Statistics for Santa Rally 2015

As we look ahead for the month of December, the question is always, will there be a Santa Rally? Take a look at a spread sheet of the last 18 years, year-end statistics, looking at 4 criteria for each year. Analysis done on a S&P 500 E-Mini Weekly Chart.

1. Was the Year-End Close greater than the Pre-Holiday high?
   • False 72%  or 13 out of 18 years. This suggests end-of-year profit taking.
2. Was there a Santa Rally? (Criteria- last week of Dec>week prior to Thanksgiving)
   • True 88% or 16 out of 18 years.
3. What was the rally or range in points?
   • (-84.25 to +110.75)
4. Was the second week in January>pre-Thanksgiving?
   • True 77% or 14 out of 18 years.

Note while stats confirm what we hear…   there is a Santa Rally more often than not; it’s worth noting the quality of the rally. When broken down, 16 out of the last 18 years, the market closed higher (purple rows) but there are actually only 6 out of those 16 years (green rows) when the Santa Rally exceeded 50 points.  In 2000, and 2007, there was no rally. The two yellow circles indicate although there was a Santa Rally, it was short lived, however the majority of the time, the rally continued into the month of January.

FOLLOWING THE AUCTION – GOING DOWNTOWN

This week in Following the Auction let’s review how last week ended with a multi-day stop-run. Then we’ll look at our charts and some of the research.  

News, news, news… now which one of these was responsible for making Thursday so unhappy?

• Rise in inflation and Fed rate-hike fears
• International news sparks turbulence, Greece, Greece, Greece
• Earnings season hiccups? Google, Microsoft, Starbucks… and more this week!
• China, China, China
• BLOOMBERG GOES DOWN!!!!   

maybe just all together… or maybe the simple fact is, nobody really wants to buy new highs, except laggards, and I doubt there’s enough of them to do anything except get flushed… so the market had to go back downtown, back where the peeps are cackling to ‘buy low’. Remember the auction moves lower to find buyers and higher to induce sellers. Apparently new highs where not in the cards last week. Just as in the daily TPO’s and a series of 5, 15 or 30 minute highs or lows present a stop-run opportunity, Friday was knocked off it’s balancing act perhaps with all the news or perhaps as Dalton says… “traders do what works, til it doesn’t”. So with price at highs and 3 great areas for stops below, and a lack of new buyers…a liquidation break cleared out the closest stops, starting with Thursday’s poor low, removed overnight.. After the stops were out, a peek into the bullish conviction ‘singles’ and buyers took price right back to the neighborhood VPOC in the 2075 area. Please click to enlarge.

Volume – Notice the volume histogram at the bottom, set for rising and falling volume not price, there has been a decrease in volume, as many are pointing to as the reason the market is struggling without continued buying. The chart below is ES CME Volume from the beginning of the year through last week. Easy to see the trend is down on volume, yellow is actual, the red line represents the 10-day Average.

Rotations – As day-traders knowing the expected or average move in a rotation is key to planning your targets and stops. As this varies with instrument, we’re looking at just the ES. Note the following time frames from recent research shows on 100 days of pit-session only, the rotations are…

• 5 minute – 16 ticks or 4 points
• 15 minute – 27 ticks or 6.75 points
• 30 minute – 38 ticks or 9.50 points

Ranges – Friday’s day range was 22.5 points. This is only slightly over the average, as coming into Friday, day’s ranges were compressed. The way to use this information is knowing the compression will lead to expansion. See the chart below for actual ranges from the beginning of the year. The range has compressed overall from the beginning of the year

The next chart shows the average ranges above the open and below the open. What is useful about these statistics is knowing some ways to employ them in your trading. For example there are zero occurrences of a look below the open by .25 that held from the beginning of the year. Twice recently when the market looked .25 below the open and rallied, looking for a nice LVN above to short provided a high probability opportunity for price to trade back below the open. Let’s say you believe the low is in, if the average range is 18 points, or even 10.50 (average) above the open, use this in your planning, it will help free your mind from the unprofitable scalp mindset.

