An Ignoble Experiment: Records Abound!

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Records Abound!

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You can’t keep a good man or a mediocre market down.
There were records everywhere including Dow, which after 1,976 days made a new all-time high and the S&P 500 which hit a 5 ½ year high. There was no surprise in a time when bad news is great for stocks; today's Service Institute for Supply Management consensus beat was just the spark the rally needed.

February non-manufacturing ISM printed at 56.0, higher than the 55.0 expected, up from the 55.2 in February and the 8th beat of expectations in a row. So why do we even care about this newest piece of economic data. This month alone, there will be at least 80 indicators focused on just the U.S., most of which will be dissected for various economic clues.

The ISM number may actually matter. In response to the plethora of economic reports, the Wall Street Journal wrote:

“Lead, follow or get out of the way. That saying oft repeated by modern management blowhards, has some relevance for economic data. In reality, most of these are lagging indicators that “follow.” Few are legitimate leading indicators. The surveys published by the Institute for the Supply Management fall firmly into the latter camp, especially if one looks beyond the headline figure.”

As a leading indicator giving a truly positive reading, this may signal that the domestic situation may not be as bad as it seems. But will an improving economy should mean a tapering QE? No, Bernanke has now made it clear no matter what the actual real or fake state of the economy is, he will never stop the liquid(ity) drug drip.

The record breaking continues!

Trade well and follow the trend, not the perma-bull OR perma-bear "experts."

---Larry Levin

Congratulations to John Gugino!

Results:

+$320 on the day!

NOTICE: Testimonials are believed to be true based on the representations of the persons providing the testimonials, but facts stated in testimonials have not been independently audited or verified. Nor has there been any attempt to determine whether any testimonials are representative of the experiences of all persons using the methods described herein or to compare the experiences of the persons giving the testimonials after the testimonials were given. The average reader should not necessarily expect the same or similar results. Past performance is not necessarily indicative of future results. No person was compensated for providing a testimonial.

Congratulations to Charlie Lewis:

The Educator of The Day today is Charlie Lewis. Charlie does our on-boarding of new students and has helped hundreds of new students get started with Trading Advantage! Thanks Charlie!!!

OPTIONS: Volatility Commentary ---Steven Lee / Michael Shorr

This morning the Non-manufacturing ISM Index was released "The NMI™ registered 56 percent in February, 0.8 percentage point higher than the 55.2 percent registered in January. This indicates continued growth at a slightly faster rate in the non-manufacturing sector." This, coupled with the fact that China rebounded from its 3.7% down day yesterday with a 2.3% move up today, allowed the DJIA to post new all time highs.

With the markets slowly making new high after new high, there are fewer and fewer trading opportunities other than simply being long the market in general. There must be stocks out there that will outperform. In this situation, we are looking for three things. Don't fight the trend, look for undervalued stocks rather than overvalued ones. Why try to pick the top of a market that seems to never go down (at least for the time being)? Next, look for stocks that are trading at or very near the low end of where their implied volatility trades. Lastly, look for compelling technical reasons for a stock to continue or even accelerate its move upwards. Take for example CF Industries (CF). It's been in a secular bullish formation since 2009. Its 30-Day implied volatility is at or near at least its 2-year low at approximately 25.5%. Lastly, examining a nearer-term chart suggests that the stock tried to make a move down starting February 22 and failed. If we can get a confirming close above its 200 day MA, we look to take advantage of CF's low implied vol and solidly upward trend in price to generate a trade signal.

FOREX: Currency Spotlight ---Ed Moya

Currencies never go in just one direction, but lately it seems like they haven't been going anywhere. Sometimes, we hear compelling arguments and see significant price moves that warrant a change in bias. Since last July till the beginning of January, the U.S. currency has fallen to the high-beta and commodity currencies. The recent dollar rally has started to gain some momentum as the U.S. economy appears to be strengthening and despite the fact that balance sheet is not shrinking.

The dollar is firmer against the euro as economic growth is abysmal in the eurozone. Germany may be strong, but the rest of the other 16 countries are not. The U.K. economy is weak and their currency reflects that over the past year. The commodity bubble propped up by the unlimited QE efforts all around the world has left the commodity currencies high and susceptible to a major correction.

This week’s price action has been rather quiet as traders await the central bank policies from Canada, Japan, the eurozone, U.K., and the U.S. jobs number. We will likely see some divergence amongst policy makers and should look forward to a normal fx trading environment. The days of risk on/risk off, the dollar goes down, the dollar goes up could be behind us. Time will tell, but be prepared for the algos and hedge funds to quickly adjust their models.

STOCKS: Watch List ---Charles Moon

We opened up and immediately hit the highs and gained momentum to close at 14253.00 in the Dow which is a new record. Sign of a bullish market I would say since anytime you create new highs, the usual reaction is to pullback off the highs. Instead we ran for quite sometime today that was helped out by good ISM-Non Manufacturing data that came out early on. It will be interesting to see if there is any correction tomorrow, or if we will maintain course and create new highs again.

If you have failed to enter any longs in the market off the pullback, then you have missed out on opportunities to make a quick buck in the markets. We are now in new territory and anything can happen. Meaning we can go higher and launch up, or we can slam back down below 14k in the Dow. I would look at defined levels of support to lean on and play the rejection or "trampoline effect" to get short term gains. You can also look to play the slide down and re-enter on longs at these levels. Do not limit yourself being a one sided trader if you are active in the market.

With stocks making huge moves early and often, it is important to see the reaction within the first 30 minutes of the market. Trying to trade this first 30 minutes can lead you to get whipsawed back and forth leading to losses quickly. Watch the stocks to react off of technical levels and play them in your favor to increase the chances of coming out profitable. For longer term plays in the market, the key word here should be value. Looking for value in the market can get you in some prime investments to get a good percentage return, but pick and choose wisely. If not you can get underwater very quickly and not have any chance for recovery. Open Position: ABT X Stocks to Watch: AAPL GOOG IBM AMZN PCLN BBRY FB CTXS BAC C GS CMI CAT NFLX WDC LULU LNKD DIS KORS FOSL X QCOM STZ NKE CHKP JNPR POT GMCR HLF ABT LOW HD LEN TOL

FUTURES: Technical Data

Value Areas:

ES 1540.50 / 1535.50
POC… 1540.25
YM 14076 / 13988
NQ 2799.25 / 2785.75

NOTES FROM THE PIT

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COMMODITIES: Play of the Day ---Patrick Assalone

Gold futures rose on speculation that central banks will maintain
stimulus measures, while physical demand for the metal climbed.
Federal Reserve Vice Chairman Janet Yellen said yesterday that the
U.S. central bank should press on with $85 billion in monthly bond
buying. Haruhiko Kuroda, the nominee to be the Bank of Japan (8301)
governor, said he would do whatever is needed to end 15 years of
deflation. Gold purchases appear widespread across Southeast Asia,
according to Bloomberg.

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