or $37.50.  This is okay, as it’s a learning experience.  That’s why it’s a good idea to simulate trading for at least 100 or so trades before you trade live.

It gives you confidence, as you know what you trade well and what you need to work on.  Journaling is a MUST!  In this case, Jody had successfully traded the Chicago PMI earlier in the morning and had a profit of $275 for the day!

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Nonfarm payrolls for the month of March came in lower than anticipated, rising 162k following an upwardly revised 14k decline in February. January nonfarm payrolls also saw an upward revision, and now reflects a 14k increase after coming in at a 26k decline initially. Despite the headline improvement in March, the US unemployment rate remained a 9.7% for a third consecutive month.

March nonfarm payrolls were boosted by improvements in both goods-producing and service providing sectors. Goods-producing employment came in positive for since March 2007, rising 41k over the month while construction employment also managed to edge in positive territory with a 15k increase over the month. Manufacturing employment came in higher for a third straight month, rising 17k following a 6k rise prior.

Service sector employment managed its highest total in more than a year, gaining 121k in March following a 33k increase the prior month. Retail sector employment rose 15k in March following an 8k rise in February. Employment in transportation and warehousing came in at an 8k increase for the month following a 9k decline prior.

Employment in information services was down 12k in March following a 7k decrease the previous month. Employment in financial activities was down 21k in March following a 15k decline in February. Professional and business services employment was up 11k over the month following a 40k increase prior. Employment in education and health services was up 45k over the month, while leisure and hospitality employment rose 22k.

Government employment gained 39k over the month with Federal government employment up 48k thanks entirely to hiring for the 2010 Census. Average hourly earnings for private workers dropped 0.1% to $18.90 in March, reflecting the first monthly decline since April 2003.

Keith Lobodzinski

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Asian Equities were lower overnight w/ the NIKKEI closing down 7.20 as losses in Healthcare, Industrials, Basic Materials and the Oil and Gas Sector were nearly offset by gains in Consumer Goods and Services and in the Utilities and Financial Sector. Chinese Stocks fell more sharply with the Hang Seng off 135pts with some major stocks missing earnings estimates…raising the specter of a poor earnings season overall. Perhaps too, the emerging notion the U.S. will brand China a Currency Manipulator in it’s semi-annual International Economic and Currency Report due on 15 April.

European Equities are just in positive territory at this writing after German Employment fell 31k against expectations for a slight gain. Following on yesterday’s Irish bank implosion is poor news on the Irish Employment front with the Unemployment rate jumping to 13.4%. Irish PPI rose 1% month on month but tanked 2.6% year on year. In other troubled countries news, Greek Retail Sales were reported up 8.1% year on year vs a prior 2.7% gain. French PPI rose just .1% month on month, raising the specter of deflationary pressures.

U.S. Equity Index futures are very slightly in the red at this writing w/ Dow Futures off 9pts and the S&P off just 1.25.

The Dollar is putting in a mixed performance with losses against the EUR still contained in y/day’s ranges. A bit of short covering on the dollar seems the likely cause rather than any sentiment change. CABLE however is over y/day’s highs w/ a big leg up as yield chasers jump into GBP/JPY. JPY is in fact weakening against the EUR, AUD and USD into this morning’s U.S. Open.

U.S. Treasury Futures up slightly at the long end of the curve w/ the 30yr up 6 ticks and the 10yr up just a couple of ticks at 116-00 basis the June contract. The 2 and 5yr are flat at this writing. The 30yr yield is down very slightly at 4.737%, the 10yr is at 3.853% and the 2/10 is at 2.798 w/ as the recent downward slope levels off. Today’s Treasury schedule is limited to a Cash Management Bill, the size of which is yet to be determined.

Commodities prices are higher into the NY Open with Crude up over $83 per barrel ahead of today’s DOE inventories report. API reported a smaller than expected build last night. Gold is up nearly $6 at $1111 and change on dollar weakness.

Today’s data includes MBA Mortgage Applications which were up 1.3%. Of particular interest will be today’s ADP Employment data at 8:15am EST with expectations for a gain fully built into equities prices. ADP is expected to gain 40k jobs. Chicago PMI is at 9:45am and February Factory Orders are at 10am. Also at 10am, NAPM Milwaukee.

Today’s speakers include the Fed’s Lockhart and Duke at 12:30pm EST.

