Canadian GDP - Nice Spike but little retracement

This Tuesday afternoon at 1:30pm GMT (8:30am EST) the GDP figure for Canada were released. This data often comes out with other data from the USA such as US GDP and Core PCE, as this is a common release time. Luckily this month it came out on its own which is very fortunate because this release is basically wasted when it comes out with another good report like US GDP and traders don't know which news to trade. Of course the afterspike trade is always there, but in terms of spike trading it is quite risky to do when there is another report which can effect the price besides the main report the trader is focusing on.

Looking back thru the previous releases of this number, it does not deviate much and if it does only by +/- 0.1, however back in March of this year there was a +0.2 and in October 2009 there was a -0.2 deviation. The price of the CAD pair did move very well on these releases. There is also an Annualized Quarterly figure which is released with the main monthly one, this is not as important but it helps if it deviations in the same direction as the main monthly number. Here is the Data:

CANADA SEPT GROSS DOMESTIC PRODUCT M/M: -0.1% V +0.1%E; Q3 GDP ANNUALIZED: 1.0% V 1.5%E- Prior GDP Annualized revised from 2.0% to 2.3%

The news release gave a nice spike trade for about 30-40 pips. There was little retracement in the minutes directly after the news, so no afterspike opportunity. Later in the session some retracements were hit, but other news out of the USA like Chicago PMI and Consumer Confidence were released and the entry of the US traders provided some relief to the US Dollar strengthening trend which had been strong thru-out the european session. Some 2 hours after the release for instance, a bounce off the 61% of the news spike reaction move did provide a bounce from 1.0250 to 1.0280, but it could not maintain momentum. USDCAD has been consolidating between 1.0100 to 1.0250 so todays price action witnessed during the news is an attempt to break-out to the upside. USDCAD did finally test parity some weeks ago, catching up with other pairs like the USDCHF, but now that Risk Aversion is back the USDCAD has held onto some of it's earlier gains. This could have something to do with the announcement that Russia would move some of its reserves into Canadian Dollars and because Canada has tight coupling with the USA.

Big Futures and Forex News Data Releases for Nov.29th - Dec 3rd

We will be trading these live this week in the Profitmongers live online forex entry signal traderoom
both giving specific info for catching the Price Spike when the news is released using the
Secret News Weapon from Fast Economic News as well as looking for afterspike opportunities 5-15 minutes after the release and longer term forex swing trades in the hours after the news - if the impact is big enough. This is a great week to sign up because there is alot of news the first week of the month. Try the Secret News weapon for 30 days for only $69 and Profitmongers traderoom for 14 days for $29

See the News Trading Schedule for the Week here

Swedish GDP and Retail Sales

This Monday Nov. 29th 2010 and 8:30am GMT (3:30am EST) some big news hit the wires from Sweden. Although there was two pieces of news at the same time the deviation was huge, so if a spike trade was not possible, then an opportunity for an afterspike was available. As the Euro was selling off anyhow, this news especially caused the EURSEK to sell-off thru-out the rest of the day. Here is the data:


SWEDEN OCT RETAIL SALES M/M: 0.8% V 0.4%E;
Y/Y: 5.1% V 4.3%E
- Prior MoM revised lower from 0.8% to 0.7%
- Prior YoY revised lower from 5.5% to 5.2%

SWEDEN Q3 GDP Q/Q: 2.1% V 1.2%E;
Y/Y: 6.9% V 5.4%E
- Prior QoQ revised higher 4.5%r from 1.9% to 2.0%

- Prior YoY revised lower from 4.6% to %

London Open Forex Entry Signal in the Live Online Traderoom

The day after thanksgiving, which saw a thin US market and gave the marketmakers a chance to chase and squeeze the traders who were short the EURUSD. After a decent sell off during the London Forex Session yesterday, all of these moves were reversed and the EURUSD nearly achieved 1.3400. As soon as the Asian Session started though more sellers showed up and as European traders woke up this Friday morning they found the EURUSD at news lows again, this time at 1.3265, which is the 61% of the September rally, see on the included Daily chart.

As trading commenced in Frankfurt at 7am GMT (2am EST), the EURUSD initially bounced off this level perfectly - see first circle on the 2nd chart. This produced a decent 30 pip bounce. The news out of the Euro zone continues to be bad. Not only Ireland, but now concerns about Portugal, possibly Spain and even Belgium now. Worries of a domino effect are in traders minds. Definitely the safe trade is to short after a rally, for instance at the Tokyo open last night, but a trader needs to get some sleep. Sometimes as a trader you have to be prepared to take the hard trade, this is the contrarian trade - the trade no one is thinking about. Sometimes it is easy to get caught up in the bad news coming thru the news wire, it can make a trader overlook the technical setups that are occuring right in front of them. Some purely technical traders go so far as to not even listen to the news, to them the price has everything priced into it.

Anyhow despite all the news, this was a significant fibonacci retracement level from the daily and I was prepared to go long a few minutes ahead of the London open. A key candlestick formation on the 1 and 5 minute charts indicated the opportunity to go long - just for a scalp. Naturally using tight stops as the EURUSD is definately in a downtrend and this looks set to continue now below 1.3000, possibly to 1.2800 depending on how the situation progresses. Got in around 1.3255 as a long lower wick doji closed 3 minutes before the London Forex Market Open, then the 5 minute candle confirmed. This also correlated to the big Quarter Century Level in the EURUSD at 1.3250 - this is another forex trading strategy that has merged with existing techniques. Here is a book about this:

Price was a bit indecisive for a few minutes but soon moved up and took out the last swing and hit the target pretty much spot on at 1.3295. One thing to look for around the London Open, and also the Tokyo and New York opens is some sort of reversal. It might be a temporary reversal before the main trend heading into the Open resumes or it could reverse the previous trend and set a new course for price action during the session. Basically the big banks have order books which they must fill, if they have customers who want to sell euros above where the market is at the open, they might buy in the spot market to move price to these levels to settle these customers orders. The market wants to do business, especially if it is a big order or a customer who gives the bank alot of business. It is also a chance to stop out any shorts who jumped in short too soon and were using a typical 20-30 pip stop loss, and also gets asian traders to take profit. All sorts of traders are entering or exiting for various reason and it is helpful to observe the price action during the open and think about what other market participants maybe doing and where they have their stops and limits. The market wants to do business and that means filling stops and limits as it goes.

EURUSD short trade during London Open - Live Trade Room Forex Entry Signal

This Thursday morning Nov.25th 2010 we were live in the ProfitMongers Live Forex Trading Signal and Eduction Room when the EURUSD setup for a nice scalp trade short. It is Thanksgiving so the markets in the USA are closed, however there was still some decent price action during the European Session.

