| | Sequester | | 
Friday’s sequester deadline came and went. There was no deal so spending will be cut across-the-board. This isn’t a bad thing since the US government has a horrible spending problem and actual reductions in spending (not reductions in the rate of growth) are necessary.
When the deadline arrived, planes did not fall out of the sky; birds continued to sing; the sun rose the following day; and most importantly, the stock market did not crash. How is this possible? We were warned that all of those things would happen and much more. Despite the fact that life goes on and there will be no problems, the blame game has begun.
From Bloomberg http://www.bloomberg.com/news/2013-03-03/boehner-says-no-progress-in-very-frank-budget-meeting.html we read the following... House Speaker John Boehner reported no progress from what he called a “polite” though “very frank” meeting with President Barack Obama over the automatic spending cuts known as sequestration.
“I don’t think anyone quite understands how it gets resolved,” said Boehner, speaking on NBC’s ‘Meet the Press.”
Boehner, who met March 1 with Obama and other congressional leaders, blamed Democrats for the impasse over the “silly” cuts. He also said Republicans will hold firm in their demands for cuts in entitlement spending.
“I’ve been here for 22 years” and “I’ve watched leaders from both parties kick this can down the road,” said Boehner. “We’re out of road to kick the can down. We’ve got a long-term spending problem that has to be addressed’” and “it is going to be addressed.”
I hope Speaker Boehner is right, but since he’s a politician, I do not believe him. In one short week, maybe two, some kind of rotten “deal” will be made and all of that spending will come back.
Nothing will change, but this time I hope I’m wrong. Trade well and follow the trend, not the perma-bull OR perma-bear "experts." | ---Larry Levin
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 | | Congratulations to David Reed! Results:
[09:05 am] David Reed: 20.5pts took 4 contracts total in the ES!!!
Quotes:
[09:03 am] David Reed: That was the quickest trade I have had in the ES
[09:04 am] David Reed: Thx..I believe I have a great deal of help choosing the targets
[09:05 am] David Reed: live!!
| | 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 Patrick Assalone: The Educator of The Day today is Patrick Assalone for the lesson that he taught this morning and the impact he has had on the students that he teaches! Today Patrick reinforced the importance of consistency, patience, discipline and using the statistics in your favor. David Reed followed his rules and methodology with great discipline this morning and was able to capture 20.5pnts in the ES this morning! By following the rules and controlling his emotions, David was done this morning at 9am! It is very important when considering a signal to keep in mind "what is good for you?" Make sure you have the proper risk management and understand your personal risk parameters. With that being said, make sure you have the proper protection when triggering a signal! If you choose to take an entry with more risk then make sure you limit your exposure or lot size when triggering any particular signal. Make sure you have the proper method, rules and stop management. Make this a part of you and then you will not have to worry about the emotions! Great teaching, powerful knowledge and a dedication to his students! Nice job Patrick!!! |
OPTIONS: Volatility Commentary ---Steven Lee / Michael Shorr
| China's official PMI, which focuses mainly on state-owned, larger companies was a bit of a surprise falling to 50.1 versus 50.4 last month. What was more interesting was HSBC's China PMI, which concentrates on smaller privately owned companies, fell from 52.3 to 50.4. The one outlier here is that the timing of the Chinese New Year may have factored into these disappointing numbers. The ISM report was released this morning as well and was the highest print since June 2011 at 54.2. This later news was well received in the marketplace as stocks trader higher throughout the day. We have been paying close attention to Apple (AAPL) for months now. We have generated multiple trade signals in this stock. Presently, the stock is threatening it's strong support area at 435. If it does hold under this key support, there could be a real flush to the downside. After analyzing the the vol term structure, we could not identify a mispricing of options. We are volatility traders. What do you do when you have no bias as to how options are priced? You use options to make a bet outside of the volatility environment, namely, a directional bet. We structured a trade that will take advantage of our bearish bias while having very good risk/reward with a relatively low cash outlay. We looked at the weekly expiring options expiring March 8. We chose this month because we think the move (if it happens) will happen very soon. This expiration gives us a short window, but we are looking for a quick turnaround here. We examined the 410/415/420/425 put condor. The spread is trading $0.65. This would be our maximum loss which would occur should AAPL not trade below 425. Our Maximum gain would be at $420. Here the spread makes $4.35. So our risk/reward is nearly 6.7 to 1. We certainly do not have a crystal ball and cannot know if AAPL will in fact go down, but if it does, we have constructed a trade that provides a good reward for a relatively low risk. |
FOREX: Currency Spotlight ---Ed Moya
| | The Australian dollar declined overnight after a report showed that residential building approvals fell 2.4% in January. Private sector houses however did improve 3.2% on the month and this is a positive sign that the recent rate cut in December has helped. Tonight, expectations are for the RBA to keep rates steady at 3.0%. Since November 2011, the central has cut rates six times to try to bolster the economy and stabilize housing. Price action on AUDUSD has been steadily declining in 2013 ever since key resistance has been respected by the 1.06 level. Key support remains at the 1.0100 level and shortly after that by parity. Downward pressure remains as concerns continue to grow regarding the economic slowdown in China. As long China remains a concern and economic growth is still fragile, the RBA will keep rates steady or perhaps may have another cut for next quarter. |
STOCKS: Watch List ---Charles Moon
| On paper the market looks like it had a pretty flat day overall, but that is far from the truth. The markets sold off quickly and stretched down over 116 points. That is when the rally started as the Dow immediately ran up from the low price off of the ISM manufacturing data. This is after it slid quickly off of weak numbers from China and Europe. The rally continued until the close of Friday which marks another pattern that has emerged in 2013. We have yet to close in negative territory in the Dow on Fridays in 2013. Every pullback was met with buying to support the market and ultimately buyers won out. Look for this trend to continue, although if the market reacts negatively to going over the Sequester Cliff, it might lead to a huge struggle for the market to finish positive this coming Friday.
Interesting to see the market reaction following the relative inactivity coming from government parties leading into Friday. I am sure proposals and concessions will be made over the weekend. We will know early on the market sentiment on going over, and even if we pullback early on, they will continue the rally as long as there is still easing from the FED. This has been the case over and over, so why would anything change now? The interesting scenario will be that we pullback, and finally the market decides this is the reason to finally push back and "correct" itself. I do see weakness taking place at technical levels, but they were pressed on headline driven news. They markets recovered quite dramatically, and finished the week off within 100 points of all time highs. Expect any pullback on any new all time highs for the markets or stocks and look to take advantage by entering in on dips if looking to go long. That is where you will find value as opposed to getting caught entering at the highs. 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 1517.25 / 1506.75
POC… 1516.75
YM 14076 / 13984
NQ 2748.50 / 2723.00 | NOTES FROM THE PIT
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| COMMODITIES: Play of the Day ---Patrick Assalone | This morning's ethanol report was positive for market direction after ethanol production for the week ending February 22nd averaged 812,000 barrels per day, up 1.9% vs. last week and down 9.4% vs. last year. The improvement in implied demand mixed with the decline in corn stocks is seen as supportive to the industry and corn market short-term. The market gapped higher and according to our methods, we are looking for long entries above the contract high or if the market trades lower at the bottom of the High Volume Area. View Video Here
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