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Futures Trade Desk- Traders Dominate Analysts and Investors

Trade Desk Client Note

Global Futures Market Review

Traders Dominate Analysts and Investors


Latest Market Update: 
Global trade bounced equity indices and bullion off near-term support ahead of two days of weak order flows. 1205 on S&P 500 will be pivotal as upside resistance. Global Futures extended the selling of risk assets and USD buying this week in response to the new threat of a French bond downgrade. This will be a dramatic week of price action as the reality facing US and EU debt holders materializes.

‘Bank early and often’ will continue to be the mantra. Trade Plan numbers caught the regular 2-to-3am ET pattern of trade that generates most of the moves in any 24-hour period of trade.

Near-term Support and Resistance: 
Commodity Update: Gold: Sup 1655 Res 1735 Neutral 1690. Silver: Sup 30.40 Res 33.20 Neutral 32.30. Oil: Sup 94.50 Res 98.90 Neutral 97.70. 

Equity/USD Update: S&P500: Sup 1155 Res 1185 Neutral 1185. Dax: Sup 5360 Res 5805 Neutral 5590. DXY: Sup 78.25 Res 79.40. Neutral 78.40.

Forex Update: EUR: Sup 1.3345 Res 1.3555 Neutral 1.3515. GBP: Sup 1.5475 Res 1.5775 Neutral 1.5640. JPY: Sup 76.20 Res 77.50 Neutral 77.05.

Trade Desk Thoughts:
Apparently nobody told the Green Shoot economic brigade that the current trough part of the peak-contraction-trough-expansion-growth global business cycle is the hardest to break. Fundamental releases tend to take a long time to make up the lag factor between optimism and reality aligning, with the lack of forward growth stories creating a volatile global trading arena.

The new-normal trading patterns are seen now on a regular basis when 18 hours of futures market trade stair-step higher and then take the elevator down in two 30-minute periods of trade, normally in reaction to the latest headline news story of note hitting the wire. The same pattern will happen in this trough phase of the business cycle until regional economic reports start to print growth numbers, and that may be a long time coming.

How can ever-increasing jobless numbers, increasing national debt figures, real unemployment rates hitting 16%, and government bond yields and valuation in disarray, lead to positive headlines and positive analyst outlooks? (Rhetorical)

It is little wonder that the market cannot generate much interest in moving prices in either direction, when finding fair value is as elusive right now as at any time. Investors with long-term outlooks are left to pick through the ruble of daily trade looking for set-ups that can actually hold a test of the previous session high or low, while traders get in, get out, and get looking again in short periods of time.

Forget year-end targets and main stream media talk of the recession ending in 2012; the reality indicates that most analysts would stand as much chance of pinning the tail on the donkey as they would getting the Friday closing number on the S&P. Calling for the bottom of the most savage of global financial melt-downs ever seen in the new-generation of algorithm-based trading arena is folly. 

This is a traders market built for reactive, contrarian thinkers who are prepared to take a shot when the links that drive futures and forex values start to move, and in general that is not during prime US broadcast time. Trading the trough phase of a business cycle leads to most daily moves of note happening at 2am-3am and then 6-7am ET each day in reaction to the European open and then the Chicago futures market re-aligning to overseas trade. 

In reality near-term outlooks and targets are all that is being offered right now as the trough phase of the business cycle becomes entrenched. Those expecting the halcyon days of ranging trade need look no further than a year-to-date drop of over 6% on the S&P 500 (1168), which is back into the trading range set during the summer of 1997.

Short, sharp bursts of order flows that reverse as quickly as they hit are the traits of a business cycle that has lost direction, and will not be breaking and holding major upside resistance areas anytime soon. Current investor-based conditions are not good for analysts to look at and certainly frustrating for them to look back on. For Futures-based traders who are opinion free and ready to work with what is right in front of them, rather than trying to deal with what they want things to be, the current conditions are more than acceptable.

Trading is a journey of small steps that when reviewed lead to a lifetime of results that can then be properly analyzed. Along the way the twists and turns of global commerce and business cycles are to be expected, and certainly not dissected to the end degree with commentary that fills every second of every day during the regional cash market hours. The analyst noise really can be deafening. 

Get a plan, set a small window of time to work each day, and take a look at what Futures trade could offer. All markets are volatile, all have inherent risk, all have pitfalls, but at least 24-hour Futures markets offer the chance to trade both the stair-steps higher, and also the elevator down, at a time when most analysts are tucked up dreaming of the economic outlook to come and their 15 seconds of TV fame.