Friendly Reminder
Each evening we focus on the most interesting aspects for the upcoming trading day. The comments are based on observations of the nightly updates of the Futures and Market Bias pages. They are provided for educational purposes only and are not intended to be direct trading advice. Also, keep in mind that these remarks are made up to 12 hours in advance of the markets opening. Therefore, overnight events may alter the outcome of these observations.
At the time this is being published, the S&P Globex Futures are trading 1.70 points lower and the Bond Market Futures are trading down 2 ticks.
Friendly reminder, tomorrow’s employment report will likely have a large impact on the September Bonds [USU9>USU9].
In a low volatility situation, markets often make a large move as volatility reverts to its mean. The problem is that the large move can be in either direction. Therefore, it helps if you can combine it with a pattern or set-up to determine a directional bias. Referring to the chart below, notice that July Wheat [WN9>WN9] had a low volatility reading last night (a). Furthermore, it was also a Turtle Soup Plus One Buy Set-up (b). This suggested that the move would be upward as volatility reverted to its mean (see last’s nights Futures Market Trading Outlook). Today, the contract gaps higher and gains 7 ¾ cents (c). As you can see, it helps to combine a directional bias with volatility (this was discussed in detail in Larry Connors’ latest volatility column).
Source: Omega Research.
For you breakout players (or more appropriately, breakdown players) both the Dmark [DMM9>DMM9] and the June Swiss Franc [SFM9>SFM9] formed bearish outside days at new lows. Look for shorting opportunities here or better yet, wait for a pullback before attempting an entry.
July Orange Juice [OJN9>OJN9] gapped open to three month highs today but reversed and closed poorly. This may have breakout players trapped on the wrong side of the market. Look for a shorting opportunity here.
Source: Omega Research.
Best of luck with your trading on Friday!
Dave Landry
PS-Reminder: Protective stops on every trade!