Markets In Transition..Continues – Part III

FATCAT_WALLSTI’m not sure what the BofA analyst is saying regarding China’s FX reserve numbers.  They reported a drop of $99.5 billion and that ‘kicked the can’ down the road for the US dollar for the time being.   There was a major shift of capital back into treasuries and out of equities and some commodities.  However, it would appear that while the Chinese Central Bank is attempting to pass the hot potato back to the dollar by defending the Yuan.  At the same time though with so many moving parts it is difficult to tell how severe the burns are.  The chain from the Yuan to the U.S. dollar and back can get tossed between several markets and sectors before it ends up back at the central banks.

2030capitalaztionchartglobalWithout a doubt, we are seeing some very high stakes being played out on an international monetary scale.  It would seem that to shift out of U.S. dollar positions has taken precedence and is more important than extending the stability of the global economy’s leader or number two is bound and determined to push itself into the number one position.   How that then transcends from one market to the next should always lead back to the currencies of the two major players, the U.S. and China.  At the moment, the pecking order remains fairly in line with the chart from last week, although I would lean more towards the top three being the U.S., China, and the EU.

Back to the markets responses to the China FX reserve number. While we wait for the interested parties to figure out how to prop up their economies without upsetting the proverbial “apple cart” there are more opportunities to trade than this mere human can keep track of — it has become essential to have a solid ‘auto-trader’ that performs for the better part – flawlessly.  Without it, I remain committed to the discussion of trading without emotions and operating with a tested and trusted signal generator. And without a less than expected number from China, the equity markets, of course, continued on their current trajectory with sudden and in some cases “Sid Vicious” turns.  It remains to be seen as to whether China will be able to reel in the mass exodus of reserve currencies.  At the moment the harder they attempt to prop up the yuan through the front door, by selling U.S. dollar reserves that are leaving out the back door and being moved back into the U.S. markets hand over fist!  The illusion remains that the U.S. has the best promise of a return.  The game remains afoot.

Check out the charts on the $ES for trades and discussion.





Logical Market Update: BOJ Sits Tight – What’s up with China and Brazil? U.S. Corrections Continue

Japan Central Bank Decides to Sit Tight – What’s Up With the Chinese Economy and Brazil?  The U.S. Corrections Continue as the Seller Flood Gates Opened, Closed, and Opened Again. 

The U.S. broader indexes took their cues from the Asian and Eurozone markets as the wave of selling circled the globe.  The precious metals took a hit although it was tempered somewhat by economic uncertainty.  The Euro ground higher pushing back above 1.33 as traders wait for the final decision from the German Courts like it was “manna from heaven”.  The Treasury markets appear to have started a long much-needed upward correction after breaking below 139 (30-yr bond future) yesterday. 


The U.S. market corrections continue and while initially trading lower at the start of after hours trade all the indexes have reversed and are now slightly higher.  The chart patterns though continue to favor additional upside to relieve some oversold readings.  It may well be a mixed bag with an upward bias as trading moves towards Friday’s “Triple Witching Expiration” and then hold tight until next weeks (Wednesday) word from the FOMC.  Bottom line here is that the increase in volatility has been a gift and wonder for day trading.   Along with solid two-way trade there is hardly a boring moment with so many signals being generated by the DTS birds that I had to turn down the alert volume and get picky!

 It was a rough and tumble day for the Asian markets after the BOJ decided to hold with its current stimulus plans and fresh economic news out of China continues to point to a slow down.  This ultimately reduces demand for commodities such as iron ore and coal used in manufacturing of steel and electricity.  The ripples quickly swept around the globe putting added pressure on Brazilian markets – since Brazil is a major commodity supplier to China. 


Take a look at iShares MSCI Brazil Capped Index (EWZ) – has lost 15% of its value since May 22nd producing a new four-year low this morning at 47.57.  While the momentum oscillators are signaling oversold there is still potential for further breakdown before this market turns higher on a sustained basis. 



Also, hit hard recently are Brazil’s giant mining companies Rio Tinto and Peabody Energy both reaching new 52-week lows along with China’s huge state-owned oil company, Petrochina. 













And to add salt to an already gaping wound Fitch Rating issued a report warning against China’s massive unregulated “shadow banking” sector.  From Reuters:


China has tens of thousands of non-bank lenders that are providing increasing amounts of credit to businesses and government outside the mainstream, regulated banking sector, a situation that is stoking systemic risk, Fitch said. 


Last year I published two articles on Seeking Alpha concerning our own “shadow banking” sector that we gleefully call “To Big To Fail”  (to read them click here and here).

With the addition of the “uncertainty factor” pushing the volatility up in all of the above-mentioned companies it brings along with it many possible opportunities.  I’m always on the lookout for potential candidates for trading.  Here are four worth checking out and plugging into the DTS “birds”. 


My point on money rotation and sector rotation is similar to that on parabolic moves that they happen with frequency within many time frames.  As traders these types of moves can be a bonus for day trading or position trading so again don’t get caught up in the “what’s the catch.”    Realizing a rotation is occurring within a stock you trade or a sector is a great source of stocks to plug into the Diversified Trading System.  Allowing DTS to cleanly and beautifully capture the moves though any or all three DTS trading platforms.  Our goal remains to assist traders to make greater profits during all types of markets.  Sector and money rotation is another tool.




Diversified Trading System


I continue to recommend as the best trading platform available to a broader range of traders from novice to expert.  The Diversified Trading System offers a cost effective product that allows a trader to enter into the “chaos” and trade more effectively.  


Trade Manager from Indicator Warehouse automatically calculates the correct amount of contracts or shares based on your account size or market volatility.  Automated stop-loss management and position sizing eliminates most of the problems most individual traders have.  Day trading and position trading both require (actually demand) good risk management.  Trade Manager does the job across the board and is an essential trading tool that ensures that you take the maximum profit from all your trades. 


A newer member of the money management tools available from Indicator Warehouse is the Profit Finder – System Back Tester When implemented it allows the user to:

  • Immediately know the impact of parameter changes. 
  • Automatically reads all of your DTS entries and exits
  • Calculates the profit/loss of each trade
  • Performs a wide number of essential intelligence boosting calculations instantly
  • Provides solid details about the effectiveness of your trading strategy/ methodology/ indicators


The last two points above are valuable tools to use.  It will show you where some “tweaking” is needed to improve results through the back testing feature. 



The Diversified Trading System used together with Trade Manager should continue to produce numerous trading signals in the DJIA, YM (mini), S&P 500, ES (mini), RUT, TF (Russell 2000 mini), AAPL, AMZN, GOOG, NFLX, and LNKD, GS, and Tesla Motors (TSLA).    


Here is an updated list of the markets where I have found that DTS (all three birds) are producing numerous signals:

  • DJIA future (e-mini available) – Highly recommended
  • S&P-500 future (e-mini available) – highly recommended
  • Russell 2000 future (e-mini available) – highly recommended
  • NASDAQ 100 future (e-mini available) very highly recommended
  • US$/Euro futures (e-mini available) – very highly recommended
  • GS (Goldman Sachs) – good two way volume –
  • AAPL (Apple Computer) – very highly recommended
  • GOOG (Google) – very highly recommended
  • LNKD (LinkedIn) – solid intraday range
  • NFLX (Netflix) – solid intraday range
  • TSLA (Tesla Motors) – highly recommended  
  • 30-yr Treasury Bond future – did not get quiet – opposite took place
  • 10-yr Treasury Note future
  • TLT (Treasury Bond Long ETF)
  • TBT (Treasury Bond Short ETF)
  • Gold (futures and ETF – GLD)
  • Silver (futures and ETF – SLV)