The chart shows how a initially at the 8am GMT London Open the EURUSD moved up to 1.3350, this corresponded with the 50% retracement of Wednesday's sharp move down during the European Session from 1.3413 to 1.3284. We did not get the live forex trade entry signal right on this fibonacci retracement level, rather we waited for price action to confirm a key reversal candlestick formation and some news hit the wires at 8:44am. Basically Moodys said they were placing several Irish banks ratings under review for a possible downgrade. The reaction was not automatic but when price showed us evidence of responding to this we did not hesitate to pull the trigger and enter the short EURUSD trade. As price moved in our favor, more news continued to come thru the news wires which supported the EURUSD short. ECB's Makuch said the Euro was slightly overvalued and then talk of an expected sovereign ratings downgrade for Italy was rumoured to be circulating the dealing desks. We took some profit around 1.3315 and were targeting 1.3290, but stretched this out to just above the big 61% fib of the September rally at 1.3270. The EURUSD 5 minute candlestick did close with a long lower wick doji right at 1.3290 while I was away, so this was a good reason to take the rest here, but regardless the stop loss was moved to lock in profit on the remaining position at 1.3320

EAI Natural Gas Inventories - Huge Spike Trade and Afterspike

On Wednesday Nov. 24th at 5pm GMT (noon EST) the EAI (Energy Information Administration) released it's weekly inventory numbers for Natural Gas Supply. Normally this news is release on Thursday at 3:30pm GMT (10:30am EST). The news release was moved up a day because of the Thanksgiving holiday in the USA on Thursday means that the markets will be closed. Although the deviation on this number was a bit lower than what normally would be safe, the Natural Gas Futures contract has been responding to this news exceptionally well recently, and even small deviations from the expected number has caused good moves. Here is the Data:

EIA NATURAL GAS INVENTORIES: -6 BCF VS. -5 TO +5 BCF ESTIMATE RANGE

TradeTheNews gives a range of expectations and this number came just -1 below this low end of this range, however the Secret News Weapon from Fast Economic News, which we use to get quick entry signals on news releases uses a median average estimate of all analysts and this was -1, and thus a -5 deviation. Lower supply means higher prices, and the Natural Gas Future rallied some +190 ticks in the first 5 seconds. About 15 seconds after the release price came back down between the 38% and 50% fibonacci retracement of this initial news reaction move. Another 10 seconds after the pullback price start its move up again, and move another +50 ticks or so up after this. It then pulled back again and went sidewise for a few minutes which can seem like eternity when u are in a news trade, yet the patient ones who trade calmly saw a further extension up for another +50 ticks. All around excellent opportunity.

DOE Petroleum Inventories - A Build like API but prices reverse up

On Wednesday as usual at 3:30pm GMT (10:30am EST) the Department of Energy Inventory figures were released. These follow the less watched API figures from the night before. The numbers had indicated a draw for the past few weeks, which is bullish for Crude, however this week's API figures on Tuesday night was a build, or more supply and is generally bad for prices. This week's DOE Inventory figures also indicated a Build, in all 3 components of the energy complex : Crude, Gasoline and Distillates. Here are the numbers:

DOE CRUDE: +1.03M V -2ME; GASOLINE: +1.9M V -1ME; DISTILLATE: -540K V -1.5ME; UTILIZATION: 85.5% V 84.2%E- Distillate demand +25K bpd to 3.8M bpd - Gasoline demand -125K bpd at 8.83M bpd

So basically a +3029 on Crude, a +3163 deviation on Gasoline, and a smaller +959 deviation on Distillates. So all 3 components agreed. Crude Oil shot down some 80 ticks as a positive deviation or build of supply will do to price. Prices then shot back after 10 seconds to the 61% of the initial news spike reaction and started to turn back down, however there was no continuation, prices turned back up and the tight stop used on the afterspike was hit. This can happen from time to time trading these events and this is why it is essential to use tight stops, however it is still a high probability trade and it works alot more often than if fails. So why did it fail? Well Crude has been selling off from Nov. 11th and has come down nearly $8, that is nearly a 9% move, sometimes the market makers do use the news to take profit on existing positions. If you had been short the past 2 weeks and you knew that thanksgiving holiday was the next day and few traders would be around for friday, why not take profit on your short when price spikes down after the news. Then the profit taking builds up steam and everyone rushes to the exits, some momentum traders sense this and also get into long positions to take advantage of the volatility. It doesn't matter, perhaps thru time in the market you become aware of when a situation like this is developing and certainly after your small conservative stop loss is hit, you are free to enter into another trade and promptly make profit again. It is when the trader holds on because they think the market must continue to move short because of the news that they get into trouble, as the market will squeeze those shorts hard and fast. Don't get caught out!

UK Revised GDP - Flat but does maintain last month's preliminary gain

This Wednesday morning at 9:30am GMT (4:30am EST) the UK release alot of economic news figures, the main of which was the GDP or Gross Domestic Product, the main indicator of the health of the economy. This is the Revised GDP as the actual GDP comes out at the end of the quarter and the 1st month of the quarter is the release of the preliminary number. Usually the biggest surprise deviation from the expected number is on the preliminary release. Last month there was a blockbuster deviation of +0.4, coming out at +0.8 above the +0.4 expected. There was a very nice move up on the GBPUSD forex pair as the market had not expected such a good number to be released. There was also some other data released but none of it is important as the GDP figures. Here is the data:

Q3 PRELIMINARY GDP Q/Q: 0.8% V 0.8%E; Y/Y: 2.8% V 2.8%E

Q3 PRELIMINARY PRIVATE CONSUMPTION: 0.3% V 0.6%E; GOVERNMENT SPENDING: 0.4% V 0.4%E
- Gross Fixed Capital: 0.6% v 1.3%e
- Exports: 2.2% v 1.5%
- Imports: 0.7% v 1.2%e

SEPT INDEX OF SERVICES M/M; 0.6% V 0.5%E; 3M/3M: 0.6% V 0.6%E
- Prior MoM revised lower from 0.6% to 0.4%
- Prior 3M/3M revised lower from 0.3% to 0.2%

Q3 PRELIMINARY TOTAL BUSINESS INVESTMENT Q/Q: -0.2% V +0.8%E; Y/Y: 4.6% V 5.6%E
- No revisions

Basically the analyst's had moved their expectations for this data to be in line with last month's preliminary release at +0.8 and that is what this month's revised figure came out as. So basically no deviation at all to trade with. No news spike trade or afterspike news trade. The chart of the 5 second price action shows that there was about a 20 pip whipsaw, and initially moving a bit higher than pre-release. This may have been seen as positive by some traders as it confirms the high preliminary GDP from last month, it was not just some blip in the data. The USD had been gain thru the european session and moving all the major cross in USD positive direction, especially the EURUSD which was down over 100 pips, so this sentiment was weighing on the quid. Some of the other UK data was down such at Total Business Investment and Private Consumption and the rest flat. On the 5 minute chart that is included we can see a technical setup which occurred during the news. A fibonacci of the move down during the first hours after the London Open was drawn, about 5 minutes after the news GBPUSD hit the 50% retracement of this move, also testing the 200 SMA and the candle closed with a long upper wick - this is a good sell signal. Price moved down some 50 pips and broke the former lows for the session.

