Morningpick BLOG

Morningpick's obituary

noreply@blogger.com (Rod Simmons, BSc.) — Fri, 17 Aug 2012 18:00:00 PDT

Obituary:

On March 26, 2011 I began blogging about stocks, futures, and forex. My blog was initially called 'Iratestocks.com'. It was an exercise of utility but as well futility. Initially, I blogged every day but then that evolved into every other day and now only weekly, at best. That's because as time passed my other interests and work life grabbed a bigger and bigger piece of the pie called life. In turn, I found it increasingly challenging to stay sharp and highly attuned to the macro events that afflict the markets almost daily, if not hourly.

During the past 16 months my statistics were decent: almost 40,000 page views and followers around the world. Some commented on articles but most did not. Nevertheless, it was fun and I learned a lot about blogging, html coding, trading, and investing. One note of interest. I never added Google ads to my blog and some may ask why. Because it's noise and I felt ads would just distract visitors from paying close attention.

But now its time to say goodbye to blogging, focus on my work life, and put Morningpick to bed. Before that though, I just want to say a huge thank you to those who returned regularly and to those who stopped by infrequently and to those who found me serendipitously.

Good luck with trading and investing,
Rod

CoT: Hedge Funds Register Biggest Bets Yet

noreply@blogger.com (Rod Simmons, BSc.) — Tue, 07 Aug 2012 16:03:00 PDT

Good evening traders and investors,

On Sunday I uploaded the CoT report for Jul-31 open interest. I noticed that hedge funds were continuing to beef up their long bets. So, I decided to use the power of MS excel to gauge the strength of their sentiment since January 3, 2012.

First, I decided to exclude those futures that did not include open interest for every Tuesday this year. I also omitted certain future contracts that, in my opinion, were unimportant. All in all, I summarized total bets for 47 contracts comparing total long or short week over week year-to-date. Here are the results:

At the beginning of 2012, hedge funds were essentially evenly split in their collective sentiment: 4.181 million long bets versus 4.177 million short bets. Since, long bets gradually outpaced short bets on average 1.7% per week reaching a long-to-short ratio of 1.38 on May-1. The pullback in May reduced that ratio to 1.10 by Jun-12. However, hedge funds have resumed leveraging their long bets increasing their open long positions to their largest spread over their open short positions on Jul-31. Of the approximately 10.3 million open positions on Jul-31, 6.6 million are long bets whereas short bets totaled 3.7 million for the biggest long-to-short ratio at 1.78 for 2012. To get a different perspective, hedge funds were a net long with 484,602 bets on Jun-12. Today, they are 2,912,348. I had to triple check the data to further assure accuracy.

I don't know if this data is normal, weak or excessive but I would have to compare previous years to find out. Maybe when I get an opportunity this weekend I will do that. In any case, when hedge funds decide to pull the trigger and close their long bets, I think we will all know.

Here is a screen shot of the data I compiled in my MS excel.

Good luck,
Rod

CoT Report Jul 31: VIX Shorts Remain 2-to-1

noreply@blogger.com (Rod Simmons, BSc.) — Sun, 05 Aug 2012 13:31:00 PDT

Good evening traders and investors,

I have uploaded the CoT report for open interest positions on Jul-31. The link is available, as always, in the right side bar under My Trading Journal.

Here are some salient data points:

VIX Futures: The contract remains heavily shorted despite a slight reduction in the short-to-long ratio from 0.50 to 0.51 leading up to last week's central banks' press conferences. In fact, the VIX continues to post some of its strongest open short positions year-to-date. Remember: there were only 2666 open short contracts on the VIX on Jun-19. Therefore, any major risk that threatens equities could see a dramatic rise in the market price of the VIX contract as traders rush to lock in profits. The VIX closed out last week at 15.64 down modestly from 16.70 the previous week. The 52 week mean is 24.50 and the standard deviation is 7.84. The year-to-date mean is 18.87 with the std dev at 2.52. I would be very poised and ready to take up several long positions if the low price of 15.45 posted on Jul-19 fails to be breached during early trading this week with an exit to lock in profits at 17.90 for one contract and then move my stop to cost on another contract. And to avoid leaving my trade naked I would pair that with a short in the US dollar.

U.S.Dollar Index: The future remains predominantly long among hedge funds, falling slightly from 47836 net long contract the previous week to 42050 on Jul-31. Open interest totalled 66185 contracts. The U.S. dollar index dropped slightly to 82.67. I am confident they were foreshadowing a negative impact from central banks on the U.S. dollar with much chatter about quantitative easing, particularly from Mario Draghi, the President of the ECB.

Other notable changes include sentiment for the CAD dollar switching dramatically to long with a net position of 12449 contracts versus a net short of -2432 contracts the previous week. While the EURUSD remains predominantly short among hedge funds, their open short positions continue to fall with -138994 contracts, down from a high of -214418 positions on Jun-5. The e-Mini S&P 500 (ES) saw a dramatic drop in short positions on Jul-31 from the previous week from -107311 to -45029 net short contracts. Open long positions in the e-Mini Dow (YM) strengthened significantly to 24865 from 6832 the previous week.

Overall, I am seeing some extreme sentiments in several futures indicating traders are heavily speculating on further quantitative easing from central banks. However, this may set the market up for a dramatic reversal in equities, commodities, and US currencies. Be ready to move and act accordingly.

Good luck,
Rod

Stocks, Futures, and Forex: Now What?

noreply@blogger.com (Rod Simmons, BSc.) — Sat, 04 Aug 2012 14:11:00 PDT

Good afternoon traders and investors,

During the weeks of Jul-20 and Jul-27 I believe that the stock market, more specifically the DJIA index, was on track to start correcting itself, possibly 10 percent or more, to reflect the global slowdown including the U.S. In fact, my technical analysis, which studies weekly, rather than daily, prices was emitting a high probability of change in direction from up to down. Rate of upward change for 1 week and 4 week were at their weakest in over a month. And, momentum was risking to close out the week of Jul-27 in negative territory. Instead, the momentum actually increased and finished the week at 195.57 points up from 181.79 the week before. And the week before that, or Jul-13, momentum was 9.92. Interestingly, Ben Bernanke and Mario Draghi spoke about QE during those two weeks which I believe were responsible in preventing the market from correcting itself, for now.