Last chart is a market profile chart, day-session only. There are singles from 2080 to 2087 from Friday’s high, a 5 tick buying tail off Friday’s low at 2064.50. Value considerabbly off the highs but overlapping the prior weeks auction. Looking below is like looking over the cliff… singles mostly down to 2047, the all time highs have unfinished business. 

What’s up this week? Check in with the team on Monday morning! Lewis @ManOverMarket joins TopStepTrader @MarketBroadcaster to go over his charts here… http://www.topsteptrader.com/chat_rooms/1009

As always, have a great week! Trade smarter… not more often!

FOLLOWING THE AUCTION – 3 Things to know about Market Profile Singles

This week in Following the Auction, we’re looking at ‘singles’ on a market profile chart.  A ‘single’ is a market profile term representing  one or more TPOs that stand alone within a whole day’s profile.  Keeping in mind market profile is not a trading system but a way of organizing data, one cannot understand profile development without recognizing one fundamental fact, it’s an auction. Let’s start with a picture, the easiest way to explain, please click to enlarge.

Given the market is continually moving from balance to imbalance and this process plays out over all time frames, this is how the day time-frame on 4/9/15 developed. Looking at the 3 charts above, the first a regular 30 minute candle chart. The second is a Market Profile chart in an expanded view (each TPO, covers a price increment on the horizontal scale, the same as a candlestick). The balance areas circled in yellow are where price has rotated back and forth between unfair highs and lows, probing to search for and confirm value. High volume nodes are formed in this process and are another way of saying time spend at price = value.

Here are the 3 things all traders must understand about single prints…

1. Single prints are the opposite of value! They express a perceived change in value and a participant driven, generally emotionally charged, auction to a new price level. Singles are the opposite of High Volume Nodes or HVNs which develop out of the rotational nature of price movement in an accepted area and = value.
2. Single prints are a sign of strong conviction by either buyers or sellers. Singles are frequently seen on trend days as price extends from balance to balance, as well as on balance days at the range extremes as buying or selling tails. A line of singles can mark reversals in trend and show rejection with price either too cheap or too expensive at that point in time.
3. Single prints are key day-trading references. In an uptrending market, a pullback to an area of singles, if sentiment has not changed will represent a buying opportunity. However context is king and a long term bullish trend has many smaller time-frame bearish days, even weeks. If a price above an expanse of ‘bullish conviction singles’ is deemed ‘too expensive’ by the auction participants, a trading opportunity also exists… the single prints below will be retraced, without a doubt. 

Last week the market developed a balance area between 2065 and and 2080. Friday’s low at 2066.75 left the profile with an 8 tick (singles) buying tail, showing rejection out of the lower extreme of the range. The if/then scenario became to test the top of the range and possible continuation as the balance area was quite developed. And that’s exactly what happened, the entire balance area was traversed! Then after spending some time building value at the upper end of balance, price made another push higher, then chopped into the close. The chart below goes back to mid-February and shows the recent balance circled in yellow with the prominent VPOC at 2074.50 in pink below price and another prominent VPOC at 2101 from the prior balance area above. A magnet and also an area to watch as previously prices above 2100 have shown little ability to attract new buyers, could earnings season change that? We’ve heard positive and negative excuses for quarterly results, and projections. As always with any auction, price is the advertising mechanism, regulated by time, the success of which is determined by volume. The end of an auction is marked by excess, balance, followed by decline. Whether you’re bullish or bearish keep an eye on volume near these highs for indication of acceptance or rejection on this third attempt to be solidly accepted above 2100.

Connect with Lewis Monday morning, watch the ManOverMarket twitter feed for all the updates. Get the pre-market research here on the blog. Join us and join the conversation… this week Lewis is back on YouTube LIVE… you can ASK HIM ANYTHING!

Have a great week! Trade smarter! Never more often…

 

FOLLOWING THE AUCTION – FIRST QUARTER REVIEW

This week in Following the Auction, we’re taking a look at where the major US stock indexes are ending the first quarter for 2015.