German IFO - Good Number but EURUSD still in trouble

This Wednesday morning at 9am GMT (4am EST) the numbers for the German Ifo from the Institute for Economic Research. This consists of 3 numbers the most important of which is the Business Climate Number. It is an index which is based on surveyed manufacturers, builders, wholesalers, and retailers. It is a leading indicator of the economic situation and is highly regarded as historically it has corresponded to how the market has done. Here is the Data:

GERMANY NOV IFO BUSINESS CLIMATE: 109.3 V 107.5E; CURRENT ASSESSMENT:112.3 V 110.4E
- Expectations Survey: 106.3 v 104.7e
- Prior Business Climate revised higher from 107.6 to 107.7
- Prior Expectations Survey revised higher from 105.1 to 105.2

This was a decent deviation higher, actually +1.8 higher than the expected 107.5 , and in the past deviations of this amount have lead to good moves higher on the EURUSD and other Euro forex cross pairs. The Euro has been under alot of pressure the past few weeks with the situation in Ireland opening the old wounds that were caused by the Greek situation just 1 year ago. The markets gave the Euro a break while the Fed's QE2 was in focus, but now that is a done deal this has taken center stage. This week especially the sell-off has intensified, with last week's low being taken out, we recall that the EURUSD did then recover significantly from last wednesday until the end of the week, rallying some +300 pips. Since the market commenced for trading this week the EURUSD has moved down and comments from Merkel yesterday about the Euro being in a crisis did not help. The asian session saw some moderate retracement up for the EURUSD after the step losses seen yesterday. Euro Peripheral Bond spreads again were widening as the London open began and all the euro forex crosses dropped from the start. Concerns are that the debt problem will spread to Portugal, although their problems are different than Ireland, but their economy is small enough that the EuroZone rescue fund should be able to cope with this. The bigger concern is the situation in Spain because they have a much larger economy and this would bring alot of pressure on bail-out fund.

As the included chart shows, the EURUSD spiked up some 10-15 pips from its pre news release price of around 1.3335, but within 1 minute is was back down to this price and quickly moved below it and lower. With the strong negative sentiment and general bad news about the Euro, it was not wise to try and trade with the number when it was positive, in fact when there is a strong Sentiment-based Flow in the market, when there is a number which moves the market in the other direction, it can be a good entry to get back into the Trend. This moved very quick and already being short on some position trades did not get a chance to add here. Spike traders did have a moment to get out within a few pips of entry unless they experienced slippage, but it does help to be aware of the Sentiment-based Price and News Flow and Major Trends in the market even if you just take forex news spike trades.

Crude API Inventory Numbers - A Surprise Build

Tuesday night at 9:30pm GMT (4:30pm EST) the Inventory numbers for Petroleum products was released from the American Petroleum Institute (API). These figures come out the night before the more important and widely watched Department Of Energy figures which come out during the active trading period near the open of the market in the USA. Past few weeks these inventory numbers have come out with a draw, or with a negative deviation, indicating lower supplies and thus prices have moved higher. Well the Energy companies must have been listening and increased their production because last night the API numbers came out higher, indicating a build in inventory, this caused prices to move lower. Here are the numbers:

API PETROLEUM INVENTORIES: CRUDE: +5.2M V -2ME; GASOLINE: -500K V -1ME; DISTILLATE: -310K V -1.5ME; UTILIZATION: 83.6% V 84.2%E
- Cushing crude inventory: 460K to 33.38M barrels

Liquidity at the time of this release is quite thin, however there was ample time and liquidity to enter safely as long as the trade was not a huge amount of contracts. The concern can be more about how price action can be rather fidgety, especially when trading energy futures which are probably have the most volatile price fluctuations. Trading the CL Futures contract is $10 per 1 cent change in price unless you have access to CFDs or a Spreadbet platform. Regardless some patience was needed, if the trader was able to get in quickly as soon as the news was released then some ticks were safely locked in, as the first retracement after the news was very shallow, just some 10 ticks and hardly a 23%, which is just not enough for me personally usually unless the deviation is very good. About 4 minutes after the release, a decent 38% retracement occurred, it was front-run by a few pips by was good enough. The Crude Oil Future then moved off this 81.20 level down to nearly 80.90, for about +25 ticks after spread, although various take-profit levels are circled in the chart, taking profits on portions of the trade as you go. This was on a news afterspike trade, one may have also straddled this report and got a much better fill.

Canadian CPI - Big Deviation Spike but Reversal

The Consumer Price Index, the major gauge of inflation was released out of Canada this Tuesday Nov. 23rd at noon GMT (7am EST). This has been a great report to trade a few years ago but recently it will only cause a short-lived spike. However this month there were quite signicant deviation on all 4 of the main numbers that come out with this report. There are yearly and monthly figures for both a Core Number, which excludes volatile items like energy and food, and a Headline number. Here is the Data:

CANADA OCT CPI CORE M/M: 0.4% V 0.1%E; Y/Y: 1.8% V 1.5%E - No revisions
CANADA OCT CONSUMER PRICE INDEX M/M: 0.4% V 0.2%E; Y/Y: 2.4% V 2.2%E - No revisions

As the 1st chart shows the USDCAD did spike down from near 1.0190 to 1.0165, so there was money to be made trading the spike using the Secret News Weapon, and members in the Profitmonger Live Online Forex Traderoom made money trading it. Price bounced quickly back up to the 61% within the 1st 30 seconds after the news release at around 1.0185 and moved back to below the 38% of the same fib move at around 1.0170 for a quick +15 pip afterspike move. Price did not continue down however and came back to the same 61% level at 1.0185 and held there for over 5 minutes, definately not a good sign. Traders were aware that there was alot of risk aversion in the markets as not only was the situation with EuroZone peripheral debt issues causing this but also there were some shot fired near the border between North and South Korea and alot of tough talk. In risk aversion situations the USD can strengthen as it is a safe haven currency, because it is the biggest most liquid market it can absorb all those in risky assets who want to get home fast.

....So to judge the performance of this CPI release based on what happened to the USDCAD pair is not right, so also included is the 1 minute chart of the EURCAD. As we can see on this chart, this news performed exceptionally well for the afterspike. After about 10 minutes of the release price retraced to the 50% of the previous swing, which included the news spike move, as price was moving down already heading into the release. From this 1.3808 level prices moved down all day as the situation in the EuroZone grew worse as various Euro ministers said things which weakened confidence in the single pair, including Angela Merkel. In fact the trade could have been held for the next day as well as it reached a total of +350 pips.

Canadian Retail Sales and US GDP - alot of data but no good deviations

This Tuesday at the main time slot for North American news 8:30am EST (1:30pm GMT) alot of data came out of both the USA and Canada. Just 1 and a half hours early Canada had released its CPI figures and now it was releasing its Retail Sales. Also the USA was releasing its GDP figures. Both numbers had potential to cause nice moves in the Forex and Futures markets, but it is kind of a waste to release them all at once as a deviation in the US number can affect the US Dollar and effect the price of USDCAD which is responding to the Canadian data. We can try to mute this somewhat by trading EURCAD or CADJPY but still these pairs will react to any move in the USD and it is the main pair which is involved in the majority of transactions in forex. Anyway here is the Data:

CANADA SEPT RETAIL SALES M/M: 0.6% V 0.7%E; RETAIL SALES LESS AUTOS M/M: 0.4% V 0.3%E
- Prior Retail Sales MoM revised higher from 0.5% to 0.7%.
- Prior Ex Autos MoM revised higher from 0.4% to 0.6%.

(US) Q3 PRELIMINARY GDP Q/Q ANNUALIZED: 2.5% V 2.4%E; PERSONAL CONSUMPTION: 2.8% V 2.5%E

(US) Q3 PRELIMINARY GDP PRICE INDEX: 2.3% V 2.3%E; CORE PCE Q/Q: 0.8% V 0.8%E

Not a significant deviation in any of these numbers to get interested in this. The Canadian Data was actually mixed with headline -0.1 and core +0.1, these sorts of conflicts are what traders want to avoid and why its best to use a larger deviation so chances are both figures will agree. Included is a 10 second chart of the USDCAD which shows how price blipped up 10 pips and then turned around back down 20 pips....nothing here.