It seems many were surprised by Mario Draghi's defiant comments both on Jul-26 and Aug-2. Maybe he too knew that the stock market was beginning to correct itself and the Euro would lose significant strength during the ensuing week. But, as one hedge fund manager pointed out, "It is difficult to trade in this current environment when you don't know when central banks will rear its ugly head." Harsh words probably, but he does make a good point. And, during the ECB press conference on Aug-2, Mario Draghi pontificated how the Euro is irreversible, and as I watched I noticed an eerie detection of arrogance when he also said, "you are foolish to short the Euro". And with comments such as "bond purchasing program to be worked out in the coming weeks" makes it difficult or at least risky to short this market or long the US currency. Therefore, I have closed all my positions in the YM eMini Dow, EURUSD, and USDCAD for now until I am more confident about the direction in prices over the next 4 to 8 weeks.

With average dividend yields approaching that of 30 year U.S. bonds, risk of greater economic downturn, diminishing returns from further QE, and rising energy prices, I can't find any data that substantiates the thesis that this current rally will continue, not even cheap PE ratios. Thus, I am willing to sit on the sidelines and wait for a correction to materialize, if it even happens at all this year. We could be range bound until we know more about what the central banks will do in September.

But, what numbers or data points would I use as evidence to consider entering this market and short the YM and long the USD?

Initial signs will come from the DJIA closing out next week at or below 12875. This will drive down momentum to 97.91 from 333.31 the week before, and lower the rate of change to 0.26% for the 4 week moving average, down from the high of 0.81% posted on Jul-6. The S&P will have to finish up the week at or below 1367. This will push the momentum to its weakest level in 9 weeks and the 4 week rate of change at 2.51, well below its peak of 11.54 on Jul-6. Since there are few important economic data points during the next two weeks, I would be very surprised if the DJIA and S&P closed out next week higher.

I have updated the June and July leading economic indicators for the U.S. The link is under My Trading Journal. While it appears that housing starts are strengthening from its lows I am detecting early signs of a possible weakening in moving averages for initial claims 4 week average, non farm payroll and net new orders excluding transportation. I will follow that up tomorrow with the CoT report for Jul-31 open interest and technicals/PE ratios for DJIA and its components and S&P 500.

Good luck,
Rod

Stocks, USD Technicals: Line in the Sand

noreply@blogger.com (Rod Simmons, BSc.) — Wed, 01 Aug 2012 08:58:00 PDT

Good afternoon,

In all likelihood you, like me, are probably sitting at your terminal and awaiting the Fed press conference at 2:15 pm EDT and will again tomorrow when the ECB announces their price stability policy. In the meantime, I am crunching some numbers just to see what prices would trigger a sell or buy.

Here is my technical breakdown:

DJIA: The index was well on its way last week to triggering a strong sell prior to Draghi's comments but that has obviously changed. Last week I had the DJIA closing by Friday at or below 12750 to confirm a weak to moderate sell signal. Since Draghi, that benchmark has risen precipitously to 12835 this week. Clearly, announcements from both Central Banks will impact that benchmark one way or another, with stronger influence coming from the ECB.

S&P 500: Last week I had the index closing the week at 1354 or below to trigger a sell signal. The index closed at 1384.93 on the strength of Drahi's rhetoric and has prolonged the current buying the trend. This week, using Monday's open and the week's current low and high, to initiate a sell the S&P would have to close at or below 1362.

USDCAD: On Jul-20 I had a buy signal on the pair at 1.0126 on its closing price as well as its high, albeit my instincts were telling me much earlier that day. Since then, the USDCAD advanced almost 120 pips by the following Wednesday. But again, similar to the above scenarios, the USDCAD has tracked a similar course but in the opposite direction. After hitting a high of around 1.0240 cents last Wednesday the USD is now flirting with par. Using this week's current opening, high and low, I have a buy signal on the USDCAD if it closes at or above 1.0060.

EURUSD: The pair has been volatile during the past two weeks, to say the least. On Jul-20 the EUR emitted a sell signal off its low, close, and moving average over 10 days. The currency lost about 100 pips leading up to Draghi's comments but 24 hours prior to unflappable President, the EUR new high triggered a buy signal. From Wednesday evening to Friday the EUR posted an impressive 300+ pip gain. It has since retraced modestly. I have a bias sell on the EURUSD if it closes this week at or below 1.2278.

GPBUSD: Let's not restate the obvious here but the GBP has tracked a similar course as the EUR. But this week's open price, high, and low prices so far have initiated a sell sign after posting buy signals five straight days. The currency would have to close at or below 1.5708 this week to confirm that bias sell. Additionally, moving averages over ten days using these prices would also confirm a sell after posting 6 days bias buy. As of this posting, the GBPUSD is trading at 1.5608.

Overall, the Central Banks have clearly drawn a line in the sand and is at the forefront of price action today and tomorrow. Stocks will either head higher before falling lower later this month and into September or they will immediately head lower. USD will obviously follow the same path but in different directions.

Keep in mind, I have several open positions in the e-Mini YM, EURUSD, and USDCAD.

Good luck,
Rod

CoT Report Jul-24: Traders Reduce Euro Shorts Prior to Draghi

noreply@blogger.com (Rod Simmons, BSc.) — Sun, 29 Jul 2012 19:39:00 PDT

Good evening traders,

I just updated the CoT report for open interest on Jul-24. The link is located under: My Trading Journal.

I have not studied the CoT report thoroughly but I quickly checked the short interest for the Euro. I notice that the long-to-short ratio for hedge funds increased from 0.16 the previous week to 0.20. It appears some foreshadowed that Draghis' comments could push the Euro higher. And, they were right of course. But with the Euro so heavily shorted I am not surprised by its precipitous rise after Draghi's comments. It will be intriguing to see what next week's CoT report will say about this week's open interest prior to both the Fed and ECB meeting this week. Will market participants trade as if QE is forthcoming?

Good luck trading this week.

Rod

Draghi's Lifeline Temporary

noreply@blogger.com (Rod Simmons, BSc.) — Sun, 29 Jul 2012 08:45:00 PDT

Good afternoon,

I just updated my earnings and technical analysis for all stocks on the DJIA as well as the indices DJI and S&P 500. The link is located under My Trading Journal. In summary, many stocks, including the indices, were well under way to posting the worse week since January but, of course, Mario Draghi, ECB President, changed all that Thursday morning.

