This week we will hear earnings from 5 of the Mag 7 stocks. As they will talk about how much they are spending on NVDA chips. The potential for intra-week volatility is there. If yields continue to move higher next week this could generate selling pressure, regardless of mega-cap tech earnings. Pre-election selling late next week is a possibility as well.
SPX fell 1.74 points (–0.03%) to 5,808.12 to end the week down 0.96%;
$DJI lost 259.96 points (–0.61%) to 42,114.40 to end the week down 2.68%;
$COMP rose 103.12 points (0.56%) to 18,518.61 to end the week up 0.16%.
10-year Treasury note yield (TNX) added three basis points to 4.23%.
Cboe Volatility Index® (VIX) climbed sharply to 19.95, nearing recent highs. The 20 level is an area to watch next week, as it traditionally signals more volatile markets.
The rise in yields puts the small caps trade on hold; high yields are not a positive for small caps. Which puts the rotation trade in question. When the FED started cutting rates the sentiment position for portfolio managers went in the direction of small and mid-cap and away from mega caps. Then we had TSLA report a good quarter, and the stock went up 20%.
S&P 500 posted weekly loss for the first time in seven weeks as rising bond yields trigger some profit taking. Yields have been on the rise recently, mostly driven by strong economic data and higher treasury issuance expectations. The last time we came out of a soft landing in 1995 software and financials were leading the market.
We didn’t see the standard seasonal market weakness in September or October to this point, so we have some jitters in the market which are becoming evident such as the VIX above 20 when the S&P is at record highs.
Futures:
Oil prices plunge 6% after Israel’s attack spares Iran’s energy facilities
During the week Crude oil volatility from the previous week has subsided as traders re-evaluate geopolitical events and conflict escalations threatening oil supplies in the Middle East. Over the weekend Israel attacked Iran’s defense systems and other facilities but did not target any oil infrastructure. As of this writing light sweet crude is trading at $67.31 the last lows for the past 3 months were $66.33 and $65.27. Oil is currently trading below both the 50- and 200-day simple moving averages, which is bearish.
“The recent Israel military action is unlikely to be seen by the market as leading to an escalation that impacts oil supply,” Citi analysts wrote in a note on Monday, cutting the bank’s Brent oil forecast by $4 to $70 per barrel over the next three months.
whether Iran will counter the attack in the coming weeks, which should lead to risk premiums rising again.
China: expectations for improved Chinese physical commodities demand have moderated despite an aggressive stimulus package and a reduction in interest rates.
Gold: chasing $3,000. other precious metals started playing catch up and might be an alternative. Silver, platinum, palladium.
Month to date leaders and laggers.
Bonds & Rates:
As of late today, traders see a 95% chance rates will fall 25 basis points at the Federal Open Market Committee(FOMC) meeting on November 6–7, based on the CME FedWatch Tool. There’s a 5% chance of no change from current rates.
10-year yield keeps going up, Analysts are saying if we get past 4.5% it may be a problem for stocks.
Paul Tudor Jones said this week “I am clearly not going to own any fixed income and am going to be short the back end of fixed income”.
What’s shorting the back end of fixed income?
“Shorting” the backend of fixed income refers to taking a short position in longer-term bonds or other fixed-income securities. In bond markets, “backend” refers to the longer maturity end of the yield curve—typically bonds with maturities of 10 years or more.
When investors short the backend of fixed income, they are betting that the prices of these longer-term bonds will decrease, which usually happens when interest rates rise. Bond prices and interest rates have an inverse relationship, so if rates increase, the value of existing bonds with lower yields drops.
This strategy might be used when investors expect long-term interest rates to rise, possibly due to inflation concerns or a tightening of monetary policy by central banks.
David Einhorn said “it is by many measures the most expensive stock market we have seen since the founding of Green Light” he also noticed what Warren Buffet has been doing, that he sold a bunch of stock and has been sitting on a mountain of cash, which express a long term view that right now is not the a great time to have a lot of equity exposure, and the opportunity set is expected to be better at some point in the not so distant future”.
Technical Analysis:
Technical perspective, uptrends largely remain intact, the COMP made new all-time highs but did not register a fresh all-time closing high.
SPX technical support remains near its 20-day moving average, now 5,787. That served as support earlier this month and again this week, with the index bouncing off it both times. However, market breadth, which had been rising, contracted a bit this week. About 73% of SPX stocks now trade above their respective 200-day moving averages, down from 80% a week ago. Typically, broader participation suggests healthy investor sentiment and supportive technicals.