There are still 2 more trading days til the official month/quarter end and anything can happen in the Middle East adding to the complexity of an already complicated situation. The dollar has slightly backed off it’s highs this week but the gain of 22% in the past 12 months has landed a double whammy on U.S. companies with big sales abroad. Revenue and earnings from foreign markets are worth less when exchanged into dollars and a companys ability to compete with rivals in countries with ‘cheap’ currency is more difficult. The currency issue isn’t hurting Facebook, Google and Twitter, all vying to be crowned King in the social media arena. According to Motley Fool, in a survey conducted last month, marketers across the U.S. were asked if they have purchased a video spot on Facebook or intend to in the next six months. Of those surveyed, a whopping 63% said they already have gone video on Facebook, or were going to next month! In fact, to personally support that, I just read (but watched) a list of 10 things on a Facebook post that had a GIF,  an animated image, for each of the items on the list! I was engaged for the 3 minutes I read the article, they won those 3 minutes of my time with their clever marketing tools, damn-it.

When I was learning about futures at a school  in Mobile, Alabama, I met Lewis Borsellino, who was the guest speaker at a special anniversary week seminar focused on just trading. The school taught the ‘7 Sisters’ review. ‘The 7 Sisters’ was originally coined in the 1950’s, referring to the 7 oil companies which formed the “Consortium for Iran” cartel and dominated the global petroleum industry from the mid-1940s to the 1970s. Now the 7 sisters referred to the ES (Emini S&P futures), YM (Emini Dow futures), NQ (Emini NASDAQ 100 Futures), DAX (DAX Futures), ZB (30 yr. Treasury Bond Futures), GC (Gold Futures), and CL (Crude Oil Futures). Having discussed the Euro Zone in a previous post WHADDAWEDONOW?, lets take a look at a few of the ‘sisters’ as we hone in on the end of the quarter. Saving the bonds for their own post, let’s look-back over the first quarter at the Nasdaq, Dow, S&P, Gold, Crude and the bully in the group…    the dollar.  (Please click to enlarge chart)

Comparing all 6 indexes for the 1st quarter, lets look at the following indicators measuring year to date progress.

• a volume profile in gold, the pink horizontal line is the VPOC, representing the ‘fairest’ price or most ‘accepted’ price during the time frame in profile, the first quarter of 2015.
• a fibonacci retracement from low to high of  the quarter, highlighting the PRZ, potential reversal zone, for price support or resistance, following the trend. In practice we look for confluence with multiple data points, this view is for the relative comparison.
• CCI, a commodity channel index, revealing in it’s yellow excursions into oversold/undersold territory.

Notice NQ has left it’s Quarterly VPOC near the high at 4433.75, with current price at 4323.75.  YM and ES spent last week retreating to the safety of their respective VPOCs. Gold (sorry only had a TOS chart) struggling above the years open about 1184, but well off it’s lows, 1140 area. Crude oil had a major impact this quarter but is ending well off the lows due to the new tensions in the Middle East. And finally the bully on the block, the Dollar, squeezing global debtors to pay back quickly, finally tagged 1.00 before also retreating to tag the quarterly VPOC around .95.

Heading into the final 2 days of the quarter, where are we going? Will the ES pick up with initiative buyers or will the bears wearing greenbacks hold off the bulls? Pour your coffee, click on our website and read our free (!!!) Pre-Market Research, then let Lewis Borsellino fill up your day with up-to-the-minute tweets from Man Over Market that will keep you coming back for more! Catch his YouTube video’s, now twice weekly and you can ask him anything!

Have a great week! Trade smarter… not more often!

 

PIT STORIES – A FOOL AND HIS (someone else’s) MONEY

PIT STORIES by Lewis Borsellino, is a collection of real-life experiences from the height of the CME trading-pits, during the time when the pit traders ruled the marketplace and directly managed orders from such customers as Merrill Lynch, Goldman Sachs, Bear Stearns, E.F. Hutton. Lewis Borsellino accounted for 10 percent of the average trading volume in the S&P contract, just for himself. Known as one of the “biggest and best” traders in S&P futures, these stories are being re-told exactly as they happened. *Disclaimer, if you are sensitive to language, this post isn’t for you.