Initially, I was surprised by the seismic shift but after some reflection I am not. Many assets were heavily shorted, including the Euro triggering a larger than normal surge in the short squeeze as traders rushed to close their positions and lock in as much profits as possible. And, with this week's Fed and ECB meeting, markets may continue on that path blazoned late last week. But, I am now foreshadowing a much greater recoil in the stock market, particularly if Mr. Draghi does not delivery. I do not feel the Fed will implement QE, if it does, until late in the fall and that depends on the U.S. economy continuing to cool. Nevertheless, traders may trade this week as if QE is forthcoming.

Back to Draghi for a moment.

What Draghi did is essentially distort market prices but only temporarily. He injected excess strength into his own dollar where many countries, including Germany, depend heavily on exports. On the other hand, the U.S. currency weakened which does not bode well for a country who imports more goods than its exports. Moreover, are not central banks modus operandi price stability rather than buying government debt? Stocks below lows set in June and U.S. currency higher than its highs by end of this year.

Later today or tonight I will update the CoT report for Jul-24 open interest, but I don't think it matters given what happened Thursday and Friday. It will be interesting to see, though, if shorting the Euro and U.S. indices strengthened before Draghi's comments.

Good luck,
rod

CoT Report July 17: Pronounced Shorts Persist

noreply@blogger.com (Rod Simmons, BSc.) — Wed, 25 Jul 2012 08:51:00 PDT

Good morning traders and investor,

I just updated the CoT report (ex. options) for Jul-17 open interest. The link is located in the right side bar under: My Trading Journal, is always permanent for future viewing, and is updated weekly.

Some discernible trader sentiments for specific assets emerged during last week's open interest include:

Hedge funds net open interest for the Ten year U.S. note increased from -36583 the previous week to -65894, the third largest net short positions since Jun-12.
Open interest for the British Pound remains marginally net short among hedge funds. I believe this has helped the Pound resist some downward pressure from the USD. However, this morning's lower than expected GDP figures (prelim) for the U.K. will increase that pressure.
Hedge funds have opened up a net short position on the CAD at -1208 versus a +4338 net long the previous week.
Short hedge fund traders maintaining a marginal lead over long hedge fund traders for Copper futures.
Long traders for hedge funds continue to reduce their positions in the e-Mini Dow that peaked on Jun-26. e-Mini S&P 500 continues to emit a strong net short position among large institutions and hedge funds bringing the total net short contracts to 204,888 up from 192,395 contract the previous week.
Net short positions continue to rise for the EUR, which is now at a long-to-short ratio of 0.16.
Gold futures still emit a robust long position but it still appears that some traders are tentative to add additional open long positions.
Open interest in the YEN currency continues to post a robust long position among hedge fund and large institutional traders.

Overall, I believe the CoT report continues to be post pronounced short sentiment for equities treasury rates, long USD, and short commodities.

Good luck,
Rod

EURUSD Technicals Confirm Strong Sell

noreply@blogger.com (Rod Simmons, BSc.) — Mon, 23 Jul 2012 18:15:00 PDT

Good evening traders and investors,

I have been busy updating several daily charts and running my technical analysis. Yesterday I confirmed that the USDCAD chart on Friday emitted a Buy signal on the high and close of the day. After updating yesterday's and today price action, now the open and the low reaffirms the Buy signal.

As for the EURUSD, we can all agree that the EUR's downward path has been a formality for quite some time. But I took a closer look just to see what my technical analysis produced using a shorter and a much longer signal to confirm sentiment bias.

On Jun-29 the EUR posted a Buy signal across the board on the early, late, close, open, high, and low prices. When I say early I am referring to moving averages over a 2 week calendar whereas late is 4 weeks. The following week the EUR climbed from 1.2433 to 1.2676. That buy signal, however, quickly changed to a a sell signal on Jul-4 when the EUR closed at 1.2516. That sell signal was triggered by the early, late, and close prices. However, the open and high were still emitting a buy signal . On Jul-5 all price points were now eliciting a sell signal. That held up until July 13 when the sell signal switched back to a buy, however, it was a fake signal as the EUR gained only 1/100th of cent from Friday's close, Jul-13 to the following Friday, Jul-20.

On Jul-20 my early and late signal were still emitting a Sell signal for the EUR despite the open and high price of that day triggering a Buy. And, when I updated the EUR's price data tonight for Jul-23 price action, the currency posted a Sell signal for the early, late, close, open, high, and low. That's the first time all 6 price points posted a sell signal since the week of Jul-8.

Overall, my technical analysis clearly confirms a continuation of a bearish trend for the EURUSD. Please note I have open short positions in the EURUSD at 1.2661.

Good luck,
Rod

Bank of America, Home Depot et al. Beeping Sell

noreply@blogger.com (Rod Simmons, BSc.) — Sun, 22 Jul 2012 17:04:00 PDT

Good evening traders and investors,

I am early into updating price data up to Jul-20 for all major U.S. indices, forex pairs, futures, and Dow stocks and I am noticing some early Sell signals emerging. You can view my excel file in the right side bar under: My Trading Journal - PE Ratios DJIA

My technical analysis has produced an early Sell signal for Alcoa:AA in the week ending Jul-13. That was confirmed this week using a much longer 6 week history. Alcoa ended the week at 8.26 prolonging a severe down trend that began April 4, 2011. Interestingly, Alcoa's revenues appear to have with bottomed with a low of $18 billion in 2009, well below the $30 billion in 2007. Last year the company posted sales of $24 billion and this year may produce similar sales.

Home Depot:HD also emitted an early Sell signal for the w/e Jul-13 and it was confirmed last week using a much longer period. HD closed the week at $50.70, down from a high of $53.28 touched just a couple of weeks earlier. I believe this sell off may have more to do with the overall slow down in the U.S. and global economy as shareholders look to bank some profits. On the other hand, U.S. housing does appear to be gaining some traction and thus HD may be a good buy opportunity if this market recoils 10 percent or more.

Bank of America:BAC is also beeping Sell signal after I updated its chart with last week's data. But what is different with Bank of America is that this short term Sell signal was confirmed by a longer term Sell signal in the same week. Look for the overall market to possibly drag down BAC's price even further as global economic markets continue to cool. And, with interest rates already anemic (and continuing to decline), I would look to BAC, or even JPM, as an investment with a very long window of opportunity, say 2015 or 2016 when reasonable interest rates should return. That could catalyze BAC's well above $10.