The Russell 2000 was the relative underperformer this week, and higher yields are the culprit. Last Wednesday (October 16th) the index finally notched a fresh two-year closing high, but subsequently turned lower as 10-year yields moved up 20 basis points since that day. The good news for the bulls is that the uptrend which began in early August remains intact, but the index could be challenged if bond yields continue to push higher.
Hot sectors: Cyber: Cybersecurity stocks are holding their own. The group is reacting to Morgan Stanley’s upbeat note on the industry. The analyst is bullish on network security stocks on the thesis of strong firewall refresh activity in the second half of 2025 and 2026 based on a four-to-five year replacement cycle, rising network traffic, and record levels of threat activity. Supporting this view is a recent Value-Added Reseller (VAR) and Chief Investment Officer survey by the analyst that showed network security as the top spending priority over the next twelve months.
Economic Reports:
The stronger than expected economic data over the past month will likely translate into a more patient Federal Reserve stance, but investors seem to be ok with tempered rate cut expectations assuming it is due to a strong economy versus re-inflationary trends.
This Friday’s reading on nonfarm payrolls, the unemployment rate, and wage inflation, among other key metrics, could influence the direction of yields.
Monday (10/28): -no reports-
Tuesday (10/29): Consumer Confidence, FHFA Housing Price Index, S&P Case-Shiller Home Price Index
Wednesday (10/30): ADP Employment Change, Advanced International Trade in Goods, Advanced Retail Inventories, Advanced Wholesale Inventories, EIA Crude Oil Inventories, Q3 GDP – Advanced, MBA Mortgage Applications Index, Pending Home Sales
Thursday (10/31): Continuing Claims, EIA Natural Gas Inventories, Employment Cost Index, Initial Claims, PCE Prices, Personal Income, Personal Spending
Friday (11/1): Nonfarm Payrolls, Average Workweek, Average Hourly Earnings, Unemployment Rate, ISM Manufacturing Index
Earnings:
For the full S&P 500, FactSet’s third-quarter EPS growth consensus is now 3.6%, down from 4.3% at the start of earnings season. As of Friday, 37% of S&P 500 companies have reported third-quarter earnings and 75% topped analyst’s EPS estimates, FactSet said. That’s below the five-year average of 77%. Info tech and communication services enjoy the strongest growth so far.
Monday (10/28): ON Semiconductor (ON), CenterPoint Energy (CNP), Waste Management (WM), Welltower (WELL), Cadence Design Systems (CDNS), Ford Motor Co. (F), SBA Communications (SBAC), F5 Inc. (FFIV), Crane Co. (CR)
Wednesday (10/30): Eli Lilly & Co. (LLY), AbbVie (ABBV), Caterpillar (CAT), Automatic Data Processing (ADP), Trade Technologies (TT), Microsoft Corp. (MSFT), Meta Platforms (META), Amgen (AMGN), Booking Holdings (BKNG), Starbucks (SBUX), KLA Corp. (KLAC), Aflac (AFL)
Thursday (10/31): Matercard Inc. (MA), Merck & Co. (MRK), Line PLC (LIN), Uber Technologies (UBER), Eaton Corp. (ETN), ConocoPhillips (COP), Apple Inc. (AAPL), Amazon.com Inc. (AMZN), Intel corp. (INTC), Atlassian Corp. (TEAM)
Friday (11/1): Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), Enbridge (ENB), Dominion Energy (D), Charter Communications (CHTR), Cardinal Health (CAH)
Memoirs of a trader: Whether trading futures or stocks I always try to trade with the trend therefore look to trade the futures and sectors that had the best week and look for continuation or pull backs. Remember not to chase, buying support usually works out better than buying resistance. TIP- fundamental news can change the trend on a dime.
Trading stocks, commodity futures and options involves a substantial risk of loss. The information here is of opinion only and do not guarantee any profits. Past performances are not necessarily indicative of future results.
About: Cannon Trading is an independent futures brokerage firm established in 1988 in Los Angeles. Our mission is to provide reliable service along with the latest technological advances and choices while keeping our clients informed and educated in the field of futures and commodities trading.
