Archive for the ‘market’ Category

Summary of Trading for Week of October 4

It was another week of unusual market moves and prolonged periods of price stagnation. As I have been saying for quite some time, the recovery from our current recession will be typified by a “mixed bag” of economic reports. Of course, this week was no exception, though the market chose to react to various reports in unusual fashion.

Friday was probably the most baffling day this week. Most economists expected the economy to add 8000 new jobs, but ADP reported that the economy actually shed 95,000 jobs. As you can see, the experts missed this particular prediction by nearly 100,000 jobs. You would expect the market to react negatively to this sort of news because employment has become a very hot topic of late, but the market chose to march merrily along its way and posted a healthy gain for the day. There are several technical factors that contributed to this gain, but it was by and large a confusing reaction to very bad news.

This sort of market action was the norm for the week, though we did experience some prolonged periods of market stagnation. Of course, this doesn’t surprise me. Since the futures market is based upon broad stock market indices, the market needs smaller investors to reenter the market and purchase stocks. I would be hard-pressed to come up with a rationale for anyone to initiate a long position in the current economic climate. To say the least, the potential for sizable gains in the market are less than compelling; on the other hand, it would not be difficult to envision a sharp correction from current index prices.

It is my opinion that the majority of market participants are traders, not investors. While traders provide an essential function in the market, the market requires smaller investors investing on a fundamental basis. Yet, the fundamentals for our current market condition are shaky and there are many pressing questions about our economy. The dollar has been weak; volume on the ES e-mini contract has been, at times, light and erratic.

To compound the current economic woes, a cottage industry in disseminating bad economic news has kicked into high gear. This is not an unusual phenomenon during recessionary periods. Quite simply, bad news sells. Of special note are the gold bugs, who come out of the woodwork during every recession and tout the benefits of owning hard assets like gold. I feel that some exposure to gold is essential for most individual investor’s portfolios; but dumping your life savings into gold is not a wise idea. There can be no disputing, though, that gold has enjoyed a very profitable run in recent years, and has outperformed the stock market of late by a considerable margin. But my point is a simple one: buying massive amounts of gold is simply not the answer to our current economic recession.

We were able to trade very effectively this week though, as numerous opportunities for high probability setups were the norm. Generally speaking, we earned between $200 and $400 most days this week. Friday was the exception, though; as the market was particularly flat and we managed only a small gain of $100. Fortunately, we had no losing days this particular week.

The E-Mini Trading Professor System trading room enjoyed a wide variety of visitors and the conversation was brisk and interesting. Lots of new faces, and more new long-term customers joined than usual. As a trader, I feel like traditional investors are currently looking for alternatives for making money in ways that are untraditional, especially participants who have typically invested solely in the stock market.

Looking ahead, next week would appear to be a reasonably volatile week as there are a plethora of importance and pertinent fed and fed agency announcements that the market will have to digest. All in all, it should make for an interesting and profitable week of trading.

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