Other Dow stocks eliciting Sell signals include American Express:AXP, Caterpillar:CAT, and Intel Corp:INTC. The only stock posting a Buy is Boeing:BA.

I will update the remaining Dow stocks during the next 24 to 48 hours and post my results here. Keep in mind with respect to the stocks above that all major U.S. indices are still posting a Buy signal, now in its seventh week. However, I expect that to change this week confirming that we are in the early onset of a moderate to major sell off as shareholders look to bank more profits earned since October 2011.

Please note that I use two technical signals: an early signal which analyzes moving averages over a 4 week period and a confirmation signal which examines moving averages over 6 weeks. My experience has been that when I try to analyze price direction over a much shorter time frame the output emits too many false signals. But just don't take my word. Please use the above information in conjunction with your own analysis.

Good luck,
Rod

USDCAD Emits Buy Signal

noreply@blogger.com (Rod Simmons, BSc.) — Sun, 22 Jul 2012 08:16:00 PDT

Good morning traders and investors,

After updating prices for the USDCAD ending Jul-20, my technical analysis has the close and high both emitting a Buy signal for the first time since Jul-12. The high touched 1.0131 on Friday but closed slightly lower at 1.0128. I used historical data from ForexPros, and not my trading broker, to generate my technical signals because my broker does not supply daily data for download. These data may differ slightly depending on which broker or charting software you use but the result should be the same based on my technical analysis. I will also add that the lows on Thursday and Friday for the USDCAD did touch the 68% fibonacci retracement from the high posted on Jun-3, a key entry point for many traders, apparently.

On Friday, I opened two long contracts for the USDCAD at 1.0094 and will look to close at least one later this week to lock in some profits. And, if my technicals continue to post daily Buy signals then I will look to add to my open long positions off the daily lows. Some important daily resistance or support levels for me are 1.0123, 1.0134, 1.0153, 1.0168, and 1.0179.

Some key economic catalysts to focus on this week include CAD retail sales on Tuesday, GDP for the GBP and new home sales for the USD on Wednesday, USD Durable Goods on Thursday, and finally, GDP and consumer confidence for the USD on Friday.

Good luck to Adam Scott who is leading The Open Golf Championship.

Rod

CoT Report Jul 10. Positions Unwinding, Shorts Unchanged in e-Mini S&P

noreply@blogger.com (Rod Simmons, BSc.) — Sun, 15 Jul 2012 14:56:00 PDT

Good evening traders and investors,

In this week's CoT report here for open interest on Jul-10, several notable trends continue to emerge.

Large speculators continue to unwind their long positions in the 10 year U.S. treasury note and shorts for the Canadian dollar. The buildup of open positions which commenced in early 2012 began retreating in early May commencing with corresponding declines in share prices, 10 year U.S. note yield and the Canadian dollar (CAD) against the greenback. As of July 10, long positions in the 10 year note have dropped from a high of 312,890 open long contracts on Apr- 3 to just 44,431 as of last Tuesday. CAD has been unwound to just 4,837 open net short positions from a high of 102,549 on May-1. I believe those remaining positions were either partly closed on Friday past and will continue to be closed this week, in all likelihood, before the 10 year note falls and the CAD falls further.

Both hedge fund managers and large institutional speculators continue to hold large open short positions in the e-Mini S&P 500 to the tune of -130,816 and and -61,579 contracts respectively. It does not appear from the CoT report that both added significantly to their open short positions maintaining a relatively unchanged long-to-short ratio between Jul-3 and Jul-10. On the other hand, hedge fund mangers significantly trimmed their net long position in the e-Mini Dow from the previous week of +20,280 to +14,058 for the current week of Jul-10. That's two weeks in a row that these managers have closed 5,000 contracts or more.

Net short positions in the EUR on the Chicago Merchantile Exchange continue to climb from a low of -82,954 on Mar-20. Last week, hedge fund managers added another 20,000 open short positions on Jul-10, keeping the long-to-short ratio at an anemic 0.18. Keep a close eye on the EUR in September as many of these positions could be closed over several weeks driving the EURUSD price back up. But for now, I believe 1.2000 or less is a real possibility given the current environment in the market. A stop at 1.2500 would be prudent in the short term unless you have the capital to not place a stop and you believe the EUR will touch 1.2000.

Last but not least, it may appear that hedge fund managers are dosing off on the VIX with it trading at around 16.74. With a closer look at the CoT report for Jul-10 shows that hedge fund managers are loading up on the shorts while large speculators are loading up on the long positions. Hedge funds reduced their net long-to-short ratio from 70% to 65% while large speculators increased their net long from 125% to 133%. The former status, however, may change this week.

As for me, I speculate that we are very close to another serious pullback in the stock market. I want to see the e-Mini Dow (YM) touch 12,900 and the USDCAD flirt with 1.0000 before I take up several short and long positions respectively. And, I think this week's economic calendar may provide the leverage needed such as CPI for the U.K and the U.S., retail sales for the U.S., and the interest rate decision by Bank of Canada on Tuesday. As well, U.S. housing starts for the U.S. and Ben Bernanke testifying before Congress may be excellent entry points. I may not even have to set up my stops.

Overall, the stock market is poised to recoil to 11,400 or lower for the DJIA by mid August.

Good luck,
Rod

Nonfarm Payroll For June Reiterates The Struggle

noreply@blogger.com (Rod Simmons, BSc.) — Sun, 08 Jul 2012 17:48:00 PDT

Good evening traders and investors,

Tonight I read varying commentaries on last week's total nonfarm payrolls in the U.S. on WSJ.com, Reuters.com, Bloomberg, CNBC, and Morningstar as well as Forexpros. The general consensus was that June's release for payroll from the Bureau of Labor Statistics (BLS) was anemic but Morningstar's economist was not as bearish. Even President Barack Obama was a little bullish saying in his press release that the problem with the jobs situation may lay squarely on construction but more so with state and local governments. Given the wide but diverse opinions I decided to take a deeper look.

First of all, to put June's 2012 nonfarm payroll numbers into proper context I had to do some historical background checks on a large sum of data.

Prior to financial crisis of 2008, total nonfarm payrolls tallied 114 million, excluding government. At the end of 2011 it eroded to 109 millon, for a loss of about 5 million jobs. Adding in government payroll did little to change that overall picture during the same period because all U.S. governments saw their payroll numbers drop by only 100,000.