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
Oil went below $70 concern of commodity inflation receded somewhat
Markets are a little stretched on the upside SPX up for 6 weeks, investor sentiment is in favor of the bulls. Small caps appear to be playing catch-up Russell closed at a two-year high Wednesday, which may help sustain the recent uptrend. Next week the economic calendar is light so the focus will be on Q3 earnings, which have been strong so far. The path of least resistance still seems to be trending higher. If the benign earnings momentum doesn’t continue throughout next week perhaps this could provide enough of an excuse for investors to take profits, resulting in a modest pullback in stocks.
What happens with the FED what’s the next move? As long as data continues to validate the soft/no-landing thesis it seems that the bias will continue to remain higher.
Deutsche bank posted that 5-year inflation swaps spiked to the highest level since March 2023. Can we see another spike in inflation that can affect the fed’s next move?
At some point the huge debt levels that we’re running suppress growth and increase interest rates and that leads to higher inflation. The market is pricing in 6 rate cuts of 150 basis points and full-on expectations of $275 of earnings. What if any of the Mag 7 miss earnings? Last quarter they all delivered good earnings and were sold off, we saw profit taking. ASML missed and semies went down this past week. Then we saw positive earnings from Taiwan Semiconductor Manufacturing (TSM), the largest chipmaker in the world. TSM reported a 54% climb in annual profit, better than analysts had expected, driven by accelerating AI demand. I understood it as AI semies demand is there.
Piper Sandler said, “the S&P is overvalued by 8% but so what”.
Stifel said this week “we’re goanna go up another 8 to 10% and then we’re goanna crash 25% sometime next year”.
Bottom line anything is plausible but what’s actionable is now.
Nuclear energy: Mega companies are investing in energy to power their AI infrastructure. AMZN announced it has signed an agreement with Dominion Energy, Virginia’s utility company, to invest more than $500 million to develop small modular reactors. Stocks in nuclear energy space – CEG, VST, D, TLN, LEU, BWXT, OKLO, SMR.
We received solid earnings from Goldman Sachs (GS), Bank of America (BAC), and Citigroup (C). Another newsmaker was UnitedHealth (UNH), which saw shares drop sharply after the company shaved the top end of its guidance amid rising costs. It was the first outlook miss in years for the giant health company.
Treasury yields fell as inflation concerns eased amid sliding crude oil prices on media reports that Israel doesn’t plan to target Iran’s oil sector. Odds of a 25-basis-point Federal Reserve rate cut next month climbed in futures trading Tuesday.
The Russell 2000® Index (RUT) pushed above technical resistance intraday at the July peak near 2,260, though it settled below that. Strength there likely reflects the slight dip in Treasury yields that also lent support to “defensive” and yield-sensitive sectors including real estate, utilities, and consumer staples. The financial sector strength related to strong bank earnings also helps the RUT, which is heavily weighted toward that sector.
Walgreens Boots Alliance jumped more than 15% after the company said it will shut 1,200 stores over the next three years. The company’s earnings beat Wall Street’s estimates. Shares were down about 70% year to date.
Data-wise, October New York Fed Empire State Manufacturing, which provides insight into New York’s manufacturing climate, was much worse than expected at –11.9, with anything under zero indicating contraction. Analysts had expected a reading of 3.6, down from 11.5 a month ago. On a positive note, the report’s six-month outlook rose to its highest in three years, and employment numbers looked strong.
On Thursday we had retail sales. They climbed 0.4%, compared with the 0.2% consensus and 0.1% in August. Excluding autos, one very strong category in retail sales was restaurants and bars, which saw a 1.05% monthly increase.
Retail sales figures indicate consumers are still doing well and spending, which means gross domestic product growth is likely to be in the 3% plus region again.
Ongoing softness in manufacturing and falling commodity prices—reducing inflation expectations, Lower crude prices can help company margins across many industries and keep a lid on inflation.
Before retail sales, the thinking was that the Fed would cut rates 25 basis points in November but consider pausing in December if data remained strong. It’s unclear if a massive jobs report, a warm Consumer Price Index(CPI) and now a very hot retail sales report, would be enough for the Fed to think about a pause at either of its remaining meetings this year. Markets have lowered expectations about the number and size of rate cuts in 2024 due to the strength in the economic data.