Also be sure to check out Doug Ragan blog entry for Trading the US GDP with the EMini S&P 500 Futures Contract

Preview of Major Forex News Trading Events - Nov 22-26 2010

Sir Pipsalot's review of the big news to watch out for this week. We will be trading this in the Profitmonger's live trading room. Watch this blog for reviews of the news.

Click here for Major Forex News Trading Events

May the pips be with you!!!

US Philly Fed - Exceptional Deviation and Exceptional News Trade

I was unable to trade this session, but Doug Ragan another head trade at the Profitmongers Live Forex and Futures Trade Signal Room was there and he covers this very well in his blog using Fast Economic News Secret News Weapon - Trading the News with the EMini S&P Futures

UK Retail Sales - small deviation and conflict

Not really much to report on this UK Retail Sales number for this Nov 18th 2010. This can be and excellent report to trade, but when there is not a decent deviation from the expected number, it just is not worth getting involved in. Pretty obviously this number reports how much stuff people purchased, and people purchasing and consuming is good for the economy. There are 4 numbers that come out with this report but generally the headline m/m figure is the one to watch, but obviously to get a high probability trade signal it is best that all 4 numbers deviate in the same direction. There was a small deviation of +0.1 on both the headline and core month-on-month numbers, however there was a conflict with the year-on-year figures which both deviated negatively from expectations, including a larger -0.3 deviation on the y/y core number. This is another reason for choosing sufficient deviations to trade. The larger the deviation of one piece of data the more likely the rest are to deviate in the same direction. Regardless none of the deviations were enough for us to get any trade opportunities, it is a shame as this report can be good to trade, but the appropriate deviations are chosen for a reason, to keep us safe and out of a market that is not likely to move in the direction we anticipate. There was also some Public Finances data that was released at the same time, but this data is not as important as the Retail Sales numbers. Here is the data:

(UK) OCT RETAIL SALES EX AUTO FUEL M/M: 0.3% V 0.2%E; Y/Y: 1.2% V 1.5%E
- Prior MoM revised lower from 0.0% to -0.3%
- Prior YoY revised lower from 1.8% to 1.3%

(UK) OCT RETAIL SALES WITH AUTO FUEL M/M: 0.5% V 0.4%E; Y/Y: -0.1% V 0.0%E
- Prior MoM revised lower from -0.2% to -0.5%
- Prior YoY revised lower from 0.5% to 0.0%

(UK) OCT PUBLIC FINANCES (PSNCR): £2.4B V £6.0BE; PUBLIC SECTOR NET BORROWING: £9.8B V £8.9BE
- PSNB ex Interventions: £10.3B v £9.6Be

- Prior Net Borrowing revised lower from £15.6B to £14.4B
- Prior PSNB ex Interventions revised lower from £16.2 to £15.0B

Included is a chart of the resulting price action. Basically a whipsaw type of movement can be seen. This is definately something to stay away from and it is this type of situation which can make straddling these reports dangerous.

DOE Energy Inventories - big deviation yet not a big move

As usual on Wednesdays at 3:30pm GMT (10:30am EST) the Department of Energy's Inventory figures were released. These numbers follow the API Petroleum Inventory figures from Tuesday night, which came out with a significant draw. This reported drawdown was at the level which was around where the average analyst's expectations for the DOE's number was, so when the DOE Crude number came out significantly lower today it was quite a shock. Remember lower numbers indicate less supply which translates to higher prices. Usually the focus on this report is on the Crude Number, as the Crude Oil Future is probably the most highly traded instrument in the Energy Complex, but also the Heating Oil and RBOB Gasoline will also move off the Gasoline and Distillates Inventory data as reported on this blog last week. It is really best if all 3 of the figures accross the Energy Complex agree, as if for instance Crude Inventories comes out with a modest build but Distillates has a large draw, the Crude Oil Future might move down quickly in response to its initial build figure, but then rally in sympathy with the draw seen on the Distillates data. Anyway here is the data:

DOE CRUDE: -7.28M V -500KE; GASOLINE: -2.66M V -500KE; DISTILLATE: -1.11M V -2ME; UTILIZATION: 84% V 82.9%E
- Distillate demand -615K bpd to 3.78M bpd
- Gasoline demand -100K bpd at 8.95M bpd

So distillates had a small build but gasoline had a modest draw and Crude had a very big draw. Normally on this kind of deviation one could have expected to see the Crude Oil Future move upwards over 100 ticks, however their has been some risk aversion in the markets and this is perhaps responsible for the only modest move seen on this huge deviation. During Tuesday the markets went into 'risk-off' mode and the Stock Indices, Commodities including Crude Oil sold off hard. The US Dollar gained across the board. However despite this there was a solid move up and a chance to get an entry on a news afterspike trade. Being aware of the larger trend downward on the Crude the move up caused by the news in the end turned out to be a good opportunity to short into this downtrend at an better price.

On the included chart on the top we can see that the Crude Oil Future after providing an excellent spike trading opportunity using the super-fast autoclick trade entry software from Fast Economic News, making roughly a 50 tick move. After this the Crude Oil Future did pullback to the 38% retracement of the initial spike move around 82.15 and again went to test its highs around 82.40 for a potential 25 tick move. Deducting a few ticks for spread and to wait for price action to confirm the 38% bounce there was at least a potential for 10-15 ticks easily, possibly 20 if you are quick and nimble. Price came back down after retesting and slightly breaking the initial news spike reaction highs by a few ticks and poked below the same 38% and then made a greenbar. This may have started to look like another entry off the same 38%, but after a fib has worked once, the chances of it working again decrease, but if an entry doesn't work just use tight stops, they quickest way to make up for a loss is to get out and look for other trades, the wrong thing to do is sit there and hope....in the fast moving Crude Oil market, especially after news a trader does not want to get in a situation like that. Crude can move fast and giving a trade a few more minutes to turn around and come back to breakeven is risky. A few minutes later price reacted around the 61-78% levels around $82, and a potential scalp entry long. There are 2 potential exits, the first around 82.20 would be preferred - Make your money and get out. However some may have been more patient and held on thru 2-3 minutes of slight pullback and consolidation and rode out the long for another 15 ticks or so. As long as the stop loss is brought to breakeven as soon as possible then a trader can relax and just let price action run its course.....look at the last chart as the news became history and the trend down in crude reasserted itself.

US CPI + Housing Starts and Building Permits - momentum take some time to build

On Wednesday Nov.17th at 1:30pm GMT (8:30am EST) the Consumer Price Index for the USA was released. At the same time 2 housing data figures were also released. Although these housing numbers are important and frequently they are released on their own and we watch and trade these releases in the live forex & futures trading room when they do. This month however they just happened to be scheduled for the same date and time as the much more important CPI.

CPI is the main measure of inflation and US Federal Reserve has been myopically focused on the deflation that has been seen in the USA and this is 1 of their 2 main mandates - some have even mentioned making inflation the sole mandate of the Fed, currently the other mandate is for the Fed to support job growth. The deflation is the main reason that the Fed has introduced another round of Quantitative Easing, aptly named QE2. They have also maintained very low interest rates, all this is an attempt to make money more available, there is more of it. They use this created money to buy bonds.