It was a slow trading day and I was standing in the S&P 500 pit, not particularly busy. Mark, a phone clerk who worked for RB&H clearing firm popped his head into the pit and tapped me on the shoulder. I could sense he was nervous and hesitant to distract me from trading, but having known him for years, I knew if it wasn’t important, he wouldn’t bother me.

Mark: Hey Lew, you have a phone call at the desk.

Lewis: Is something wrong?

Mark signaled to come out of the pit so we could talk in private. I ducked under the top step trading post and walked out of the pit towards Mark.

Lewis: What’s up?

Mark: There is a detective from the Chicago police on the phone, he has called twice. The first time you weren’t in the pit and I told him I didn’t see you.

Lewis: Chicago police? I wonder what the fuck this is about. Did he say?

Mark: No but he said he was going to keep calling until he talks to you.

Lewis: Fuck it, is he on the phone now?

Mark: yes

I walked over the RB&H trading booth and picked up the phone…  hello…

The cop had the typical Chicago south-side Irish accent, a combination of detective and tough guy attitude.

Detective McMahon: Is this Mr. Lewis Borsellino?

Lewis: Yes, how can I help you?

Detective McMahon: This is detective John McMahon with the Chicago Police Area 1 Financial Crimes Division. Do you mind if I ask you a few questions?

Lewis: Sure, go ahead.

Detective McMahon: Mr. Borsellino, have you been in a terrible car accident in the last year?

Lewis: No I haven’t been in a car accident since prom, my senior year, 20 years ago.

Detective McMahon: Were you in the hospital more importantly, did you have a head trauma which caused you to be in a coma?

Lewis: No, no head trauma, no hospital, no coma.

Detective McMahon: Do you have a trading relationship with a company named Short Term capital management out of Tampa Bay Florida?

Lewis: That doesn’t ring a bell.

Detective McMahon: How about a gentleman by the name, Mark Thorsen? Do you know him?

Lewis: No, I never heard of the guy, Detective should I get an attorney? How many more questions do you have?

Detective McMahon: No, you’re ok, look do me a favor and call detective Charlie Stone at the Tampa Bay Police department, let me give you his number.

Lewis: Hold on, let me get a pen. (I put the phone on my shoulder to take out a trading card and prepared to write the number down.) Go ahead; I’m ready… what’s the number?

Detective McMahon: 555-555-5555 Detective Charlie Stone, Tampa Bay police, he’s waiting for your call.

Lewis: Ok, I got it, thanks.

Detective McMahon: No problem, thank you.

I hung up the phone and looked at Mark.

Mark: Everything OK?

Lewis: Yes, he wanted to know if I was in a car accident and in a coma for the last year.

Mark: Wow, that’s fuckin’ weird!!

Lewis: The way I have been trading lately, I wish I was in a fuckin’ coma. At least I wouldn’t be losing money!!!

Mark: The market has been so slow we aren’t doing any business, more and more on the fuckin’ e-mini machine. I will be looking for a new job soon.

Lewis: So will I! Let me call this guy and see what’s up.

Mark dialed the phone and stepped aside so I could sit at the desk and talk privately…

Voice on phone: Hello Detective Stone speaking.

Lewis: Detective Stone, this is Lewis Borsellino calling from Chicago. What can I do for you?

Detective Stone: Mr. Borsellino, thank you for calling, would you mind if I ask you a few questions?

Lewis: No, go ahead…

Detective Stone: (Starts with the same line of questioning as the Chicago police) Mr. Borsellino, have you been in a car accident and suffered trauma to your head which caused you to be in a coma for the last six months?

Lewis: I told the Chicago Detective no. No accident. No coma!

Detective Stone: I am sorry; I have just a few more questions…

Lewis: OK

Detective Stone: Do you know a Mark Thorsen who runs a trading company named Short Term Capital Management:

Lewis: No. Like I told the Chicago police the company and the owners name does not ring a bell. What do they trade? Stocks or commodities?