It will be a pretty light week of economic data. However, there are two major updates on the state of the housing market, with September’s existing home sales out on Wednesday and September’s new home sales out on Thursday. Housing is a key watch item for investors and the Federal Reserve because it represents a large, unavoidable cost for most Americans, and it’s proven to be a sticky source of inflation. Last week, September housing starts were slightly better than expected, though they were down month over month. We’re unlikely to see a sustained material improvement in the housing market until bond yields come down, which will help pull mortgage rates lower and, in turn, make monthly payments more affordable.
Bonds:
Expect the sideways churning in the bond market to continue until there is a catalyst for the next move. Credit spreads will likely remain tight. The U.S. dollar, having rebounded again from the low end of its two-year trading range, looks like it has some room to move higher as weakness in global growth relative to the United States keeps it firm.
Currently, Bloomberg probabilities suggest a 92% chance of a 25-basis point cut at the November FOMC versus 89% last Friday. Through 2025, the probabilities are suggesting 150 basis points of cuts, which is consistent with the September dot plots from the Fed.
Before the next Federal Reserve meeting November 6–7, key data include September’s Personal Consumption Expenditures (PCE) price index on October 31 and October nonfarm payrolls on November 1.
The European Central Bank (ECB) cut rates 25 basis points for the third time this year.
Futures:
#SLV highest since November 2012. #GLD continues its record run.
As of Tuesday, looking at the daily chart for the Gold Futures December 2024 (/GCZ24) contract we can see significant buying pressure as the contract climbed to new all-time highs. The contract has consistently traded off the 20-Day Simple Moving Average which was tested yesterday on below average volume. /GCZ24 is currently trading well above the 50-Day and 200-Day SMA price points.
According to the CFTC Commitment of Traders report released October 8th managed money traders have decreased their long position by -20,271 contracts and increased their short position by +132 contracts. Managed money traders are net long 194,059 contracts. The 14-Day Relative Strength Index at 59.17% indicates more buyers than sellers.
Chinese stocks are under pressure lately, with declines this month eroding gains from the massive rally sparked by China’s stimulus announcement in September.
Investors appear to have lost faith that the government’s stimulus will be the answer to that economy’s problems,” Yardeni Research said in its Wednesday briefing note. “The quick knee-jerk rally in Chinese equities already looks like it’s getting a leg cramp.”
China’s third-quarter GDP rose 4.6% on an annual basis between July and September, inching just above the Reuters consensus view of 4.5%. Retail sales also climbed more than analyst had expected. Chinese stocks popped more than 3.5% Friday on stimulus hopes despite GDP falling sequentially from 4.7% in the second quarter.
European and Asian stocks mostly climbed this week, and Japan saw inflation dip, which could ease concerns about another rate hike there.
Conclusion from this week:
The decline in oil and solid retail sales this past week point to an economy with moderating inflation and resilient growth.
discipline mandates that we consider lightening up our stock exposure in an overbought market. We’re not there yet but still close.
You need a catalyst for the sector and stock that you’re trading to move higher. The markets were missing a catalyst this week for further upside. Some of the economic reports this week suggest that the FED may slow down further cuts. SPX price-to-earnings (P/E) ratio of nearly 22 remains historically elevated.
Earnings:
Monday (10/21): Sandy Springs Bancorp Inc. (SASR), SAP SE (SAP), Nucor Corp. (NUE), WR Berkley Corp. (WRB), Alexandria Real Estate Equities Inc. (ARE), AGNC Investment Corp. (AGNC), Zions Bancorp (ZION). Logitech (LOGI).
Tuesday (10/22): GE Aerospace (GE), Danaher Corp. (DHR), Verizon Communications (VZ), Philip Morris International Inc. (PM), RTX Corp. (RTX), Lockheed Martin Corp. (LMT), Texas Instruments (TXN), Baker Hughes Co. (BKR), Seagate Technology Holdings (STX), Enphase Energy (ENPH), Norfolk Southern Corp. (NSC), General Motors (GM), Freeport-McMoRan (FCX), 3M (MMM),
Wednesday (10/23): Coca-Cola Co. (KO), Thermo Fisher Scientific Inc. (TMO), Nextera Energy Inc. (NEE), AT&T Inc. (T), Boeing Co. (BA), General Dynamics Corp. (GD), Tesla (TSLA), T-Mobile US (TMUS), International Business Machines Corp. (IBM), ServiceNow Inc. (NOW), Lam Research Corp. (LRCX)
Thursday (10/24): S&P Global Inc. (SPGI), Union Pacific Corp. (UNP), Honeywell International Inc. (HON), United Parcel Services Inc. (UPS), Northrop Grumman Corp. (NOC), Carrier Global Corp. (CARR), Capital One Financial Corp. (COF), Digital Realty Trust Inc. (DLR)
Friday (10/25): Sanofi SA (SNY), HCA Healthcare Inc. (HCA), Colgate-Palmolive Co. (CL), AON PLC (AON), Centene Corp. (CNC)
Technical Analysis:
NDX is less than 2% away from it’s all time high 20,675. NDX remains in an uptrend and price has been converging over the past two months in triangle trend. mega-cap tech earnings, which we’ll get the week after next, will likely determine whether we can make new all-time highs or not.