All industries, except for education and health services (EHS), trimmed their payrolls between 12-2007 and 12-2011. EHS added 1.5 million jobs. What was mostly accountable for the massive layoff were the construction and manufacturing industries who both lost 2.1 million jobs each. So, if the U.S. economy is to recover then these two industries must rebound, preferably sooner rather than later.

Now that we have a historical perspective about where the U.S. was, is, and needs to go we can better understand June's payroll numbers as well as the payroll data since January.

According to the BLS, the U.S. added 84,000 jobs in June 2012 which is made up of 71,000 in the service sector; mostly contributed by a 25,000 gain in temporary help for the professional and business services sub-industry. Goods producing industry added 13,000 jobs with a good portion going to the motor vehicle and parts manufacturing sub-industry. Construction added an anemic 2,000 jobs. All these data are seasonally adjusted.

But looking at one month of data fails to give us a broader understanding of the job picture. Remember: the construction and manufacturing Industry trimmed 4.2 million jobs from 2007 to 2011 according to the BLS. If we go back in time, say to January of 2012, we really get a better sense about how healthy or unhealthy the employment situation is in the U.S depending on your point of view.

Since January, all major industries have increased their payrolls. That's good, right? But wait. The construction industry, despite adding 2,000 jobs in June, has trimmed 55,000 since January and that's in an industry which employs about 5.5 million. Government (federal, state, and local) also trimmed 50,000 (so President Obama you are partly correct) but that's with a total contribution to the total nonfarm payroll of 21.9 million employees. In other words, the construction industry trimmed another 1 percent of its workers while governments shed about 2/10ths of 1 percent. I guess President Obama either forgot to point that out or avoided it because it is, after all, an election year.

There was one positive note, though. The manufacturing industry added 100,000 jobs (mostly in motor vehicles and parts sub-industry) since January 2012 but that still averages out at 16,000 per month. And, at these rates, we are possibly looking at 2 to 3 years before the construction and manufacturing industry fully recover from the devastating financial tsunami of 2008.

Most of the jobs losses in the construction industry occurred during Q2 2012 where it trimmed 40,000. On the other hand, manufacturers saw most its growth during the Q1 2012 adding 70,000. And, when I put it altogether, Q2 2012 produced on average 91,000 jobs (ex. Government) per month versus 226,000 during Q1 2012. This should reflect in the earnings season for Q2 2012 which begins tomorrow with Alcoa. With stocks from the DJIA index currently valued at around 100%, we should see some serious pull back. But, I could be wrong.

Jobs returning to the motor vehicle manufacturing industry is a good thing. But as you can see from the above sobering data, it appears, at least to me, that the U.S. continues to struggle possibly because of attenuated local and foreign consumption. And, maybe that is why stock prices retreated in May and commodities like copper and crude oil receded from its winter highs.

In ending, whether President Obama gets re-elected because the spin masters paint a different picture is one trade I would be willing to bet for rather than against.

Please note that I did not provide links of screen shots of the data I presented above from the Bureau of Labor Statistics because it would just overwhelm the article.

Good luck,
Rod

My Trading Journal

noreply@blogger.com (Rod Simmons, BSc.) — Tue, 03 Jul 2012 09:27:00 PDT

Good afternoon traders and investors,

After a year of blogging about publicly traded companies and trades that I either recommended or initiated myself, I have decided to open up my trading journal to visitors to my blog.

My trading journal consists of the commitment of traders report which I already post, U.S. leading economic indicators, and projected market value for listings on the Dow Jones Industrial index. When I say projected value I am comparing the price earnings ratio for the upcoming quarter to the price earnings ratio in the previous quarter to determine whether the current market price for a company is overvalued, undervalued or of equal value. This is important for trading futures e-Mini Dow YM. I will update those three research documents throughout the week. Finally, I am configuring an internet radio station, probably at Shoutcast.com, where you can listen to me entering and/or exiting LIVE trades in the forex and futures markets. My live trading will be coming soon. I will also complement the live trading with a spreadsheet so you can view where I enter and exit trades and its corresponding profit and loss.

The purpose is to help and educate other traders and investors around the world as well as provide greater transparency about my own trades since I write about them. It is one thing for me to promote a trade but it's not the same if I don't make the same trade myself.

The links to my trading journal are provided at the top of the right side bar under "My Trading Journal". Feel free to utilize these tools and I hope they help you whether you are a trader and/or investor. Data sources are from reliable governments, institutions, and agencies. However, I can't guarantee that the data is complete and correct so use at your own risk.

Good luck,
Rod

CoT Report June 26, 2012

noreply@blogger.com (Rod Simmons, BSc.) — Sun, 01 Jul 2012 11:35:00 PDT

Good afternoon traders and investors,

Before I get to the CoT report, I just want to comment on the recent surge in the markets that occurred Friday past. It was just that a surge or short squeeze triggered by a deal finalized by EU leaders late Thursday evening. Unfortunately, the squeeze was driven when Europen and Asian markets were opened but North American markets were closed and most traders and investors were asleep, including me. Therefore, I failed to capitalize.

Now to the CoT report. View here.

These are some of the notes I made in my trading journal about this week's CoT report for open interest on June 26, 2012:

1. Hedge managers net short position for 10 year U.S. note (traded on CBOT) increased from -22,997 contracts on June 19 when it closed at 133.15 to -55,639 contracts on June 26 when the 10 year note closed at 133.49.

2. GBPUSD (traded on CME) net short position at 1.5705 on June 19 was -17,153 but drifted dramatically to long by June 26 at net short of -758 contracts when GBP closed at 1.5570. Interestingly, the GBP surged against the USD to 1.5703 two days later when EU leaders agreed in principle on how to recapitalize banks without increasing their government deficits. I don't know if the EU summit in Brussels triggered this change in sentiment but with the Bank of England poised to lower interest rates later this week I suspect most traders will trigger the sell button. Either way, the volatility should continue until some definitive trend emerges, possibly by mid to late July.

3. Hedge managers continue to have difficulty trading the USDCAD pair with net long positions more or less unchanged from June 19 (+8,201 contracts) to June 26 (+9,277). The CAD trimmed 55 pips between those dates but, like the GBP, made up significant ground and then some by late Friday. With ISM manufacturing and services indices, ADP payroll, and U.S. and Canada unemployment rates out later this week, it could turn out to be a very volatile and possibly profitable 5 days of trading.