Anyhow a higher than expected CPI is generally supportive the US Dollar, as if inflation comes back it may signal that QE2 is working and it is time to scale it back and think about raising rates. So far Australia, New Zealand, Norway, and even Canada have raised their rates after the financial crisis saw all Central Banks cut them drastically. When will the ECB and BOE follow, could the USA be the last to hike, or is it possible that a scenario like is seen in Japan where deflation has continued for over a decade and rates have remained next to zero for all this time. CPI has 4 numbers, 2 yearly and 2 monthly, 1 is a core number which excludes food and energy which are considered more volatile, and a headline number which includes food and energy. Anyhow here is the data:

(US) OCT CONSUMER PRICE INDEX M/M: 0.2% V 0.3%E; CPI EX FOOD&ENERGY M/M: 0.0% V 0.1%E; CPI NSA: 218.7 V 218.8E
- CPI Y/Y: 1.2% v 1.3%e
- CPI Ex-food & Energy Y/Y: 0.6% v 0.7%e (Core Y/Y CPI at 0.6% is lowest reading on record)
- CPI core index SA: 221.8 v 221.8 prior
- No revisisons

*(US) OCT HOUSING STARTS: 519K V 598KE (lowest since April 2009); BUILDING PERMITS: 550K V 568KE
- Prior Housing Starts revised lower from 610K to 588K
- The decline in overall starts was almost entirely due to a 44% plunge in multi-family starts. Single-family permits rose by 1.0% to 406K

- Note: Housing starts -11.7% m/m is approximately double the lowest street estimate.

So all the CPI figures were lower by -0.1, this was not enough of a difference lower for it to trigger the lighting fast entry generated by the Secret News Weapon from Fast Economic News Service, however the housing data was also lower. So looking at all the data as a whole after it was released, it all did seem rather negative for the US Greenback. Although the deviations for CPI were small but all 4 of the figures were all negative, which was a definate plus because some times they will conflict, where for example the Core month-on-month number is a positive deviation and the Headline year-on-year figure is negative. Then to add fuel to the fire the Housing Starts figure was the lowest reading since April 2009. As mentioned in previous posts, whenever we see a news headline where a number is the highest of lowest in a certain period of time, the market will pay attention to this. So this housing crisis, which started the how financial meltdown a few years ago, does not seem to be getting that much better, at least in the USA. The Building Permits Data was also lower, not by a large amount and it is not as important as the Housing Starts number, but as it also came out in the same negative direction all the other data, it did not matter and only supported the other data.

Ultimately in these situations price action is true indicator as to whether the data is good or bad. Normally in the trading room we focus on USDJPY when trading Spot Forex for US Data, as well as either the 10 year Notes or the EMini S&P 500 when looking at futures, but we have also started watching the USDCHF as it has had some really good moves on economic figures from the USA. Focusing on the moves in Spot Forex, initially the USDJPY and USDCHF only moved down 15-20 pips minute after the release. There was then a pullback as we have seen on many releases, to the 61% on USDJPY, but on USDCHF the 38% got frontrun. The USDJPY then moved about 10 pips from the number, while the USDCHF produced a 20 pip move, so definately outperforming the Dollar Yen on this news.

Also included are some charts of the next few hours after the release, as with US data sometimes we have to wait for the US Stock market to open, also sometimes there is more US Data at 3pm GMT (10am EST), and many market participants want to see all the data before making their trading decisions. There was no data except the DOE Crude Inventories at 3:30pm EST (10:30am EST), however with all the bad data there was really no reason not to stay short. If price action had turned back up then of course the decision to exit would have had to be take. The Swiss just went into a period of sidewise consolidation for the next half hour, before momentum gently turned lower and then accelerated. From the cart we can see several trading entry opportunities, drawing a new fib over the entire news reaction and watching the candlestick close for entry. Even after the initial move down price on the USDCHF came back up to test the news reaction low at 0.9925, producing another opportunity to enter if the trader had not yet got in or to add more to the position after banking some profit on the initial move down. The USDJPY made a key reversal also about half an hour after the news was also at the 61% fib of the news reaction swing which then price extended down even past the 161% extension of the same move.

UK Claimant Count Change and BOE Meeting Minutes -

This Wednesday morning, nov 17th at 9:30am GMT (4:30am EST) the employment data for the UK was released. There are a few numbers but the main one we watch in the live forex and futures trading room is the UK Claimant Count Change. This is a bit different that other employment figures such as the Non-Farm Payroll out of the USA. On this one a lower number is better because what the number is reporting is the number of unemployed people claiming unemployment benefits, so fewer claimants equals more employed equals better economy and thus strong British Pound. There is also the ILO Unemployment Rate and an Average Weekly Earnings number. Naturally it is helpful if these come out deviating from the expected number in agreement with the deviation of the Claimant Count Change, higher earnings are good as it means more spending by workers, and a lower ILO Unemployment Rate is good as it also signifies more employment.

However today this data came out at the same time as the release of the minutes from the last Bank of England Meeting when they discussed whether or not to change Interest Rates or to add or subtract from the Asset Purchase Facility the APF. For these minutes the main thing to watch for was any change in the vote out of the 9 members of the BOE. Sentance is the hawk of the group and he consistently votes to raise rates, while Posen is the dove and wants to raise 50 Billion to the 200 Billion already allocated to APF. There was some possibility that up to 2 of the other remaining 7 members may have voted to raise the APF like Posen. This would have been bad for the British Pound as more APF basically means printing more money, and more money in circulation means it is less valuable. However there is more to this report than watching the vote count, traders also need to look out for any change in the language of the statement, any change in outlook positive or negative. This can be a subtle change and always can depend on how the market chooses to interpret the statements based on the kinds of things the market is focused on at the time, again subject of a another post. Anyway here is the news:

(UK) OCT JOBLESS CLAIMS CHANGE: -3.7K V +6.0KE (first decline since July); CLAIMANT COUNT RATE: 4.5% V 4.5%E
- Prior Claims Change revised better from 5.3K to 1.3K

(UK) SEPT ILO UNEMPLOYMENT RATE: 7.7% V 7.7%E
- No revisions

(UK) SEPT AVERAGE WEEKLY EARNINGS 3M/Y: 2.0% V 2.0%E; WEEKLY EARNINGS EX-BONUS 3M/Y: 2.2% V 2.3%E
- No revisions

(UK) BOE AGAIN VOTES IN 3-WAY SPLIT ON MPC VIEWS; Sentance again voted for a 25 bps interest rate hike, Posen again voted to increase the ATP by £50B
- MPC Majority: Balance of risks has NOT changed significantly and decided it was right to keep the expansionary policy.
- MPC Majority: Forecasts that CPI to decline towards the 2.0% target in the medium term; Some of the majority did see risk of higher inflationary expectations; Members of majority have differing views in inflation risks
- MPC Majority: Premature to tighten while there is significant spare capacity but also premature to ease without clear signs of slowdown
- Reiterates that most of the members stood ready to adjust policy in either direction
- Member Sentance (hawk) noted that recent news was in favor of a tightening policy sooner rather than later
- Member Posen (Dove) noted that BoE's forecasts underestimated the impact of fiscal tightening on consumption and budget cuts.

So basically all was positive for the Pound on this report. The vote count was as expected and the no other members had joined Posen. Claimant Count Change came out lower, however it just missed the required deviation to trigger an autoclick news spike trade by a few decimal points. Initial Price Action was up but it was very whippy, coming back to the pre-release price and moving back up again all in the first few seconds. Going into this news traders were mindful of the large move down we had the day before, cable basically fell over 200 pips and really broke out a few hours after the US Stock Market opened. This falls was caused by a larger sell-off in stock indices as fears about the situation in Ireland and about the Chinese raising Rates came into focus, however there were some specific events which added fuel to the fire because the market was well aware of these facts before things really dropped off hard, especially for the Pound. Around 3:30pm GMT BOE's King said it is possible that the BOE will conduct additional QE, also about 5:30pm the Fed's Bullard said that it was possible that the Fed will not do the full 600 Billion specified in the last meeting. The Stock Indices did not like this. We see when the Stock Markets & Commodities sell off basically this is risk aversion and this causes a the USD to strengthen.