Detective Stone: I am not sure, could be both, but I am not sure.

Lewis: Well all I trade are stock futures not individual stocks.

Detective Stone: Ok Mr. Borsellino. You wrote a book: The Day Trader from the Pit to the PC?

Lewis: Yes, I wrote that book.

Detective Stone: Do you know how Mark Thorsen would have a signed copy of your book addressed to him?

Lewis: Addressed to him? What do you mean by that? Like I mailed it to him?

Detective Stone: No no, inside the cover, you signed the book… hold on, let me read what it says…( I can hear tussling of the papers…) Mr. Borsellino, can you hear me?

Lewis: yes, I can hear you detective.

Detective Stone: Ok, it reads the following… Mark, Good Luck with your trading, nice meeting you. Best wishes, Lewis Borsellino

Lewis: Detective, how do you know if I signed the book? Not to be difficult but that book sold 75 thousand copies! Anyone could have signed that book.

Detective Stone: Yes, of course you’re right but we have to check out his story.

Lewis: Detective let’s assume I did sign the book, in the last 5 years I have been to 50 trade shows. Seriously I could have signed a thousand books with the same sort of wording. I have no idea who this guy is.

Detective Stone: That’s what we figured but we have to check out all the leads!!!

Lewis: Can you tell me what is going on? Maybe I can help you.

Detective Stone: Apparently, Mark Thorsen started a company called Short Term Capital Management. He was showing your book to potential investors and implying you were the trader and he and you were partners.

Lewis: You’re kidding! I don’t remember this guy… how much money did he raise?

Detective Stone: It appears to be like $600,000.

Lewis: Wow! $600,000!!! Can I ask you a question?

Detective Stone: Sure

Lewis: Why are you asking me about being in a car accident and a coma?

Detective Stone: Oh well, several of the investors started asking for their money back. He said he goes to Chicago once a month to meet with you but six months ago you had a bad car accident and you’re in a coma and all the accounts are frozen.

Lewis: You have to be kidding me! That’s telling me all the money’s gone! He either lost it or spent it!!!

Detective Stone: I think you’re correct. We’ve been tracing the money… looks like he bought a new boat, a new car and at least $50,000 went to the strip clubs!!!

Lewis: That’s terrible! Well I definitely don’t know this guy. I hope I helped you!

Detective Stone: Mr. Borsellino, you were a big help, thanks for calling me! Sorry to have bothered you.

Lewis: No problem, if you need me, you know where to find me!

Detective Stone: I don’t think we need to talk to you anymore! Bye.

Lewis: Bye.

THE 10 RULES OF TRADING

All the links to all of Lewis Borsellino’s 10 Rules of Trading.

Rule # 1   http://goo.gl/TcxlGN

Rule # 2   http://goo.gl/zHMqcB

Rule # 3   http://goo.gl/Q9oe1d

Rule # 4   http://goo.gl/9DZHSt

Rule # 5   http://goo.gl/VgakMF

Rule # 6   http://goo.gl/Ms48Ry

Rule # 7   http://goo.gl/D35Y8o

Rule # 8   http://goo.gl/7fYGdD

Rule # 9   http://goo.gl/pSvPSH

Rule # 10 http://goo.gl/Cm4ZNJ

PIT STORIES – THE FRIDAY BEFORE BLACK MONDAY

New Series! PIT STORIES by Lewis Borsellino, is a collection of real-life experiences from the height of the CME trading-pits, during the time when the pit traders ruled the marketplace and directly managed orders from such customers as Merrill Lynch, Goldman Sachs, Bear Stearns, E.F. Hutton. Lewis Borsellino accounted for 10 percent of the average trading volume in the S&P contract, just for himself. Known as one of the “biggest and best” traders in S&P futures, these stories are being re-told exactly as they happened. *Disclaimer, if you are sensitive to language or political correctness, this post isn’t for you.