4. Net short positions on the EURUSD increased significantly to 159,880 on June 26 from 141,066 on June 19. The EUR pulled back by almost 200 pips by June 26 before surging on Friday by 2.18 cents. The ECB rate at 745 a.m. EDT this Wednesday should deflate some of this enthusiasm, if not sooner.

5. Hedge managers appear to be posting significant losses for crude oil WTI (CL: NYMX). Their net long positions decreased only slightly from 123,908 on June 19 when crude oil closed at 84.35 to 112,833 on June 26 when it finished the day at 79.36. I suspect many stop orders were triggered.

This week should see some technical retracement during Monday's trading but whether that retracement wipes out Friday's gains is anyone's guess. But I am speculating that last week's surge will be short lived.

I have posted at the top of my home page my opening positions for July 1 for some of the more highly liquid assets that are traded. I will update those positions throughout the day and week when I identify, in my opinion, clear signals to Buy or Sell. Please note, I trade the e-Mini Dow (YM) through OptionsXpress and USDCAD, GBPUSD, and EURUSD using Questrade.

Gook luck to Italy and Spain playing in today's Euro Cup final.

Rod

U.S. National Debt: The 99 Cent Payment

noreply@blogger.com (Rod Simmons, BSc.) — Tue, 26 Jun 2012 18:15:00 PDT

Good evening traders and investors,

There was much discussion last year about the United States raising the debt ceiling to prevent the country from defaulting on it debt obligations - a would-be first in its colorful 235 year history. And no doubt, there will be much banter later this year on the same topic but as well political wrangling over a so-called fiscal cliff when a number of tax laws are expected to expire. Both events, the debt ceiling and taxes, impact the U.S. ability to manage debt.

Think of it this way. Let's say you apply for a mortgage. In Canada, banks use a debt-service ratio to determine one of several criteria you must meet to qualify for loan: credit card, car, or mortgage. Generally, banks don't like it when your monthly debt payments exceed 40% of your total gross monthly income. But let's assume you qualify for a mortgage. Two years elapse and you are enjoying your new home but then the number of hours you work are cut back and your income drops significantly. It could turn out that your revised debt service ratio could exceed 40%. And, that previous mortgage you qualified for, you would no longer be approved. That is sort of where the United States is but not exactly as reported.

No matter what article you read or video you watch everyone is negative and gloomy about the U.S. debt. Hair raising numbers such as $15 trillion or $146 trillion are beamed across every technological transport device and in print media. Some have gone as far as comparing it to the Empire State building if you stacked the U.S. national debt using $100 denominations.

Yes, the national debt is very important particularly with investing since Government spending can significantly impact GDP and in turn company returns. But my analysis below is not intended to dismiss the seriousness but rather to try and put it into perspective and dampen some of the fears and dispel some of the myths.

According to Treasury Direct for the United States, the national debt is about $15.8 trillion as of May 2012. See here. In 2011, the annual interest paid on the debt was $454 billion for an annual interest rate of 2.89%. See here. Now, find your credit card statement and locate the interest rate you pay your credit card company. It's probably well above 10%. My point: call your credit card company and ask them for a lower rate. ;).

Moving right along.

Now, according to the last report from the U.S. Department of Labor the labor force was about 154 million and the average hourly wage per nonfarm payroll was $23.41. See here.

Using some simple math and to put a new spin on this U.S. debt situation, it means that the annual interest accrued and paid out per available U.S. worker for the first 9 months of fiscal 2012 is about $1954 or 99 cents per hour if we use a full time job paying 37.5 hours per week.

Now while this is probably oversimplification, my point is this: There are several ways to look at things. Some prefer to see the glass as half empty, some see it as half full, while engineers say the glass is too large. And, remember when you read or watch news during the latter part of 2012 that speaks to the U.S. national debt and the stock market, your contribution is about 99 cents per hour (of course, that's just to pay the interest).

Don't let the news dictate your investment or trading decisions. Be objective and stick with the fundamentals and economic data such as U.S. durable goods orders (net new orders) which will be released tomorrow at 1000 a.m. EDT. Other key data points include housing starts, purchasing managing index, interest rate spreads, and payroll data such as hours work, pay rate, and number of new employees. The U.S. national debt is not an issue, nor is debt in most countries except for Japan, Greece, and Italy.

Good luck,
Rod

CoT Report June 19, 2012

noreply@blogger.com (Rod Simmons, BSc.) — Mon, 25 Jun 2012 04:30:00 PDT

Good morning traders and investors,

It's Monday morning and time to check our CoT report for open interest positions taken on June 19, 2012. View complete CoT report (excluding options) here.

Just want to note about last week's CoT report, without getting into specifics, is that it appears hedge fund managers had trouble with the market last week. After the Greek elections and prior to the FOMC meeting many contract futures did not play out according to hedge fund managers speculated sentiment. In other words, they entered long when they should have gone short and/or short when they should have entered long.

Some future contracts that appear to have produced significant losses (on paper) for hedge fund managers include West Texas Intermediate crude oil, 10 year bond, e-Mini Dow, EURUSD, USDCAD, and gold.

As for me, my short term sentiment is short stocks, indices, and its derivatives, but long USD and treasuries.

Good luck,

Rod

US Dollar Cautiously Bullish; Downward Pressure on Stock Prices

noreply@blogger.com (Rod Simmons, BSc.) — Thu, 21 Jun 2012 17:37:00 PDT

Good evening traders and investors,

Today's drop in the stock market or pop in the USD index does not mean we now bet the farm. But, we can certainly sacrifice a cow or two.

I think we can all agree that the bulls have run out of gas and are now running for the hills. Thus, there should be continuous downward pressure on stock prices and upward pressure on USD from this point forward, in my humble opinion.

Today, the USD closed significantly higher against major currency pairs. But expect some sort of technical retracement. I generally use fibonacci 68% retracements to determine significant resistance lines and possible entry or exit points.

A good entry point for the USDCAD is a short at 1.0291 with an exit and/or reversal at 1.0222 which could be met with significant resistance. Keep in mind, though, that there is upward pressure on USD and thus a stop loss at 30 pips above the entry price could easily get blown out if the trade is not actively managed.

GPBUSD is bias long and poised to retrace to 1.5672 with a good entry at 1.559. But again, be cognizant that there is significant downward pressure on the GBP.

