Now that we have the NFP report out, we have a big fat zero to digest. I think if this report did not exist nothing would be different. Anyone knows at this point that we have some serious economic issues in this country, and for that matter in virtually every country. I generally do not day trade until this report has had some time to settle down a bit. I do not even consider it at all in any trade I enter or exit that is done on a daily chart, it is just noise. Unfortunately though it does support the notions that things are not improving and there is no recovery. Anyone with a functioning brain and an IQ over 80 knew there was never a recovery in the first place and that it was BS. Onward.
We are seeing a Bond market rally so far after the release of the number, but not a huge one. We were up for the session by a decent amount before the release of the report, and the gains have extended. This is becoming now a marginal pattern at best to short, which I have not done yet. As I have stated, the seasonal and cyclical patterns are still strongly up, and I do not like going against both of those. I do it at times but do not make a regular habit of it. I need something else to back a trade against a trend this strong. The next two tables show trading around this coming holiday. The first one shows selling on the open the last day before this holiday and exiting at the first profitable opening with a $1500 stop. This tells us that is not much of a strategy and we should not have been going short today. The second table shows the results of shorting the opening the day after this holiday, with the same exit strategy. This strategy is a pretty good one by historical tendencies.
Several years ago I used to trade almost solely off things like this. I moved away from that when the pit sessions were rendered irrelevant in the Bond Market. However, I still like to look at things like this for tendencies. In this case it kept me out of trouble today, although had I been selling it would have been below the prior day's low which was not ever visited today. Nonetheless I might have been looking the wrong way. Of course the other issue is the overall seasonal tendency of stocks to decline here is kicking in, and Gold and the Swiss and Bonds are the flight to safety vehicles right now. As I have discussed here, I do not view Bonds as a bubble simply because they are where they are for fundamental reasons. The Fed, the ultimate Commercial player, is buying them in mass quantities, and it is tough to fight the Fed. That is one old adage that is very true. Governments lowering rates in bad economic times is a trait of the markets that has been in existence for decades. The Gold phenomena is a new age relationship, with no historical precedent, which is why I call that a bubble. Maybe that will be a new fundamental relationship going forward, but it is not in the data consistently over time like the Bond market yet. One simple rule in trading is go with what works until it doesn't work anymore, and that is what you should be doing with GOLD. Even though this is an abberation, it is working so go with it.
Net net, now we know that if one is going to short Bonds here it would be better to wait until the day after the holiday. It is possible we could get a trap pattern up here where we make a new high and quickly reverse, so that is what I am looking for now. If you look at the chart, one quick thing to point out that I have labeled on there, is how my COT Synthetic is showing pretty strong buying even with rising prices. This is unusual and tells me to be careful shorting here. The normal movement of that indicator is down when prices rise. When it is rising, or in this case staying high in the face of rising prices, that tells me insiders are pushing this upward not small investors.
Have a great weekend and good trading.