On October 16, 1987, the Friday before Black Monday, I was waiting to board a plane headed for Europe with 7 friends and business colleagues. I had been to the CME trading floor and traded until noon.  I left the exchange short 20 big S&P contracts with profits of $125,000.  A limousine drove me to O’Hare International Airport terminal…

The following conversation took place at the gate and was between my clerk, Joan Weber and myself, as I explained how to manage my position. Keep in mind, not many people had cell phones and they certainly were not used to the language or volume coming out of my mouth… yet I was oblivious to my surroundings… nor did I give a fuck.

Lewis:  Joanie, where is the market at? Did I get stopped out of the shorts?

Joanie:  You’re not going to fucking believe it, since you left for the airport the market is down another 1000 points, 500 points from limit down.

Lewis:  You’re fucking kidding!!!!! What’s limit down, 2500?

Joanie:  Yes, 2500… it’s fucking crazy!!!!

Lewis:  How much money am I up?

Joanie:  $200,000

Lewis:  If I get out at limit down, how much?

Joanie: $250,000

Lewis: Did the two numb nuts and Jap check all our trades?

Joanie: Yes everything is checked, the first out trade run came out we have a few price outs but no strait outs.

Lewis:  You’re sure?

Joanie:  Yes

Lewis:   Ok, I will be on the plane and I fucking can’t call you. Put a buy stop at 2400.00 OCO limit down or market on close.  I don’t want to hold them over the weekend. Market will probably bounce back big on Monday!!!! When we land in New York I will call you.

Joanie:  Ok limit down or MOC? Or 2400?

Lewis:  Yea, worst case scenario we make $75,000K.  Make sure I am flat… anything can happen over the weekend, probably big bounce on Monday!!!

Joanie:  Yea, I think your right. Ok what should I do with you’re Euro dollar options?

Lewis:   Fuck those options, they aren’t worth dick!!  I am long the 1000/ 94.00 calls the market is trading 92.50.  They’re going to expire next week worthless!!  I am going to lose 25k on that Maury Kravitz play!!!

Joanie:  They’re worth a $1,000… You get a grand back.

Lewis:  Fuck it, let them expire. Maury and his bright fucking ideas, I love him!!! But I think he is cracking up, he is fucking nuts.  Yesterday he told me he is going to fucking Mongolia and look for Genghis Khans’ fucking tomb with Chuck Connors.

Joanie:  Who is Chuck Connors?

Lewis:  You know the big fuckin’ goofy actor with the big jaw who played the Riflemen on TV.

Joanie:  How does he know him?

Lewis:  Fuck if I know.  Look, make sure you cover the shorts… I think the market can have a big rally Monday.

Joanie:  Don’t worry I got it!! How many fucking times you going to tell Me!!!

Lewis:  I know. I know  Well  it’s not like I’m going around the fucking corner,  I will be in fucking Europe!!! Maybe I should cancel this fucking trip… the market is crazy? The fucking market is getting killed it’s down almost 10% on the week.

Joanie:  Let me know I have to cancel my plans.

Lewis:  Ah, fuck it!!  I’m up 2 million on the year I’m going to Switzerland and Italy, I’ve never been to Europe.  Where you going?

Joanie:  Going to see my parents in Arizona.

Lewis:  Ok enjoy yourself.

Joanie:  What should I do with the clerks?

Lewis:  Pay them and give them the week off.

Joanie:  Have fun and be a good boy!!!

Lewis:  You know me I am always good!!!

Joanie:  Yea, I know you…

Lewis:  Love you Joanie

Joanie:  Love you too!!!

Danny:  Hey Lewis the plane is boarding

Lewis:  Ok I’m coming

Lewis:   Joanie, you have you cell phone in case I have to find you?

Joanie: Yea

Lewis:  Ok bye

Danny:  Everything ok?

Lewis:  The fucking stock market is getting killed again today.

Danny:  Is that bad for you?

Lewis:  Fuck no! I am up 200,000k… its going to be a great trip.

Danny: Fuck it… let’s have some fun!!!