The EURUSD was beaten up badly today losing almost 180 pips from its intraday high. So, a good entry bias long is highly probable at 1.254 with a stop loss at 1.25011. Expect significant resistance at 1.26316 and thus a sign to close the trade and/or reverse. Overall, there is downward pressure on the EURO so long trades beyond a day or two could easily be stopped out until this pressure eases.

Good luck,
Rod

EUR, GBP, CAD, Dow, S&P: Two Scenarios

noreply@blogger.com (Rod Simmons, BSc.) — Tue, 19 Jun 2012 13:32:00 PDT

Good afternoon traders and investors,

Today the FOMC are meeting and will give a press release tomorrow when they will announce where the U.S. economy is heading, the Fed rate, and any further stimulus. My research leads me to speculate that the U.S. economy is slowing down, the Fed rate will not change, but there may be some sort of stimulus, albeit nothing like QE or Operation Twist. Therefore, here is my trading strategy if big Ben announces some sort of stimulus:

Using daily charts, USDCAD, which is curretly registering an RSI(14) of 50.80 and is thus not yet oversold, is poised to retrace to 1.00503, a 68.2% fibonacci retracement of the current uptrend that began on May 1. EURUSD is currently posting an RSI(14) of 46.78 and is thus far from being overbought and therefore is positioned to retrace 68.2% at 1.29158. GPBUSD is in a similar trading pattern whose RSI(14) is 52.06 and it looks like it could retrace to 1.59120. Again, that is a 68.2% fibonacci retracement.

Again using daily charts, the DJIA index is currently sitting at or slightly above its 68.2% retracement of 12,842. With a daily RSI(14) of 59.32 and the advantage of possibly the Federal Reserve initiating another round of stimulus, it could provide the ammunition to push the DJIA to 13,000 or higher. The S&P 500 has reached its 68.2% retracement but is now trading slightly below at 1358 as of this writing. And it too, with a RSI(14) of 59.74, can be pushed higher into overbought territory depending on what the Federal Reserve does tomorrow.

Overall, there are two scenarios.

1. If the Fed does not announce any further stimulus then the USD may have reached its bottom and the DJIA and S&P may have reached their tops. Then it is only a matter of time before the stock market pulls back yet another 5 to 8 percent.

2. If the Fed does announce some type of weak to moderate stimulus then the USD may move slightly lower during the next four weeks. And, the the DJIA and S&P may move slightly higher to 13,300 and 1420 respectively. Then it, stocks, will be poised to pulled back 10 percent or more.

As for me, I will be ready to long the USD and short e-Mini Dow (YM) or S&P (ES) as risk-ratio is almost too good to be true.

Good luck,
Rod

CoT Report Jun 12, 2012

noreply@blogger.com (Rod Simmons, BSc.) — Sun, 17 Jun 2012 12:55:00 PDT

Good afternoon traders and investors,

I hope you are enjoying your weekend and looking forward to a very profitable week in the markets. It could be another week of mild to moderate volatilty with all eyes on the FOMC meeting on Wednesday.

Greek election votes are beginning to stream over the wires and it appears that the New Democracy (probailout) party is heading toward a majority BUT here is an interesting tweet from EU correspondent for Kathimerini Greek Daily, Mr. Kostas Karkagiannis, who said "Pasok won't participate in a coalition government without syriza. Good night and good luck." The EUR gained ground on the USD prior to this news headline but has since retreated 18/100s of cent or 18 pips. I don't know if there is any correlation between the EURUSD and the latter. Nevertheless, it signals that a big fat Greek political party may be yet, once again, put on hold.

Since it is Sunday it is time to update my CoT Report for Jun 12, 2012. I had to upload the data to Zoho.com rather than Google spreadsheets because I am having difficulty with Google's server.

During the past two weeks I only uploaded the CoT Report for Financial Futures but this time I uploaded the CoT Report for most futures including agriculture, metals, energy, indices, and financials. You can view the CoT Report here.

Some notable positions include the following:

Hedgers increased long positions in GBPUSD from 118% to 141%.
Hedgers remain predominantly bias short CADUSD but its sentiment is weakest in 6 weeks.
Net positions in crude oil WTI remain predominantly neutral but with a slight increase in long posturing.
Net positions in the e-Mini Dow remain bias short but losing steam since May 1. On the other hand, positions in the e-mini S&P 500 claim no winner and shorts and long are exact among hedge traders.

My play is now long the USDCAD if it does not break lower than 1.0210 and short the e-Mini Dow if it does not break higher than 12,700. I will wait for confirmation either tomorrow or Tuesday.

Good luck,
Rod

Ben: Say When. Stocks will move lower, USD will move higher

noreply@blogger.com (Rod Simmons, BSc.) — Fri, 15 Jun 2012 09:45:00 PDT

Good afternoon traders and investors,

Is this a perfect opportunity to short or to buy in?

Right now my trade has been short USDCAD and long e-mini Dow (YMM12) since June 1 but look to close that later this afternoon. Greek elections are a brief play Sunday evening but will look to Ben to say when during next week's FOMC meeting for a much longer play.

With the U.S. economy still expanding but at a risk of slowing down I don't believe the Fed will hint at a third round of quantative easing, initiating Operation Twist II or extending Operation Twist I. Moreover, if Ben wishes to stimulate the economy NOW it will be perceived as political posturing and aiding President Obama's re-election. A more likely scenario is further easing after the election and if the U.S. economy slow down accelerates or struggles to turn around later this fall.

My play is exit my short USD prior to next week's events then possibly long USD at around 1.0220 (USDCAD currently at 1.0244 at time of this writing) with stop at 1.0150 and limit at 1.0430 for a risk ratio of 1:3. Pair this with short YMM12 with entry at around 12700 to 12800 (YMM12 currently at 12644 at time of this writing) with stop at 13000 and limit at 12200 for 1:3 risk ratio. I may move the stops around depending on geopolitical events and ensuing economic data but you get the picture.

My overall short term 3 to 6 month outlook is stock prices will fall with DJIA index bottoming at 11,400 to 11,500 by September or October. Then it will be a waiting period to see if the U.S. economy can reverse this current slow down and whether it will require further stimulation.

