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February NFP was a bit better than expected at -36K. At the beginning of the week the estimate was for -20K, but it kept dropping during the week; I saw an average estimate of -70K yesterday. There was a slight downward revision to the Jan NFP. This was a friendly number for ‘risk exposure assets’ – equities and commodities.
In this morning’s STI watch list, my comment for crude oil was: “Sell day; yesterday’s high at 80.95 is the Sell day objective. Power Buy?” A reader asked what I meant by Power Buy.
According to the Taylor cycle, yesterday was a Buy day for Crude Oil futures. I only knew this ex post facto; as Monday wasn’t a clear cut Sell Short day ex post ante. (Looking back, Monday was a breakout sale, and Buy days often follow breakout sale days.).
An attendee at the webinar I did yesterday asked me about my comment this morning on bond futures. I said: “Sell Short day; the swing high at 118-01 is resistance. 117-24 is the reference price.” He asked me what I saw there. I started typing him an email, but I thought I’d put it up as a post instead.
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Yesterday I highlighted a breakout setup in the T Bond futures (read it here), That setup gave a good pop today after the weak consumer confidence number. Let’s look at how you could have traded it.
The daily chart for March T Bond futures is below. I drew the blue horizontal line at Friday’s high of 116-28; that was the upside breakout point I used. 117-074 was Friday’s high and the top of the little triangle; it was the first objective for a breakout rally.
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There were a lot of boring markets today. After the ‘old’ 8:30 open, S&Ps had about a 6 point range. For whatever reason, no one was doing much today.
The good news is that volatility tends to be cyclical, and today’s low volatility is often indicates that higher volatility may be coming in a number of markets. (I discuss patterns that identify when volatility is likely to pop, and how to trade these setups here.)
Sovereign fears are increasing again; the German/Greek 10 Year spread is wider this morning. Greece will attempt to sell a new bond next week, should be fun. The Obama administration made more comments about China and the Yuan; there’s talk they may label China a currency manipulator under the 1988 Omnibus Trade and Competitiveness Act. They also said that China is becoming more protectionist against multinationals. I didn’t see any specific news about the Greek situation, but risk appetite is down recently. The UK posted its first budget deficit since they began to keep records in 1993. US jobless claims rose by more than expected last week; the rise was attributed to last week’s weather. PPI came in higher than expected, although its impact was kind of blunted by Wal Mart’s earnings report. Their earnings were soft, and they noted price deflation in food and electronics. Q4 sales were down 1.6% ex-food, that’s a weak number. We get L.E.I. and the Philly Fed survey at 9 AM, then crude inventories at 10 AM. Crude inventories are expected to be +1.8 mln. barrels last week.
According to the Taylor Technique, today was a Sell Short Day for the 10 year T Note futures; actually for all along the Treasury curve. I was watching Ten Years today.
Monday through Thursday last week saw bearish action; the open was higher than the close for those four sessions. Friday was the TT Buy day; the close higher than the open is evidence of this. Yesterday was the Sell day; it exceeded the Sell day objective at 118-08.0 (there also was the opportunity for a Power Buy yesterday; you can read about the Power trade setup here).
Gold futures have staged a good rally in the past weeks, rallying $84 from the February 5 low. Today it reached a significant price level and had a good trade opportunity in the process. What was it?
Friday’s bar was a breakout setup; it was an inside day and the narrowest of the previous four sessions. Tuesday saw a breakout rally out of this setup as it rallied over last Thursday’s high and Fib resistance at 1103.80.
Overnight the Greek Finance Minister said there’s no need for an EU bailout of Greece. Sovereign concerns were already easing; this helped it out. The sharp move in the Euro/Yen cross is a sign of the return of appetite for risk. US housing starts were stronger than expected. At 1 PM we get the minutes from the last FOMC meeting. The Dollar is seeing strength this morning, regaining some of yesterday’s losses. Crude oil has seen strength off desire for increased commodity exposure, but I wonder if there isn’t a bit of concern over the Iranian situation coming in as well.
By the Taylor Method (read the basics here), today was a Sell day for the Euro Currency futures. As you can see on the daily chart below, it had bearish action Tuesday to Thursday last week (open higher than the close). Friday turned out to be the Buy day, using Thursday’s low at 1.3594 was the reference price for the Buy day; this was also roughly a double bottom with the 2/5 swing low at 1.3584.