 

FOLLOWING THE AUCTION, THE DOLLAR FLEW, THE EURO GOT DOWN, AND PUTIN HAD A LOVE CHILD

This week in Following the Auction, we’re looking at the trend in the dollar… now actually worth a buck and the trend in the euro… now actually worth a buck! (getting close) The dramatic result of this relatively recent currency change between the dollar and many currencies, but specifically between the dollar and the euro are evidenced by the explosion of articles and ads for European travel!

The top three speculative topics this week in global news were the rising dollar, the falling euro and the disappearance of Vladimir Putin. Putin turned up in Switzerland apparently to see his new baby daughter with Alina Kabaeva, the retired Olympic gymnast. Congrats Vlad, you dog. The other two most googled topics were the rising dollar and the falling euro. The euro has significantly broken it’s decade long support (1.20) as the dollar has broken its decade long resistance (1.00). This weeks dollar rally was fueled by increased expectations for an interest rate increase. The stronger dollar has huge impact on imports and exports and is in a state of constant fluctuation with the world’s most popular currencies in trend instead of balance. Arbitrage is the process of taking advantage of price-differences for the same item in different markets. Using a domestic hypothetical example, let’s look at coffee prices, variance, opportunities, and results over time. Please click graphic to enlarge.

In the example above we see the cheaper coffee from Seattle being sold in Boston taking advantage of the price-difference. Over time however the greater demand in Seattle allows prices to creep higher, meanwhile in Boston the  increased supply brings down the price and somewhere in the middle the arbitrage opportunity is gone as the auction brings back equilibrium.  Thinking about the dollar versus the euro, let’s substitute our domestic coffee example with international tourism. Now what happens?

 While these two currencies may be close to parity, it’s nevertheless about the cheapest we’ve seen the euro since 2003, about a year after the Euro-zone common currency first started circulating. The monthly charts below show @DX vs @EX, the dollar vs the euro. Note the dollar off it’s lows hasn’t quite reached the 50% retracement from it’s highs. Note the euro off its highs has surpassed the 70% retracement from its lows.

Relative to stocks, someone buying European stocks today, if the dollar keeps gaining against the euro, those shares would be worth less after the price is converted to dollars, even if the price of the stock in euros hasn’t changed… meaning you can buy something cheap but unfortunately it could become cheaper! On the other hand… vacation season this year should be significant for Europe with huge pent-up demand for all of Europe’s major attractions. Helping us take advantage of these cheap prices might just be the multi-currency prepaid cash passport card, that allows you to load up to 5 different currencies on 1 card. So you can lock-in your rate each time you load your card. That’s smart trading! 

What’s going to happen this week? Start it off with a bang and sign-up with MOM! Let Pat Tabet and Charles Cochrans’ pre-market commentary get you thinking… then let Lewis Borsellino fill your market day with trading talk and updates and … yes… some humor…  via the ManOverMarket twitter feed. Come on’ get down with us!

As always trade smarter please, not more often!

 

 

FOLLOWING THE AUCTION, LOOKING SPARSE UP HERE?

This week in Following the Auction, we’re looking at recent price action in the S&P 500 and recent action in the EuroStoxx 50. 

News this week from the worlds financial gurus was a riot with Warren Buffet declaring he did the research and 6-year-olds have the lowest death rate in the world, so he strategically developed a diet to mimic that of a 6-year-old boy. He’s enjoying his PB&J’s and lots of Coca Cola… 5 a day! (do you think he owns KO?)  Buffet is also known as a value investor as was another financial guru who passed away this week, Irving Kahn. Kahn, born in 1905, had an understanding of the concept of value investing prior to the stock market crash of 1929, when  he noticed that traders were bidding stock prices into the stratosphere. Selling short 50 shares of red-hot Magma Copper that June, Kahn wagered the price would plummet. When the market crashed on Oct. 29, his $300 investment, about $4,000 in today’s dollars, more than doubled. On an NPR interview in 2006 he said, “I wasn’t smart, but even a dumb young kid could see these guys were gambling. They were all borrowing money and having a good time and being right for a few months and, after that, you know what happened.” Interesting comment to think about… fear and greed… always an integral gear to the auction. 