Good luck,
Rod

EUR, GBP, and CAD Remain Cautiously Bullish

noreply@blogger.com (Rod Simmons, BSc.) — Wed, 13 Jun 2012 06:57:00 PDT

Good morning traders,

Just updated my hourly charts on the EUR, GBP, and CAD and all three remain cautiously bullish against the USD. In other words, the upward (EUR, GBP) or downward trend (CAD) since June 1 remains intact and therefore no reason to exit a Long (EURUSD,GBPUSD) or Short (USDCAD) trade. If you trade a smaller timeframe such as 30, 15, or 10 minutes this analysis would not apply.

For the CAD a critical short term pivot point remains at 1.0210 which was tested twice since June 1. If it is tested a third time and not clearly broken then I will reverse my short position to a long.

The critical short term pivot point for the EUR is 1.2450 which has been tested several times since June 1. For the GBP I see a weak pivot point at 1.5406 and thus it may hold up well against the USD during the next 4 to 8 weeks.

Overall, there is limited downside risk for the USDCAD and limited upside risk for the EURUSD and GBPUSD, therefore, my cautiously bullish outlook could quickly turn to cautiously bearish by the time the Greek elections are over and Ben Bernanke has given his speech next week.

Congratulations to the Los Angeles Kings who won the Stanley Cup finals against the New Jersey Devils. Another year that the Cup is not home in Canada.

Good luck,
Rod

Stocks: Economies Set To Weaken Prices Even Further

noreply@blogger.com (Rod Simmons, BSc.) — Tue, 12 Jun 2012 07:12:00 PDT

Good morning traders and investors,

So, if you have been sitting on the sidelines and wondering if you should enter Long in this market because you witnessed a 300 point sell off yesterday and an even larger one in May then you may want to re-think the move. The next 8 to 12 weeks could get ugly. And, here is why.

Yesterday, the Organization for Economic Co-operation and Development released their composite leading indicators and it was not good. Take a look at this screen shot of a chart from their press release.

While you notice that economic activity is improving in all 33 members of the OECD area, individually major economies are either in a recession or about to slow down.

Let's start with the Euro Area. Its rate of change from month to month continues to post negative figures and thus its recovery has essentially all but stalled. Canada's economic activity is recovering but it's painstakingly slow. And while Germany's economic activity is recovering, the needle has barely moved in 5 months. While the United Kingdom appears to be on a healthy recovery, there are two other much larger economies that stand to turn this current stock market from a correction to a bear rally.

China's month on month change decline in economic activity has accelerated. Its rate of change in slowdown has increased from -0.16% in January 2012 to -0.26% in April 2012. It appears that their bank's fiscal tightening has been too strong. I am assuming that is why their central bank reduced bank reserves and cut interest rates. It will be several months though before that has any measurably impact.

But most importantly and more concerning is the United States economic activity. During the past 5 months its rate of change has dropped significantly from 0.27% in December 2011 to a barely perceptible 0.02% in April 2012. And, with May's economic data already posting huge declines (e.g., non-farm payrolls at 69,000), I believe next month when the OECD update their leading indicators, it is very likely the U.S. will show that the country's economy has begun to slow down.

Overall, it appears the stage has been set as most major economies around the world are poised to pull back.

But, what does this have to do with the stock market if you are an unsuspecting retail investor or trader?

When any economy, let all the two largest economies in the world - one pulling back faster than a stretched rubber band and the other about to flip flop from expanding to slowing down, companies are at an increased risk for lower sales and in turn lower profits. This should translate into stock prices depreciating.

With the DJIA index, DAX exchange, and the Hang Seng index still posting healthy gains since September of 2011, I believe the risk for lower stock prices is greater than higher prices. Thus, I would expect at least a 10 to 20 percent downturn in the U.S. market with most other markets following behind albeit their downturns a little attenuated.

I do not believe central banks and/or governments can act fast enough to: 1) arrest the economic slowdown and, 2) reverse it and prevent the 10 percent drop in the U.S. stock market. Nor can I come up with any plausible reason why any investor would want to enter the market now and buy knowing that major economies around the world are about to slow down or are slowing down. Yes, some stocks are cheap but may be those same stocks will be cheaper in one, two, or three months.

Folks, behold the bear market. It will be upon us sooner rather than later. My play is now Short the e-Mini DOW (YMM12) and Long the USD against the CAD, GPB, and EUR probably until late September.

Good luck and enjoy your summer golfing,
Rod

COT Report Financials June 5, 2012

noreply@blogger.com (Rod Simmons, BSc.) — Mon, 11 Jun 2012 13:11:00 PDT

Good afternoon traders and investors,

Here is this week's version of my COT report for financial futures contracts. I edited the document from CFTC then uploaded it to Google Spreadsheets for better viewing and analysis. View COT here. If you have any difficulty viewing the document please comment or email me at editor@morningpick.com.

Some notable changes (or not) in this week's COT report for financials include:

Canadian dollar bias Long strengthening.
Japanese Yen bias Long weakening.
eMini S&P Index Long to Short ratio has stabilized at around 0.50
10 year U.S. Treasury Notes remain a robust bias Short
Vix Futures continues to post a Long to Short bias ratio of 2:1.

Good luck,
Rod

Buy Dips; Sell Rallies

noreply@blogger.com (Rod Simmons, BSc.) — Mon, 11 Jun 2012 09:33:00 PDT

Good morning traders and investors,

I am currently vacationing in Southern Florida and will get back to analyzing and blogging about the markets in greater detail after June 20.

Here are some of my general assumptions about the market during the past two weeks and the upcoming two weeks.

1. Presently, my play is buy on dips and sell on rallies.

2. This current rally is one part technical and one part picking up some cheap stocks. It is not spurred by a much deeper undercurrent such as expanding economic growth as indicated by the jobs data, retail sales, manufacturing, housing sales, and inflation during the past two months.

3. We are at a greater risk for a larger downturn than we are for a small upswing so entering and exiting quickly may be a better opportunity to bank some quick profits; otherwise hold stocks with a 8 to 10 month outlook.

4. I am not worried about any country in Europe except for Italy which needs to borrow about $35 billion per month, according to Bloomberg sources. It could potentially make a downturn in the stock market much worse or prevent a bull run from stalling.

5. If DJIA Index approaches 12,800 to 13,000 I will be bias short the eMini DOW (YMM12) and U.S. treasuries paired with bias long the USD against most currencies.

6. Be careful about the information major stakeholders report about this market. Many of their correlations and assumptions are incorrect, in my opinion. Stick with the economic data as the more reliable and valid tool.

Good luck,
Rod