Despite all this however, in the Profitmonger's Live Trade Room an afterspike trade was given near the 38% retracement of the initial spike after the news release. Just above here was the 38% of the larger move down the day before. Just like during yesterday's CPI when GBPUSD was contained by the 50% retracement of the move down for the whole week - which by the way lead to a gain of over +200 pips!!!! Learning to watch how the news interacts with the larger timeframe trend, sentiment and flows in the market can lead to the some of the most profitable trades, they do take a bit more time however, not the 5-15 minutes that most news trades take. The GBPUSD moved off this key fibonacci level but again bounced off the former spike high and came back up to test this fib level again around 1.5935 forming a slightly lower high....Cable then sold off back below the 1.59 handle so this was a decent +65 pip move.

API Petroleum Inventories - Another positive deviation

Have commented on this report for a few weeks now. Although it is released during a quiet time of the day and the release time varies slightly. The past few weeks however it has come out pretty much precisely at 9:30pm GMT (4:30pm EST). The data comes ahead of tomorrow's more important Department of Energy Inventories at 3:30pm GMT (10:30am EST), which is more important. Generally a lower number is good for Crude as it indicates less supply, less supply equals higher price. Here are the numbers:

*API PETROLEUM INVENTORIES: CRUDE: -7.65M V -500KE; GASOLINE: -1.65M V -500KE; DISTILLATE: +220K V -2ME; UTILIZATION: 81.5% V 82.9%E
- Cushing crude inventory: 1.07M to 32.92M barrels

So nearly a 7 million barrel draw on crude inventories below expectations. As the included chart shows, there was a move up heading into the news - perhaps the news got leaked. Still when the news did get released the December Crude Oil Futures Contract continued to move up an additional 20-25 ticks. After 2-3 minutes it pulled back the the 50% retracement of the news spike and headed back up for a 15 tick news afterspike trade.

German ZEW Survey Economic Sentiment and EuroZone CPI

A slew of German and Eurozone news releases hit the wires at 10am GMT (5am EST). The main figure we were watching in this batch of Data was the German ZEW Survey Economic Sentiment, which was expected at +2. Usually a deviation of about +/- 10 on this figure can generate a nice forex trading entry signal. This data is normally released with a ZEW Survey Economic Sentiment for the whole EuroZone, as well as the ZEW Survey Current Situation. These other 2 figures are not as important as the main German number but it does help if the Economic Sentiment figure for the EuroZone deviates from expectations in the same direction as the German Economic Sentiment number. However this morning this news also came with CPI data for the EuroZone. The German ZEW has not been reacting so well the past couple of releases as well as they fact that today it was coming out with all this other data. Sometimes it is only good for a small spike trade, but also it can also generate a nice afterspike trade, so one must be cautious when trading this. Here is the data:

(GE) GERMANY NOV ZEW ECONOMIC SENTIMENT: +1.8 V -6.0E; CURRENT SITUATION: 81.5 V 75.0E
- No revisions

(EU) EURO ZONE NOV ZEW ECONOMIC SENTIMENT: 13.8 V 2.0E
- No revisions

(EU) EURO-ZONE OCT CPI M/M: 0.4% V 0.3%E; Y/Y: 1.9% V 1.9%E; CPI CORE Y/Y: 1.1% V 1.0%E
- No revisions

Interestingly, the EURUSD blipped down 10 pips of so in the 5-10 seconds before scheduled release. The EuroZone CPI data was released first right at 10am and it was higher with a +0.1 deviation from expectations, and the EURUSD immediately started to move up. About 8-9 seconds later the German ZEW data came out also higher but with only a +7.8 deviation. Then nearly 17 seconds after the initial EuroZone CPI data the EuroZone ZEW came out with a +11.8 deviation. So all good data, but it trickled out and the EURUSD had already moved quite a bit by the time the German ZEW data came out, which was the main piece of data to use for catching a quick forex news spike trade. The SNW autoclick software has built in safety features for such instances so everything was already cancelled, regardless there was a small continuation up after this release and price stayed steady for about a minute after all the data was released. With all the positive data however it was an opportunity to look for a forex news afterspike trade, and the chart included with this post shows how the price of the EURUSD bounced off the 61% fibonacci retracement of the move of the initial spike directly after the news release, producing a quick scalp of 10-15 pips. This release has not been doing so well so it was not worth holding onto it when it appeared to be unable to regain the original spike high level and continue. However the initial price move caused by the EuroZone CPI initially was very interesting and further research into this news figure will be researched. It is not a frequent occurrence that the CPI is release at the same time as the ZEW so it will interesting to see how the CPI moves the EURUSD on its own.

UK CPI - overreaction and reversal

The Consumer Price Index, which measure the change in the cost of a basket of commonly purchased items, for the UK was released this morning at 9:30am London Time (GMT). The indicator has been trending higher for the past few months, and so according to the data, the UK does not have the same deflation which the Fed in the USA is trying so hard to get rid of by quantitative easing. So going into the news the number was expected to surprise to the upside, however most of the price action during the London Open was quite choppy and indecisive. The numbers were released and they were all a bit higher than expected, but not enough to trigger a spike trade according to the parameters we have successfully used in the past. Although recently the market has been very sensitive to news and there have been some good moves, this is not always the case, and especially on CPI data, when Interest Rates came down very low during the financial crisis, it was not reacting so well. This data comes out with 3 figures a monthly and yearly headline, and also a core year-on-year figure, which excludes the volatile food, energy, alcohol, and tobacco items. Generally to get a high probability trade on this news figure release all 3 numbers should deviate in the same direction, however the most important figure to watch is the headline y/y figure. Also the Retail Price Index is released at the same time, which is similar but includes only consumables and includes housing costs such as rent, again ideally this RPI would also deviate from the expected number in the same direction as the CPI, ie. + or - deviation, however it is not so important if it conflicts with CPI, as that is the big figure the market is really paying attention to. Here are the figures:

(UK) OCT CPI M/M: 0.3% V 0.2%E; Y/Y: 3.2% V 3.1%E; CORE CPI Y/Y: 2.7% V 2.6%E
- No revisions

(UK) OCT RPI M/M: 0.2% V 0.3%E; Y/Y: 4.5% V 4.6%E; RPIX Y/Y:4.6% V 4.6%
- No revisions

During the London session it did look like GBPUSD had bottomed and was ready to move higher, but there was no decent momentum, all this changed as soon as the news was release and the pair moved briskly up just over +30 pips. There was a small pullback of 10 pips, however with such a small deviation it was not enough for a good low-risk entry, and the price of GBPUSD did not even make a 38% pullback. It then headed another 20 pips higher to about 1.6088, for about a +45 pip move total. This level coincides with the 50% pullback of the move down on the GBPUSD forex pair since the start of the week, and the quick reversal off that level confirmed this as an important longer term fibonacci level (see the 2nd chart of this post-a 30 minute GBPUSD chart). Incidentally the central daily pivot was also at 1.6079, as well as the swing high during the asian session at 1.6081, thus creating a double top. Traders will often notice that price will come up or down to a previous swing high or low, break it by some pips (the amount of pips vary), and then turn around. This is the classic sweep out of stops, and perhaps to lure a fresh herd of breakout traders into the market to be squeezed. This subject could easily become the subject of a longer post. The GBPUSD continued down after this for a run of 100 pips. This is why it is important to be aware when the price maybe overreacting to a small deviation and not get so caught up in the short term volatility after the news release so as to forget the bigger picture fibonacci levels, trend, flows and sentiment.

