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Jay Norris
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Jay Norris is a 20-year CBOT floor veteran, author of the Best Seller "Mastering the Currency Market", McGraw-Hill, 2009, and "Mastering Trade Selection and Management", McGraw-Hill, 2011. He is a Market Analyst and Director of Education at Trading-U.com where he teaches the... More
My company:
Trading University
My blog:
Seeking Alpha
My book:
The Secret to Trading Forex, Futures, and ETF's: Risk Tolerance Threshold
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  • Einstein, Trading, & The Higher Power App

    Albert Einstein told us the most important question facing humanity is "Is the universe a friendly place?"

    He knew ahead of time that the answer was "yes", because when you look at the regularity of the great cycles and movements of heavenly bodies as a backdrop to human evolution it is obvious that the universe has provided mankind with the perfect environment to grow and prosper.

    Einstein concluded that we must use scientific discovery and our natural resources to create tools and models for understanding the universe, rather than wasting our physical and mental resources on defending ourselves from it, because as the great scientist said, "power and safety will come through understanding its workings and its motives".

    As traders we need to ask the same question of the markets. "Are the markets a friendly place?"

    When we look at markets from their mercenary beginnings to the agriculture revolution to the industrial revolution up to the technology boom there is little doubt that the evolution of commerce, i.e.: modern markets, have benefited humanity greatly by keeping the cost of food and energy affordable and the cost of securities, i.e. savings and retirement investments, relatively high.

    When you look at the most powerful pricing determinants: demographics, the policies of elected governments, and economics, we start to recognize that these influences are to a trader and investor what energy, matter, and gravity are to a physicist. As the earth relies on the cycles of the sun and solar system we rely on the patterns created by our own population and governments.

    To answer the question, yes, the markets are humanity friendly. And the higher power that guides them is our collective conscious. Just has Einstein pointed out the universe was a friendly place, and neither dangerous or random, with his famous quote: "God does not play dice with the universe", we need to realize that the expansions and lesser contractions created by collective commerce are not something to fear but something to rely on and learn from. That is the most valuable app in history. We are, collectively, the higher power. To paraphrase Winston Churchill, "after exhausting all other possibilities [we} always do the right thing".

    The take-away from this for traders is to stop trying to figure out what will happen next with markets and go along with what is happening now. Too many investors waste time and brain power on focusing on how to time the next market collapse, or how to profit from some coming calamity because of a fearful mindset, and miss out on the opportunities provided by current bull and bear markets. Warren Buffet summarized this point perfectly when he said, "Our approach is very much profiting from lack of change rather than from change".

    The bottom line, don't bet against human progress and trust that the sun will rise again tomorrow.

    Jay Norris is the author of "Mastering Trade Selection & Management", McGraw-Hill, 2011. To see Jay highlight trade set-ups and signals in live markets go to: Live Market Analysis

    Tags: Einstein, Trading
    Sep 04 11:00 AM | Link | Comment!
  • Gold Set To Repeat The Great Sell-Off Of 2013

    While U.S. economic releases last week hardly painted a positive picture of the economy, and the Euro gained sharply against the dollar, there were a couple of developments that reminded us that many economic reports are "rear view mirror indicators" and that in the big picture we are still in a bear market in commodities and a bull market for the U.S. Dollar.

    Interest Rates

    Despite most analysts agreeing that the Fed will again put off raising interest rates in June, the yield on U.S. 10-year Treasuries jumped from 1.91 to 2.11 last week - that may not seem like much but it is actually a 10% move-- see Figure 1.

    (click to enlarge)
    Figure 1. Daily Chart of the U.S. 10-year Note Yield

    After carving out a higher low in April the yield on the 10-year notes rallied into position last Friday to potentially reverse its 50-day pattern this week and put in a higher high - a higher high in a downtrend equals a market reversal.

    We interpret higher interest rates in the face of slower than expected economic numbers for March twofold. Number 1: while March's economic performance may have been disappointing, April's won't be. And number 2: while consumers had not spent as much as estimated in the 1st quarter of 2015, savings rates, along with home prices, are up strongly, and so is consumer confidence.

    Gold

    Despite the weaker dollar throughout last week the Gold market slumped badly - see Figure 2 -- begging the question "why?" Gold is a leading indicator of economic fear, and does well when the economy experiences uncertainty, which is what the March data, from job growth, to manufacturing, to retail sales, was showing.

    (click to enlarge)
    Figure 2. Daily Chart of Gold Futures

    We see the sell-off in the gold market last week as confirmation of a positive U.S. economic performance for April, which will be seen in the May releases; and as a reflection of a marked improvement for household balance sheets given the healthy uptick that U.S. home prices are currently experiencing.

    The Trade

    The question following the analysis is how can we profit?

    Higher U.S. rates are supportive of the current long-term trends in place: a U.S. Dollar bull market and a bear in commodities. So the advantage of a trade based on this higher interest rate theme is it will be in-line with the current dominant trends.

    After going back and analyzing market performance during the most recent jump in U.S. rates in the 2nd quarter of 2013, the most obvious correlation to higher interest rates was lower gold prices- see chart.

    (click to enlarge)
    Figure 3. Weekly Chart of U.S. 10-year Treasury Yield & Gold

    When 10-year interest rates rose a full percentage point in the second quarter of 2013 -- chart on the left -- it spelled a quick and violent end to the previous bull market in gold. From this perspective we believe another leg higher in U.S. rates, this time sanctioned by the Fed, would finish the job started in 2013 and push gold below $1000.

    Should U.S. rates continue to uptick the risk /reward on a short gold trade looks to be the best trade on our screen today.

    Jay Norris has written two books on trading which were published by McGraw-Hill. To see Jay highlight trade set-ups and signals in live markets this Thursday go to Live Market Analysis and click on the "free trial" option.

    May 03 7:47 PM | Link | Comment!
  • What Gives: Durable Goods Or Stocks?

    With new U.S. Durable Goods orders having come in lower for 6 of the last 7 months, and the S&P 500 having chugged happily higher over that same period, market analysts have to be asking the question "what gives?"

    Here is a historic chart of new durable goods orders -- top --and the S&P 500 on the bottom.

    The March Durable Goods figures will be released tomorrow at 8:30 AM EDT by the U.S. Census Bureau and are expected to rise by 0.7%

    (click to enlarge)

    The long-term correlation seen in this chart makes perfect sense; when consumers and businesses are buying "big ticket" items the economy does well and the stock-market benefits.

    When Durable Goods purchases turn lower however so does the long-term trend in stock prices.

    In 2008 stocks led the way lower while in 2000 durable goods topped 2 months before stocks corrected.

    Currently Durable Goods topped in July of '14 and have been lower for 6 of the last 7 months. Before you get too bearish on stocks though, realize that there is a powerful Spring seasonal for the U.S. Economy that is just kicking in.

    And volume into the stock market is also much higher than it was during past cycles meaning it takes longer for the momentum to wane. Markets are like ocean liners...they take a lot of distance and time to turn around.

    Stay tuned; this ain't rocket science and they haven't repealed the law of gravity just yet either.

    Jay Norris has published two books on trading for McGraw-Hill and currently hosts Trading University's Live Market Analysis

    Apr 23 8:19 PM | Link | Comment!
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