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Tuesday, April 23, 2013
Today’s trading ideas and investment themes:
Resource Roundtable Update: Markets on the Edge
Energy: Crude Setting Up to Test $90
Softs: Sugar Trades Sideways
“Honesty is the best policy – when there is money in it.”
– Mark Twain
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Tuesday, April 23, 2013
Resource Roundtable Update:
Markets on the Edge
The big news on Tuesday was that the broad stock market plummeted lower on a fake news alert sent over Twitter, the 140-character messaging service that is quickly becoming Wall Street’s choice for flash investment news. The Associated Press’ Twitter account was hacked and the culprit sent out a tweet saying: ““Breaking: Two Explosions in the White House and Barack Obama is injured.”
That’s absurd, right? Still, trading bots reacted to the news and sold, sold, SOLD! It was enough to send the Dow plunging more than 140 points, bond yields tumbling, and the yen soaring.
Then the news came out that the report was false. Within six minutes, the Dow recovered its losses and was trading with triple-digit gains.
We can look at this a few ways:
- First, despite the protestations on CNBC to the contrary, it’s obvious that High-Frequency Trading (HFT) algorithms have too much power to move the market.
- Second, many traders (or at least the firms using HFT algos) are long the stock market and short the yen.
- Third, this market is more nervous than a nine-tailed cat in a room full of rocking chairs.
There’s not much to take away from this event except that those traders who had bids under the market are happy and those who had disciplined stops in place are likely feeling steamed. Wall Street continues to lose credibility, and probably will until serious reforms are put in place.
Maybe this one-day “WTF” dip will put some steel into traders’ spines and some real conviction into a market that is wobbling without real direction lately.
The broad economic news is mixed. Europe was up big on news that governments there may be moving away from austerity programs and toward stimulus. China sold off on news that its economy is not growing as fast as hoped or expected, but it’s still growing. Here in the U.S., home sales jumped while growth in U.S. factory activity is at a 6-month low and gasoline sales continue to slide lower. Go try and make sense of that mess.
But as for market news – it’s pretty darned good. Earnings are at record highs and important names are beating the street. And there are short-term trends developing that we think have real potential. We have some of those trading ideas for you tonight. Good luck, and good trades.
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**********Trade Entry and Track Record Process***********
Here are our general trading guidelines …
- We recommend buying two contracts unless otherwise specified.
- If/when you hit PT1, immediately sell half the position. Move the stop up to your entry point and place PT2 for the second half of the trade.
- If no stop-loss and/or profit target is included in the original recommendation, we’ll issue one in the next update.
- All new trades are entered at the prevailing price at 7:30 am ET the morning after the recommendation.
- We follow stops in electronic markets ONLY in the currencies, bonds and interest rates (generally speaking that’s CME, CBOT and Globex products).
- When trade entry prices deviate from the recommended entry point in the issue, move stops accordingly. The stop should be increased by the same spreads as shown in the issue.
- For agricultural markets, use both electronic and pit-traded prices side by side. Be warned, they can and have differed – that’s just a sign of the times were living in.
- We recommend you close out trades only in the regular session (the previously mentioned electronic markets are the exceptions). When you close out a trade, remember to cancel all open stops and/or profit targets.
Now, on to this week’s trades …
Resource Roundtable (RR) and Limit Up Publishing (LUP), LTD does not advocate auto-trading. You should take the time to review and discuss these recommendations with your broker.
RR & LUP are strictly research publishing firms and do not provide individual investment advice to subscribers. These are merely trading ideas; you and your broker should make the final decision on entry and exit into a position, as well as placing profit targets and stop losses. The information we publish is based on our opinions plus financial data and independent research – it is NOT intended to be used as customized recommendation to buy, hold, or sell securities, or engage in any trading strategy. Such recommendations may only be made by a personal advisor or the broker you select.
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