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Looking at the last two trading days of the week

By Mark O’Brien, Senior Broker

General:

Continued dollar strength this week, an expected more hawkish leaning by Fed officials in today’s release of last month’s FOMC meeting minutes and a more widespread sentiment that higher U.S. rates will cause a recession all have provided the backdrop against the downward bias in the major equity indexes. Along the same lines, the stronger dollar has added to the negative macro view toward physical commodities. Paradoxically, U.S. economic data continues every so often to post positive data and that has reduced recession fears. On balance, it appears the path of least resistance for equity indexes looks to be down for now.

Markets:

Energy: Natural gas (March contract) pierced through the $2.00 price point for the first time since September 2020 before rebounding up to positive territory as of this typing. That’s a precipitous ±$34,000 per contract move from the contract’s recent ±$5.40 highs going back almost three months to the day. Bearish fundamentals can take credit for the sell-off, notably a ±19% decline in demand among the 27-nation European Union from last August into January and continued poor U.S. demand as above normal temperature forecasts for the U.S. nationally remain intact through the first week of March. The major winter storm crossing the country through the end of the week looks to be providing minimal support.

Metals: Gold (April) remains mired near its lows for the year near ±$1,835/oz, not eager to recover from its ±$130 slide since its ±$1,970/oz. intraday high of Feb. 1, a ±$13,000 move.

Plan your trade and trade your plan. 

Aluminum futures continue to gain market adoption and provide market participants the confidence they need to manage their aluminum price risk.

Daily volume in January hit an all-time high at 2,974 contracts per day, with open interest hitting a record 2,545 contracts on February 3. Market participation hit a record 148 participants up 18% from December 2022.

The active outright for aluminum is April, and the CQG code is ALIJ23 <COMDTY>. It will roll to May, ALIK23 <COMDTY>, on Wednesday, February 15

Plan your trade and trade your plan.

The Week Ahead – FRB Federal Reserve Bank’s quiet period or Blackout period is over

The FRB Federal Reserve Bank’s quiet period or Blackout period is over, The Fed members are again, free to entertain speaking engagements. If you remember last week, Chairman Powell and the FOMC (Federal Open Market Committee) announced the expected .25 rate hike.

The President’s State of the Union address is tonight @9 P.M. EST, 8 P.M. CST. Although you should be able to view his speech on any of your favorite news outlets, we don’t expect any market changing announcements of substance. Be on the ball if there is.

Tomorrow we have a few different members speaking throughout the day.

We also have WASDE report which can really move markets like beans, wheat, corn and other grains.

On the jobs front we do have a jobless claims report, pre market on Thursday at 7:30 a.m. CST. Finally for the week,

Plan your trade and trade your plan. 

What a difference between Monday and Tuesday if you are a day trader of markets like ES, NQ, MNQ etc…..

Monday we saw some large moves, both up and down with good volume, then Tuesday came and we witnessed a consolidation, narrow range and lower volume.

Many times large trend days will be followed by narrow, range bound trading days.

Also volatility tends to cycle, higher volatility periods, followed by lower volatility. Obviously not an exact science but some observations.

So what you may ask? Knowing the type of environment you are trading is is VERY important as different styles, trading methods and money management techniques will work quite different in volatile days versus low volatility days, strong expansion trending days vs. range bound trading days etc.

So the sooner you can asses the type of trading day you are in and utilize the proper weapons from your arsenal, the better off you will be – in my opinion……

Plan your trade and trade your Plan 

Big day ahead tomorrow – Highly anticipated CPI report and more!

Heads up: along with the regularly released Labor Department’s Initial Jobless Claims, which measures the number of individuals who filed for unemployment insurance for the first time during the past week, tomorrow we’ll be apprised yet again of the inflation situation here in the U.S. with the release of the Bureau of Labor Statistics’ Consumer Price Index Report, which measures the prices paid by consumers for a basket of consumer goods and services – more than 200 categories of items among food, housing, apparel transportation, medical care, recreation, education and communication – from airline fares to x-ray machines. The report is released at 7:30 A.M., Central Time. The corresponding Producer Price Index will be released this coming Wednesday, Feb., 18.

Also tomorrow, the USDA will release its Crop Production Report along with the World Supply/Demand report. The report is released monthly, and provides annual forecasts for supply and use of U.S. and world wheat, rice, coarse grains, oilseeds, and cotton. Both are released simultaneously at 11:00 A.M., Central Time.

  Trading Resource of the Week – “Trading Around Key Economic Reports” FREE Course

In this “Trading Around Key Economic Reports” FREE Course you will learn:

·    What is CPI?

·    About the Retail Sales Report

·    What is NFP ( non farm payroll) Report?

·    Understanding US housing Data

·    FOMC

·    Understanding Oil Data Report

·    Importance of Consumer Confidence Survey

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