June 17, 2013

Logical Market Update: Lobbyist Still Control Congress – Bond Market Still Struggling – Day Trading Still Preferred

Lobbyist Still in Control of Congress – The Bond Market Continues to Struggle as Danger Signs Grow – Is it Time to Take Profits on Positions?  – Day Trading Still Preferred


Last Wednesday the House of Representatives passed a bill that effectively undermines the CFTC’s (Commodity Futures Trading Commission) ability to regulate derivatives.   The evidence is clear in that there are very few things politicians in D.C. can agree upon but one that they do is undermining Dodd-Frank. It would appear that the financial lobby is winning on getting the Dodd Frank Act gutted and made ineffective.  This has become Texas Congressman Hensarling’s primary focus.  As Chairman of the House Financial Services Committee Hensarling has managed to pass a series of bills under the guise of “improving” Dodd-Frank.  The truth is the committee has become an industry-approved pipeline of dangerous legislation that would basically render Dodd-Frank useless in enforcing any reforms. 


Erika Eichelberger at Mother Jones provided a clear summary of the bills (click here to read the article):

    One of the offending bills would allow certain derivatives that are traded within a corporation to be exempt from almost all new Dodd-Frank regulations. The second would expand the types of trading risks that banks can take on. The third would allow big US-based multinational banks to escape US regulations by operating through international subsidiaries. Financial reform advocates say it is way too early to start messing with Wall Street reform, especially since key parts of Dodd-Frank have yet to go into effect.

The Chairman of the CFTC, Gary Gensler continues to strongly advocate reigning in the excesses of the market and ensure the common-sense reforms within the Dodd-Frank Act be allowed to go into effect next month.  His position remains that a strong need for international regulation continues in order to stop the next financial crisis and “to restore Wall Street to its proper role channeling capital, not siphoning it.


Treasury Markets

The U.S. bond market correction is still in force, as it appears that bonds can’t catch a break as the selling pressure remains at full throttle.  The correction has been in progress for almost a year with the 30-year bond reaching a high at 153’11 on July 9, 2012. 


The patterns in progress are incomplete suggesting some major trouble ahead for bonds.  Check out the (monthly) charts below for the 30-year bond future and the 10-year note future.  On both charts the red arrows are support areas and thus far both are holding initial areas, but don’t expect it to continue.  Near-term is remains likely an additional bounce higher will occur, before yielding to the next round of downside pressure. 


30-Year Bond




10-Year Note



The equity markets also remain in corrections.  Intervening rallies though, should continue this week and set up the next leg down.  The charts (daily) below continue to indicate support to complete the corrections lies well below current levels.  I would anticipate a few “ugly” days of downside activity.   Longer-term I still believe the broader indexes will move to additional new highs before the advance is complete. 






S&P 500


Russell 2000







It is interesting times in which we live and choose to trade.  I have advocated changing strategies as a trader in becoming more of a day trader (no overnight risk) versus carrying positions.  This remains important during times such as these.  When the dust settles it will be important to have the cash to invest for the next move. 



Diversified Trading System


I continue to recommend as the best trading platform available to a broader range of traders from novice to expert.  The Diversified Trading System offers a cost effective product that allows a trader to enter into the “chaos” and trade more effectively.  


Trade Manager from Indicator Warehouse automatically calculates the correct amount of contracts or shares based on your account size or market volatility.  Automated stop-loss management and position sizing eliminates most of the problems most individual traders have.  Day trading and position trading both require (actually demand) good risk management.  Trade Manager does the job across the board and is an essential trading tool that ensures that you take the maximum profit from all your trades. 


A newer member of the money management tools available from Indicator Warehouse is the Profit Finder – System Back Tester When implemented it allows the user to:

  • Immediately know the impact of parameter changes. 
  • Automatically reads all of your DTS entries and exits
  • Calculates the profit/loss of each trade
  • Performs a wide number of essential intelligence boosting calculations instantly
  • Provides solid details about the effectiveness of your trading strategy/ methodology/ indicators


The last two points above are valuable tools to use.  It will show you where some “tweaking” is needed to improve results through the back testing feature. 


My point on money rotation and sector rotation is similar to that on parabolic moves that they happen with frequency within many time frames.  As traders these types of moves can be a bonus for day trading or position trading so again don’t get caught up in the “what’s the catch.”    Realizing a rotation is occurring within a stock you trade or a sector is a great source of stocks to plug into the Diversified Trading System.  Allowing DTS to cleanly and beautifully capture the moves though any or all three DTS trading platforms.  Our goal remains to assist traders to make greater profits during all types of markets.  Sector and money rotation is another tool.


The Diversified Trading System used together with Trade Manager should continue to produce numerous trading signals in the DJIA, YM (mini), S&P 500, ES (mini), RUT, TF (Russell 2000 mini), AAPL, AMZN, GOOG, NFLX, and LNKD, GS, and Tesla Motors (TSLA).    


Here is an updated list of the markets where I have found that DTS (all three birds) are producing numerous signals:

  • DJIA future (e-mini available) – Highly recommended
  • S&P-500 future (e-mini available) – highly recommended
  • Russell 2000 future (e-mini available) – highly recommended
  • NASDAQ 100 future (e-mini available) very highly recommended
  • US$/Euro futures (e-mini available) – very highly recommended
  • GS (Goldman Sachs) – good two way volume –
  • AAPL (Apple Computer) – very highly recommended
  • GOOG (Google) – very highly recommended
  • LNKD (LinkedIn) – solid intraday range
  • NFLX (Netflix) – solid intraday range
  • TSLA (Tesla Motors) – highly recommended  
  • 30-yr Treasury Bond future – did not get quiet – opposite took place
  • 10-yr Treasury Note future
  • TLT (Treasury Bond Long ETF)
  • TBT (Treasury Bond Short ETF)
  • Gold (futures and ETF – GLD)
  • Silver (futures and ETF – SLV)