Russell appears to be forming a bull flag formation on the charts. This bullish pattern would be confirmed if the index closes above the upper trendline of the flag, or some technicians look for a close above the top of the flagpole which is at Wednesday’s 2,286 close.
KWEB ETF China, retraced 50% according to Fibonacci numbers.
Memoirs of a trader:
For the past two years I added trading options as opposed to just trading stocks. Trading options is very risky we’re paying for time value (every day that passes on your option without the option moving in the direction of your trade, the option loses time value). And if the stocks you’re trading aren’t moving, trading the options is a losing bet. Another thing that caught my attention, 20 years ago options premiums were much cheaper than they are today, The only options trade that worked for me this week was selling a put, taking the other side of the trade (which can be very risky) but works when the underlying stock doesn’t move or moves in your direction. Conclusion stick to trading stocks when the stock isn’t moving you aren’t losing and add options only once the volatility gets going.
Trading stocks, commodity futures and options involves a substantial risk of loss. The information here is of opinion only and do not guarantee any profits. Past performances are not necessarily indicative of future results.
About: Cannon Trading is an independent futures brokerage firm established in 1988 in Los Angeles. Our mission is to provide reliable service along with the latest technological advances and choices while keeping our clients informed and educated in the field of futures and commodities trading.
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
Hot market of the week is provided by QT Market Center, A Swiss army knife charting package that’s not just for Hedgers, Cooperatives and Farmers alike but also for Spread traders, Swing traders and shorter time frame application for intraday traders with a unique proprietary indicator that can be applied to your specific trading needs.
December hogs satisfied their first upside PriceCount objective early this month and have consolidated their trade. At this point, the second count would project a possible run to the 82.15 area IF you can resume the rally and break out above resistance at the April high.
PriceCounts – Not about where we’ve been , but where we might be going next!
The PriceCount study is a tool that can help to project the distance of a move in price. The counts are not intended to be an ‘exact’ science but rather offer a target area for the four objectives which are based off the first leg of a move with each subsequent count having a smaller percentage of being achieved. It is normal for the chart to react by correcting or consolidating at an objective and then either resuming its move or reversing trend. Best utilized in conjunction with other technical tools, PriceCounts offer one more way to analyze charts and help to manage your positions and risk. Learn more at www.qtchartoftheday.com
Trading in futures, options, securities, derivatives or OTC products entails significant risks which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies is not necessarily indicative of future results.
Broker’s Trading System of the Week
With algorithmic trading systems becoming more prevalent in portfolio diversification, the following system has been selected as the broker’s choice for this month.
The performance shown above is hypothetical in that the chart represents returns in a model account. The model account rises or falls by the average single contract profit and loss achieved by clients trading actual money pursuant to the listed system’s trading signals on the appropriate dates (client fills), or if no actual client profit or loss available – by the hypothetical single contract profit and loss of trades generated by the system’s trading signals on that day in real time (real‐time) less slippage, or if no real time profit or loss available – by the hypothetical single contract profit and loss of trades generated by running the system logic backwards on back adjusted data. Please read full disclaimer HERE.
Would you like to receive daily support & resistance levels?
* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
Economic Reports
provided by:ForexFactory.com
All times are Eastern Time ( New York)
Improve Your Trading Skills
Get access to proprietary indicators and trading methods, consult with an experienced broker at 1-800-454-9572.
Explore trading methods. Register Here* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
#Equities, #Consolidation phase, #Interest rates, #Precious metals, #Gold, #Silver, #US Dollar, #Crude oil prices, #HurricaneHelene, #Middle East tensions, #Chinese stimulus, #Redbook US Retail Sales, #Case Schiller US Metro-Area Home Prices, #Richmond Fed Manufacturing Index, #Service Sector Index, #Consumer Confidence, #New Home Sales, #Micron Technology
Many experienced traders say that the stiffest challenge you’ll face in becoming a futures trader is conquering your own psyche. Why? Because losing is part of trading, and people hate to lose.