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It was a pretty boring morning, news-wise.  Can’t have everything, right?

from Tiernan Ray at barrons.com:

Deflation strikes again.

Following on a surprise dip in producer prices yesterday, the prices people are paying at the cash register fell in February, on average, it turns out this morning, based on data from the Bureau of Labor Statistics.

The Consumer Price Index was unchanged in February from January, the Bureau reported, whereas economists had been expecting a 0.1% increase across the board.

With food prices rising “slightly” and energy prices dropping. Energy dropped half a percent, food rose 0.1%, and all other items rose 0.1%. Specifically, used cars rose 0.7%, medical care rose 0.4%, while apparel was off 0.7%.

Somewhat less concerting, initial claims for jobless insurance for the week ending last Friday fell by 5,000, to 457,000, though that was slightly higher than the 455,000 observers had been expecting, the Bureau reported this morning.

S&P 500 futures were up 1.3 points for the March contract, at 1,162.30.

The dollar’s strengthening this morning, rising to $1.3672 per Euro from last night’s closing cross of $1.3741.

And commodities have weakened, with futures on light sweet crude oil for delivery in May down 43 cents at $82.78 per barrel, and April futures on gold up $1.40 at $1,125.60 per ounce.

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Lots of people ask me this when I tell them we trade futures contracts.  They assume they might be like stocks.  However, they are pretty different. A futures contract is a standardized contract to buy or sell a specified commodity of standardized quality at a certain date in the future and at a market-determined price (the futures price). The contracts are traded on a futures exchange. Futures contracts are not “direct” securities like stocks, bonds, rights or warrants. They are still securities, however, though they are a type of derivative contract. Understanding  the origin of futures contracts certainly helps to explain what they are:

The Dojima Rice Exchange in Osaka, Japan c. 1914

Aristotle described the story of Thales, a poor philosopher from Miletus who developed a “financial device, which involves a principle of universal application.” Thales used his skill in forecasting and predicted that the olive harvest would be exceptionally good the next autumn. Confident in his prediction, he made agreements with local olive-press owners to deposit his money with them to guarantee him exclusive use of their olive presses when the harvest was ready. Thales successfully negotiated low prices because the harvest was in the future and no one knew whether the harvest would be plentiful or poor and because the olive-press owners were willing to hedge against the possibility of a poor yield. When the harvest-time came, and many presses were wanted all at once and of a sudden, he let them out at any rate he pleased, and made a large quantity of money.

The first futures exchange market was the Dōjima Rice Exchange in Japan in the 1730s, to meet the needs of samurai who – being paid in rice, and after a series of bad harvests – needed a stable conversion to coin.

Hopefully, this helps to explain what we trade.  For more information, attend a live seminar near you, a Thursday evening 7 pm MDT webinar or check with us.  We can email you links to videos or send you a DVD.  Remember, Market Mover Trading only exudes pressure on the market; never pressure on you!

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The S&P futures are tacking onto yesterday’s encouraging performance despite sluggish econ data from the EU and UK.  The S&P futures are also ignoring strength in the Dollar and appear to be on a trajectory of their own these days.  Meanwhile, the futures are creating further separation from their highly psychological 1100 level.  Confidence is gaining in America’s economic recovery, particularly in comparison to the EU and UK.  However, uncertainties are still hanging around the globe, particularly in Europe.  On a positive note, the RBA decided to raise rates again today, a show of confidence in the global economic recovery.  On the other hand, China’s banks made a large cut in lending during the month of February, and it remains to be seen whether tightening in China will dampen recoveries around the globe.  Market volatility could pick up tomorrow with the U.S. releasing its Services PMI and ADP Non-Farm Employment Change data.  Investors are already trying to soften the blow from a potential letdown in employment data because of adverse winter weather conditions.  However, tomorrow’s data points could have considerable influence nonetheless.  The UK will also release its Services PMI data along with an HPI figure, preceded by Australian GDP during the Asia trading session.  Hence, there will be more than enough data to move markets tomorrow, not to mention ECB and BoE policy meetings on Thursday.  That being said, market activity could increase as the week progresses.  Meanwhile, the S&P futures have taken down some key barriers, although they still face our 3rd tier downtrend line.  Our 3rd tier downtrend line nearly runs through 2010 highs, meaning a more significant breakout could be on the horizon should fundamental and psychological developments create favorable environment for U.S. equities.

Thanks to Fast Brokers News.  Tomorrow should be a fun trading day!

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