Talking about value investing relative to our current market prices versus Europe and some say European stocks look very cheap, especially compared to the U.S.  investment strategists are mixed on whether to overweight or underweight Europe but agree investors would be wise to include some exposure in their portfolios. As futures traders we worry less about the investing aspect and more about volatility, ATR and margin. However, we track smart money footprints and resulting trends. With the financial worlds’ eye on Europe and Dragis’ QE, let’s take a closer look at the S&P 500 and the EuroStoxx 50. While the S&P 500 has 500 stocks and the EuroStoxx 50 has only 50 stocks, it nevertheless is a very liquid market and over the last decade has become more popular with day-traders in the US, and clearly longer term investors as well. Note the following information on both charts, please click to enlarge.

• High in 2000 – ES 1655.25 – EX 4941
• High in 2007 – ES 1466.75 – EX 4060
• Low in 2009 – ES 530.50 – EX 1188
• Current price (circled in yellow) in relation to above highs and lows
• Lower pane chart shows the United States Dollar vs the Euro currency.

Note these two indexes relative to the old highs from 2000 and 2007 and where they are now. The S&P 500 broke the trendline the end of 2012, the EuroStoxx 50 broke the trendline last month.  Not to be ignored are the currencies in the lower chart pane,  see the dollar in a short squeeze and liquidation on the euro. Note the euro has broken the 1.18/1.19 level (grey horizontal line) it has held as support over the last 10 years as the dollar is coming close to hitting the 1.00 level, it’s resistance over the last ten years. 

Clearly the trend is up on both indexes but the auction in the S&P got a little tired last week as evidenced by an RTH (regular trading hours) excess high. The last all-time-high at 2088.75 was a market profile ‘poor’ high which implies an unfinished auction. Wednesday’s high of day at 2117.75 left a 3 TPO ‘excess high’ and marks the end of the auction, for that period in time. While the excess certainly marked the high for last week, with 3 days of one-time-framing lower, value moving lower yet not quite reaching 2099.50, the lower BAE (balance area extreme) upper limit. Staying above 2099, LVN (low volume node) keeps the weekly trend up and challenges the excess high. Acceptance below the LVN targets the two prominent HVNs (high volume nodes) below at 2096.25 and 2093.25. Carry forward information, a poor low from 2/23/15, 2099.75 an additional poor low from 2/20/15, 2082.25 and a gap between 2070 and 2071.50. Two poor highs, Thursday and Friday.

A final day-trading comparison chart between the EuroStoxx 50 and the S&P 500. The charts compare last week, the EU on a 24-hour chart, the US day-session open marked with a grey vertical line. The ES chart is the day-session only. I think the arrows give a relatively good feel for how the week progressed in both markets. Please click on chart to enlarge.

Coming into the final month of the quarter, what shall we expect? Register for FREE on the website and then get your coffee and open Pat Tabet’s Pre-Market update, waiting for you upon login. Then, Charles Cochran posts commentary on the ES, ZB, CL and 6e with actionable trading levels based on volume profiling! Heading into the open, Lewis Borsellino will get down to business with the Man Over Market’s Morning Call. When you’re asking.. whaddawedonow?The MOM team has answers!  

Have a spectacular week! Trade smarter… not more often!

LIVE TRADING, WEATHER PERMITTING… TODAY’S CHARTS AND LEARNING

Enjoy this after the close! Lewis Borsellino’s ManOverMarket live trading and education videos are an hour packed with charts, trading (when the market is moving), proprietary indicator descriptions, market profile education and entertaining stories from Lewis’ Pit Days!  Watch this one later… catch the next one live! Check the twitter feed for upcoming dates and times so you can mark your calendar. Each session Lewis will answer questions from viewers through his ManOverMarket twitter feed. Listen to him explain how he leans on the bias and uses his chart indicators developed by Pat Tabet and ‘tweaked’ over 20+ years! Bring your questions next time… Traders… this is great stuff! 

Here is the link to today’s video.. http://t.co/bTsuPd1xdB