In this “Trading Psychology” Course you will learn:
How to examine your patterns and behaviors and recognize when they are holding you back
Maintaining self-confidence as a trader even in the face of inexperience
The mathematical expectation model and how it can decrease your losses
Determining the trading plan that is right for your trading personality
Understanding and using Motivation – Risk – Reward to its full advantage
* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
Market Overview for the last 2 trading days of the week
By Mark O’Brien
Heads up:
Keep an eye out for the second of this week’s inflation reports: the Bureau of Labor Statistics’ Producer Price Index. The report will be released tomorrow, 7:30 A.M., Central Time.
Energy:
This morning, the Energy Information Agency released its weekly crude oil stocks report and the data was a bullish curveball showing a surprise withdrawal in U.S. crude inventories and a bigger-than-expected drop in U.S. gasoline stocks. April RBOB gasoline futures rose over seven cents as of this typing – a ±$3,000 per contract move – up to ±$2.66 per gallon, close to 6-month highs. Spurring the price increase, Ukrainian drone attacks struck several oil refining facilities in Russia for the second day, damaging its refining capacity
Metals:
In concert with the month-long slump in the U.S. dollar and a lingering expectation the Fed will reduce borrowing costs this June, today gold is chipping away at its ±$20 sell-off Monday and poised to around its prior all-time high close (basis April): $2,188.60/oz. As of this typing, April gold is ±$2,177.00.
Indexes:
All three major stock indexes have sustained trading near their all-time highs this week – after the Personal Consumption & Expenditures Price Index on April 1st (the Fed’s preferred U.S. inflation gauge), February’s non-farm payrolls last Friday and Tuesday’s higher-than-expected CPI reading yesterday. As of this typing, prices are mixed ahead of tomorrow’s release of the Bureau of Labor Statistics’ Producer Price Index.
Softs:
So far, the king of all-time highs this week is not Bitcoin (see below). It’s Cocoa. The May cocoa contract broke above $7,000/ton, nearly $2,000/ton higher over the last month – a ±$20,000 per contract move, including today’s 361-point ($3,6010) move today – with “no top in sight,” stated by The Hightower Report.
Crypto:
March Bitcoin futures are set to close at a new all-time high above 73,000 today. With the Bitcoin ETF now trading, remember that the world’s largest futures and options exchange – the CME Group – offers Bitcoin and Micro Bitcoin futures and options with efficient price discovery in transparent futures markets, prices based on the regulated CME CF Bitcoin Reference Rate (BRR) and easily traded on your supported trading platform. Make it your choice for managing cryptocurrency risk.
* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
Today’s CPI report, market action and looking back at my notes from previous CPI trading days encouraged me to share the below:
Maintaining a trading journal is a critical practice for any trader who aims to achieve long-term success in the markets. This meticulous record-keeping serves several vital functions that contribute to a trader’s development and strategy refinement.
Self-Reflection and Accountability: A trading journal fosters a habit of self-reflection. By documenting the details of each trade, including the rationale behind entry and exit points, traders can review their decisions objectively. This process encourages accountability and helps traders to recognize patterns in their trading behavior, both successful and detrimental.
Strategy Optimization: Over time, a trading journal becomes a valuable data repository that traders can analyze to fine-tune their strategies. By identifying what works and what doesn’t, traders can make informed adjustments to their approach, discard ineffective methods, and capitalize on strategies that yield positive outcomes.
Emotional Regulation: Trading can be an emotional endeavor, and a journal can act as a stabilizing force. By committing to a disciplined recording of trades, traders can distance themselves from the emotional highs and lows of market volatility. This emotional detachment is crucial for making rational, data-driven decisions.
Performance Tracking: A trading journal enables traders to track their performance over time. It provides a clear picture of profit and loss, helping traders to assess their financial progress and set realistic goals for future trades.
Learning Tool: For novice traders, a journal is an invaluable learning tool. It allows them to learn from their mistakes and successes, accelerating their journey towards becoming proficient traders.
In essence, a trading journal is more than just a record of transactions; it is a trader’s roadmap to continuous improvement and strategic mastery. It is an indispensable tool for anyone serious about excelling in the dynamic world of trading.
* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
Trading Resource of the Week – Trade Alerts Via Email/Text
Hot Market of the Week – May Wheat
Broker’s Trading System of the Week – MidCap SP Swing System
Trading Levels for Next Week
Trading Reports for Next Week
Important Notices –
FED Blackout Period Begins Sat. 9th, lasts for 9 business days
A smattering of earnings. Mostly Microcap to Midcap: Adobe Reports
Tuesday and Thursday Data: CPI, Jobless claim , Retail sales and PPI
Begin Trading June indices if you haven’t already: M = June
Spring your Clocks forward for those countries that subscribe to Daylight Savings.
Trading Resource of the Week : Understanding Open Interest by CMEgroup.com
Understanding Open Interest
Open interest is the total number of futures contracts held by market participants at the end of the trading day. It is used as an indicator to determine market sentiment and the strength behind price trends.
Unlike the total issued shares of a company, which typically remain constant, the number of outstanding futures contracts varies from day to day.
Open interest is calculated by adding all the contracts from opened trades and subtracting the contracts when a trade is closed.
For example, Sharon, Cynthia and Kurt are trading the same futures contract. If Sharon buys one contract to enter a long trade, open interest increases by one. Cynthia also goes long and buys six contracts, thereby increasing open interest to seven. If Kurt decides to short the market and sells three contracts, open interest again increases to 10.
Open interest would remain at 10 until the traders exit their positions, at which point open interest declines. For example, open interest declines to nine when Sharon sells one contract. When Kurt decides to exit his position, he buys back his three contracts and brings open interest down to six. At this point, until Cynthia decides to sell her six contracts, open interest will remain constant at six.
Open interest and volume are related concepts, one key difference is that volume counts all contracts that have been traded, while open interest is a total of contracts that remain open in the market.
Traders can think of open interest as the cash flowing to the market. As open interest increases, more money is moving into the futures contract and as open interest declines money is moving out of the futures contract.
CME Group products with the largest open interest include Eurodollars, Treasuries and stock index futures.
Open Interest Analysis
Analysts typically use open interest to confirm the strength of a trend. Increasing open interest is typically a confirmation of the trend whereas decreasing open interest can be a signal that the trend is losing strength.
The idea is that traders are supporting the trend by entering the market that increases the open interest. As traders lose faith in the trend they exit the market and open interest declines.
Open interest data is published at the end of each day. Additionally, every Friday afternoon, the CFTC publishes a report called the Commitment of Traders.
This report details open interest from different classes of market participants and whether they are holding a long or short position. This breakdown offers valuable insights into what producers, merchants, processors, users, swap dealers and money managers are doing in the market for a futures contract.
Open interest is one variable that many futures traders use in their analysis of the markets used in conjunction with other analysis to support trade decisions. Large changes in open interest can be an indicator when certain participants are entering or leaving the market and may give clues to market direction.
Hot Market of the Week – May Wheat
Hot market of the week is provided by QT Market Center, A Swiss army knife charting package that’s not just for Hedgers, Cooperatives and Farmers alike but also for Spread traders, Swing traders and shorter time frame application for intraday traders with a unique proprietary indicator that can be applied to your specific trading needs.
May wheat in Chicago broke down into a new contract low yesterday where the chart satisfied its third downside PriceCount objective. It would be normal to get a near term reaction from this level in the form of a consolidation or corrective trade, at least. At this point, IF you can sustain further weakness, we are left with the low percentage fourth objective to aim for around $4.20.
PriceCounts – Not about where we’ve been , but where we might be going next!
The PriceCount study is a tool that can help to project the distance of a move in price. The counts are not intended to be an ‘exact’ science but rather offer a target area for the four objectives which are based off the first leg of a move with each subsequent count having a smaller percentage of being achieved. It is normal for the chart to react by correcting or consolidating at an objective and then either resuming its move or reversing trend. Best utilized in conjunction with other technical tools, PriceCounts offer one more way to analyze charts and help to manage your positions and risk. Learn more at www.qtchartoftheday.com
Trading in futures, options, securities, derivatives or OTC products entails significant risks which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies is not necessarily indicative of future results.
Broker’s Trading System of the Week
With algorithmic trading systems becoming more prevalent in portfolio diversification, the following system has been selected as the broker’s choice for this month.