As the price of GBPUSD moved down off this key 1.6088 50% fibonacci retracement level, we can see in the last chart how price reacted off the various fibonacci levels created by the swing during the news. There are many examples in previous posts of trading in the direction of the initial spike move of the news release after it has retraced, however generally a trader will want to do so within the first 5-10 minutes after the release. As time after the release passes, the probability of the classic news afterspike pullback trade diminishes. The chart shows how 10 minutes after release the 38% had a small bounce, again the 61% fibonacci retracement created another bounce some 16-17 minutes after release for 10 pips, and even the 78% caused a 12-15 pip bounce some 25 minutes after the release. Surely this could have confused any trader looking for a continuation of the initial spike move up, but with such a small deviation, once the trade had moved a few pips after the bounce off the fib level, stops should have been tightened. It highlights the importance of having a fast reliable source of market news, any trader simply watching price without knowing the actual numbers could have got caught by this. It simply was not the type of deviation of give the trade a big stop. Always remember to use tight stops on forex news afterspike trades! Even if a trader gets it wrong - 1 trade with a 30 pip stop equals the same as 3 trades with 10 pip stops. This is not the same for swing trading and other strategies but in fast moving news trading it is advisable.

US Retail Sales - core flat but headline good dev

Today we saw the release of the Retail Sales figures out of the USA. The focus is on the main Core Retail Sales figure to get a spike trade, however today this figure came out as expected. The headline figure, which includes automobile sales, did come out with a -0.5 deviation. This is about the deviation we were looking for on the Core number. Initially price action did not respond much, in fact in the first few seconds the USDJPY actually went up a few pips, however it then turned back down, it was not a fast move however and it did pullback to provide some afterspike forex news trade signals. Here are the figures:

*(US) OCT ADVANCE RETAIL SALES: 1.2% V 0.7%E; RETAIL SALES LESS AUTOS: 0.4% V 0.4%E V
- Retail Sales Ex Auto & Gas: 0.4% v 0.3%e

- Prior Advance Retail Sales revised higher from 0.6% to 0.7%
- Prior Ex Auto revised higher from 0.4% to 0.5%

Always fib the initial swing after the news, this will give the trader certain levels to look for an entry. It can be tempting to chase the price, and often even this will give pips when there is a continuation, especially after a larger deviation. A safer way is to wait for the pullback after the initial spike. In this news release, the market needed a bit of time to make the move. Most traders, not seeing a deviation on the core, stood aside for a moment and then once price started reacting in the expected way to the headline figure, they jumped in. On the EURUSD chart included there was an initial pullback to the 50-61% hot zone, this then extended up to the 161% extension of the same move (this 161% at 1.3650 is also the 61% of Friday Nov.12th range), also later on it came back to the former swing high, and although it did break below this for a few moments, it came back above and started heading higher. On the USDJPY chart the pullback was only to the 38%. Normally we focus on the USDJPY pair when trading this news, however at times the USDJPY does not react so well so it is always advisable to also look at the EURUSD or USDCHF for trade opportunities.

Doug Ragan has also posted about how the EMini S&P Futures Contract traded during the news, including info about trading a the opening gap. I took this trade and made 3 ES Points, or 12 ticks....quite happy about that...Cheers Doug!

GBPUSD reacts off Fibonacci Levels during European Session

Initial move on GBPUSD and EURUSD during the London open was to continue the down move which got going in latter half of the asian session. About 2 hours after the london open, an asian sovereign was reported as buying GBPUSD and the pair shot up from 1.6050 to back above the 1.61 handle, see here. Drawing a fibonacci retracement from the 1.6158 high seen at the 5pm Sunday night open to the 1.6040 lows achieved during the 1st half hour after the london open, as well as another fibonacci retracement drawn from the pre-Frankfurt swing high at 1.6130 to these same lows. We can see that the 61% of the larger move and the 78% of the smaller move created an area of confluence, creating a low risk entry area. This was also a standard sweep of the handle, and if no extension of this move down was seen, a trader could at least expect to see some retracement off the burst higher created by the ACB. Of course you might think you are positioning yourself against the trade of the Big Fish, but you do not know for sure if they were taking profit, scalping, or what, nor where their stop loss is if it is a new entry. This is the type of trade to look for, unfortunately after watching rather lackluster price action for 2 hours, I was not around when this occurred, but wanted to make a note of this type of setup so others can get an idea of what to look for.

Alot of data out of the UK this week: CPI, Retail Sales & the UK Employment data, also CPI and Retail Sales out of the US. Not like the start of the month but some decent big reports.

Scalping the DAX using Pivots

The rumor mill really got going during the European Session this Friday November 12th. The EURUSD was at lows 1.3575 just before the London open. However it lifted off these and just didn't look back. Later, about 2.5 hours into the session TradeTheNews audio news feed reported a rumor of a bailout package for Ireland, and the EURUSD promptly continued from 1.3680 to 1.3740, until the Irish Finance Minister came out and said that these rumors were not true and it sold off back to 1.3665. Very tricky environment, however trading the DAX using pivots went much more smoothly. Of course the DAX also responded to these rumors and news but using the pivots to catch quick scalps was still profitable. See attached chart for an example. There are a few other trades not related to pivot trading. These other trades are just little momentum scalps, including one loss - a sell at 6651 and exit at 6659, and 2 wins - and initial sell at the open for 6657 to 6627 and another quick scalp 6666.5 to 6661.5. The pivot trades are buying the bounce off S3 and Selling the bounce off S2.

Australian Employment - prenews spike then harsh reversal

Thursday, November 11, 2010 00:30:21

*(AU) AUSTRALIA OCT UNEMPLOYMENT RATE: 5.4% V 5.0%E (matches 10-month high); EMPLOYMENT CHANGE: 29.7K V 20.0KE (3-month low);
- Full Time Employment Change: -14.1K v 55.8K prior
- Part Time Employment Change: 43.8K v -6.3K prior
- PARTICIPATION RATE: 65.9% V 65.6%E

- Prior Employment change revised higher to 49.6K from 49.5K
- Prior Full Time Employment change revised higher to 59.4K from 55.8K
- Prior Part Time Employment Change revised lower to -9.8K from -6.3K

EAI Natural Gas Inventories - spike but no continuation

Last week we commented on the EAI Natural Gas Inventories. This report usually comes out on Thursday, however this week it was released on Wednesday due to a holiday in the USA tomorrow. Also the usual time of 3:30pm GMT (10:30am EST) was moved to 5pm GMT (12 noon EST) so the report would not come in at the same time as the DOE numbers. This release the number came out a bit lower than expected...less Natural Gas Inventories mean higher prices. The estimates given at TradeTheNews is usually a range, however the FastEconomicNews provides a median value which was given at 24 in the Secret News Weapon autoclick software. Using the FastEconomicNews as the primary estimate, this produced a -5 deviation, and we saw a decent spike from this. In the past a deviation of 7-10 was required to safely trade this spike, however at times this news can be much more sensitive and it has moved on deviations of just 1 or 2.


