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Futures Dominate- Anxious Times For Cash Markets

May 02, 2011 1:12 PM ET
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Traders witnessed one of the most disjointed pre-market trading sessions that is likely to ever be seen between the Friday Wall Street close and Monday open. The warnings were posted by TheLFB trade team over the weekend that a perfect storm was brewing and that volatility looked set to explode.

There were late-breaking headlines on Friday that questioned Ireland’s bail-out detail and economic growth, along with Dow Jones reports that the Euro-zone banking sector had major issues to still address. Adding to the fray were moves to hike silver bullion margin requirements, that all came together with a last-minute spike higher in gold, oil, and S&P trade that was matched with a short signal on silver from TheLFB trade team.

European markets were disrupted by the May Day bank holiday and it was left to SPY (136.30) trade to reflect the global market desire to hold equity risk. A spike in price to test TheLFB Resistance 3 at 137.20 on SPY failed to hold in overnight trade, and a new short signal and alert will be issued to clients only if a daily chart closes below 135.70 this week. The short targets will include 133.50 and 131.95 if global momentum builds.

TheLFB SPY 15 Min Chart

Breaking news over the weekend of Bank of Japan record breaking quantitative easing intentions along with headlines of terror suspects being caught were enough to send futures contract values all over the charts. The Japanese Nikkei created gaps higher at the open and after lunch, as equity traders rejoiced with a 3% move in reaction to the BOJ back-stopping risk.

Gold traders saw two early Asian session 1-hour chart moves that added and then reversed over 1%, only then to see all of the loss reversed higher by the time Wall Street opened. The GLD (152.60) ETF easily absorbed the overnight moves, and continues to build on TheLFB trade desk long alert that was generated on Apr 26 11 with a break above 146.50. The gold trade plan issued by TheLFB each day to subscribers also captured the overnight long moves. A move below 151.00 would signal that the long moves may have run out of momentum.

A short silver alert was generated by TheLFB trade team on Friday, with a move lower from 47.50, which gave traders the opportunity to open a position in reaction to the distinct lack of correlation between the precious metal and what was happening in gold, equity, and oil trade. ETF and paper-backed silver traders took a hit to the chin after 15% was shaved off bullion values at the start of trade on Sunday, from $48 to $42 in a move that eventually settled at $47.00 once Wall Street opened.

TheLFB USO 15 Min Chart

Holders of the very active SLV (45.40) ETF sat and watched from 17:00 ET on Sunday, all the way through to 09:30 ET on Monday, as the price destruction took place. Having closed Friday at $46.88, SLV opened at $44.09 then dropped lower to $43.60, and handed a margin call to those not properly leveraged, and a potential 7% loss to those who closed long positions in the initial moves to balance books. Traders who had acted on the short-silver alert were handed a decent gain at the open.

Those trading via the liquid 24-hour forex market were offer the chance to trade minute-by-minute as things unfolded in the commodity and equity futures market. Currency trading offers the chance to be in a live market that reacts to the unfolding price action from 17:00 ET on Sunday, all the way through to 17:00 ET on Friday. Those stuck in cash market-only trades may have sat and wondered, minute-by-minute just what on earth was going on, and likely had heavy eyes on Monday morning.

SLV breaking lower through TheLFB trade desk 44.80 Support 3 area looks to draw in a test of 43.65, which will be in-line with further margin increases in the silver bullion arena. Although buying-the-dip has worked well this year in silver trade, the amount of fundamental clouds building ahead of US Non-farm payroll numbers on Friday leads to a cautionary outlook on silver potential, with the path of least resistance a move lower to test the 43.00 20-day SMA area a distinct possibility.

Oil trade was not immune from the price action, with WTI crude oil trading in a 4% range overnight that saw a move from 113.70 down to 110.75, only to reverse higher and settle in the Wall Street session at 114.40. USO (45.35) traders saw the ETF hold up much better than SLV as price action bounced off TheLFB trade desk neutral pivot point at 45.10, but failed to break Resistance 2 at 45.70.

A move lower to test 44.80 and 44.00 this week looks inevitable if US oil inventories print higher than expected on Wednesday. Upside targets will be 46.50 and 47.00 if oil bulls get momentum. Alerts and signals will be sent directly to clients as things unfold.

Traders looking to take advantage of subsequent opportunities can follow along with TheLFB trade team as they monitor charts throughout the regional trading sessions using a combination of fundamental analysis and technical strategies. Forex provides traders the opportunity to get ahead of the cash market game with 24-hour currency trade that can be transacted with little cash exposure and no day-trading restrictions.

Whichever way the global cash equity and commodity market chooses trade, and whatever happens as a consequence of Wall Street sentiment in the preceding Asian and European session, TheLFB trade team will keep its clientele abreast of activity. More importantly clients will see how to capture the potential ahead of the cash market open.

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