The performance shown above is hypothetical in that the chart represents returns in a model account. The model account rises or falls by the average single contract profit and loss achieved by clients trading actual money pursuant to the listed system’s trading signals on the appropriate dates (client fills), or if no actual client profit or loss available – by the hypothetical single contract profit and loss of trades generated by the system’s trading signals on that day in real time (real‐time) less slippage, or if no real time profit or loss available – by the hypothetical single contract profit and loss of trades generated by running the system logic backwards on back adjusted data. Please read full disclaimer HERE.
Would you like to receive daily support & resistance levels?
* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
Hot market of the week is provided by QT Market Center, A Swiss army knife charting package that’s not just for Hedgers, Cooperatives and Farmers alike but also for Spread traders, Swing traders and shorter time frame application for intraday traders with a unique proprietary indicator that can be applied to your specific trading needs.
April RBOB completed its first upside PriceCount objective this month before setting back in a consolidation trade. At this point, IF the chart can resume its rally with new sustained highs, the second count would project a run to the $2.73 area which is consistent with a challenge of the fall high.
PriceCounts – Not about where we’ve been , but where we might be going next!
The PriceCount study is a tool that can help to project the distance of a move in price. The counts are not intended to be an ‘exact’ science but rather offer a target area for the four objectives which are based off the first leg of a move with each subsequent count having a smaller percentage of being achieved. It is normal for the chart to react by correcting or consolidating at an objective and then either resuming its move or reversing trend. Best utilized in conjunction with other technical tools, PriceCounts offer one more way to analyze charts and help to manage your positions and risk. Learn more at www.qtchartoftheday.com
Trading in futures, options, securities, derivatives or OTC products entails significant risks which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies is not necessarily indicative of future results.
Broker’s Trading System of the Week
With algorithmic trading systems becoming more prevalent in portfolio diversification, the following system has been selected as the broker’s choice for this month.
The performance shown above is hypothetical in that the chart represents returns in a model account. The model account rises or falls by the average single contract profit and loss achieved by clients trading actual money pursuant to the listed system’s trading signals on the appropriate dates (client fills), or if no actual client profit or loss available – by the hypothetical single contract profit and loss of trades generated by the system’s trading signals on that day in real time (real‐time) less slippage, or if no real time profit or loss available – by the hypothetical single contract profit and loss of trades generated by running the system logic backwards on back adjusted data. Please read full disclaimer HERE.
Would you like to get weekly updates on real-time, results of systems mentioned above?
* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
Trade management is more important than Market Analysis….
I have done this so many times before, my colleagues tell me when it happens to them as well as some of my clients….You have the perfect read on the market. The market actually ends up doing what you thought it would and in a BIG way…yet somehow you managed to LOSE money despite your perfect analysis. To me this is sometimes more frustrating than having a bad losing day.
What happened?
Poor trade management, that’s what happened.
Yes, reading the market well is a much needed quality if you plan on making money rather than contributing donations to the market but more important is how you manage the trade / position once you read the market. Much easier said than done, especially after the fact but here are some tips that I am hoping will assist you in the next time you have a good market read.
By the way, the reason to this quick trading tidbit is the stock market rally we saw today in stock indices. Both my colleague and I “had the right analysis” on this possible rally yet he managed to lose and get stopped out twice while I took a small piece of the rally BUT not nearly as much as I should have….
1. You don’t have a crystal ball. To think you can buy an ES contract in this volatility and use a 2 point stop in hopes of making 20 points profit is a very low probability event…you would need to buy it at the PEREFECT time for this to happen. Point is, with higher volatility you need to use WIDER stops to give yourself a chance. That may mean using SMALLER trade size.
2. If you are able to, share your read with another trader, it may provide you with a better perspective just by sharing.
3. If you think there is room for a big move or what we call a “runner” – be prepared to for the pullbacks. Use multiple time frames to gain a better perspective and hang in there for the big move, if this is what you think can happen.
4. If you have enough risk capital, try to use multiple contracts, example buying 2 rather than 1. Taking profit on the first part of the position will help you relax and look at what the market is really telling you rather than what you would like it to say. It helps reduce both the fear and the greed.
5. “Plan your trade, trade your plan”
Again these are just some short pointers, written quickly after today’s session in hopes of helping you when you face a similar situation.
* This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.
RISK DISCLOSURE: Past results are not necessarily indicative of future results. The risk of loss in futures trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.
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