*EIA NATURAL GAS INVENTORIES: +19 BCF VS. +20 TO +25 BCF ESTIMATE RANGE
- US Nat Gas inventories hit all time high of 3.840Tcf.

Unfortunately due to technical issues today the news spike trade using the autoclick software was not possible, however as soon as the initial spike was rendered a fibonacci was draw over it. We can see that price came down to the 61% and seemed to move off it, but then continued down to the 78% where it bounced. This is where the trade entry can be seen on the chart. Price moves very quickly and if the trader waits for some confirmation they will have to chase after the ideal entry price has already printed and passed. As soon as the front-month Natural Gas future contract was bought, it again turned and came back to the 78%, putting the trade into -12 ticks in the red, and this continued for at least half a minute under some bid tone came back into the market and drove prices up. Surely most traders can relate the experience of being underwater slightly in a fast moving market and thus desiring to exit as soon as a decent amount of profit is accrued on the trade. This is what basically what happened, so as Nat Gas came back to the 38% this was deemed good enough and the market was exited at 4.186 for +19 ticks.

Just last week the Nat Gas Future was trading around 3.800, and was near 3.600 the week before that, and as this is not normally a market we observe we were surprised to see it above $4 again. Natural Gas has been very bearish in general as huge new sources have been discovered from Pennsylvania to Texas, meaning more supply and thus lower prices. So on the fundamental basis we continue to maintain a bearish bias on Natural Gas, but we generally do not trade based on bias. However the early New York session was characterised by risk aversion again, like the latter part of yesterday's New York Session, and equity indices where dropping, along with commodities and the EURUSD. Natural Gas can be seen to have had a decent pullback in a longer term bearish trend, so thus we were not inclined to hold this long trade thru hell or highwater, and it looks like we were correct to just take what we had rather than wait for more. -5 is not a huge deviation anyhow but especially when it is countertrend, and also because although this inventory number signifies less inventory and thus bullish for gas, the truth is there is more inventory coming online as new taps are put on the Barnett and Marcellus Shale.

DOE Petroleum Inventories - a draw moves energies up

Every wednesday, unless there is a holiday, the Department of Energy (DOE) releases its Petroleum Inventory numbers. The numbers include numbers for a few types of energy products including Crude Oil, Distillates and Gasoline. There is also an Refinery Utilization figure which comes out. All 3 of the main components of the energy complex came out with a draw down, this follows the draw seen on the API Petroleum figures given yesterday a half hour after the New York stock market close. It was not such a large draw as the API, but this report is more important, especially when all the components accross the complex come out in the same direction. This time Crude had the biggest draw, at -4.27 million, followed by distillates at -2.97 Mil and Gasoline coming in at -0.9 Mil below the average estimate of all analysts. Generally anything over 2-3 million is sufficient, depending on market dynamics and variations across the complex.

*DOE CRUDE: -3.27M V +1ME; GASOLINE: -1.9M V -1ME; DISTILLATE: -4.97M V -2ME; UTILIZATION: 82.4% V 82.1%E
- Distillate demand +290K bpd to 4.39M bpd
- Gasoline demand +40K bpd at 9.06M bpd

The front-month Crude Oil Future initially jumped about 35-40 ticks in the first few seconds of the release, this is actually quite a tame move as a deviation of over 4 million can move Crude over 100 ticks. Amazing a news spike trade using the autoclick got a fill in the market at 86.71 and knowing the extreme volatility of this report it is sometimes best to take profit when a decent amount is seen, it is also good to have some sort of automated script to take profit and move up the stop loss for the trader, especially in these fast moving markets seen after highly anticipated news releases. There then extended a further 15 ticks above the $87 level before retracing back to the 61% of the initial spike. There was some technical difficulty with the price feed after the release, but looking at this the trader will notice that there were in fact 2 tests of this 61% level, with the 2nd test going a bit lower than the first. This may have scared some traders out and it shows the importance of sticking to the original stop loss as sometimes just as we think we know the market will do something it then turns around and does the opposite of what we thought it looked like it was going to do.....does that make sense? Hmmm perhaps the market price moves are trying to make themselves look like they are about to do something so it gets us traders involved with them...the basic function of markets...but this is going on a tangent. Eventually price reached the 161% extension of the initial spike move, there was however a another pullback along the way. Normally this news can be very volatile so as soon as a trader is up 10-15 ticks they should look to take partial profits and/or at least move their stop loss to breakeven. However how many of these afterspikes are showing these perfect 50-78% pullback and then retesting highs or even going for the further fix extensions? Seems like many right now....certainly the going is sweet for forex news afterspike trading.

Also included are 2 other charts: Heating Oil Futures and RBOB Unleaded Gasoline Futures. Heating Oil is a distillate and RBOB is Gasoline...you will notice that the spike on RBOB Unleaded Gasoline was smaller than Crude and Heating Oil, and it makes sense since the draw on Gasoline was smaller than the draw down seen on Crude or Distillates.

UK BOE Inflation Report

This morning at 10:30am GMT (5:30am EST) the Bank of England came out with its inflation report. This is not a number but rather some prepared text along with BOE's Chief Merv King gives a speech. Yesterday I did hear a rumor that this Inflation report was going to be dovish, however I could not confirm this rumor on any official news wire, it was rather something a very knowledgeable and connected trader told me. There was also some comments from the IMF in regards to the new Conservative-Liberal Democrat's approach to fighting the deficit in the UK. Regardless the GBPUSD fell some 220 pips during Tuesday's New York session. The USD gained accross the board, however this was particularily seen in cable. The further USD gains could be attributed to the announcement that China will likely hike interest rates 3 times in the next 12 months, this is USD positive, this added fuel to the fire as the USD has gained this week so far due to the positive Non-Farm Payrolls and the fact that FOMC finally made the amount of QE2 clear, and this had already been priced into the markets. Also a poor US Treasury auction during Tuesday increased the risk aversion which in turn strengthened the USD, the equity indices also fell.

Text and speeches are a different type of news to trade. Generally the forex news trader must assess if the wording is dovish, which will weaken the currency, or hawkish which will strengthen the currency. Sometimes the words central bankers can use can be quite complicated as most of them have doctorate degrees in economics. However ultimately as the trader we have to trust the price we see, so if we can get a general idea of the text and see price confirm this we can usually enter a low risk trade and make pips quickly following the momentum of the post news volatility. Basically they changed from a more cautious tone to a more optimistic one.

Here is what was announced: (* = highlighted)
(UK) BANK OF ENGLAND QUARTERLY INFLATION REPORT: READY TO MOVE IN EITHER DIRECTION AS RISKS EVOLVE (REITERATES)
- 2012 GDP just over 3% v 3.0% Aug forecast

- Inflation:
*- Inflation rate to rise further in near term; risk to inflation forecast are to the upside
*- Near term inflation forecast higher than in Aug
*- Inflation rate to remain above target through 2011
- Without rate hike, CPI to fall below target in early 2012
*- Timing and extend of CPI decline uncertain, roughly equal chance CPI above or below target in 2 years.
- Notes a wider than usual range of views on inflation outlook.

- Policy:
- Forecast assumes key rate rises gradually from H2 2011

- Growth:
*- Risks to growth forecasts skewed to the downside.
- Annual rate of growth 2.5% in mid-2011, above 3% in mid 2012
- Forecast show GDP growth at just over 3% in 2 years, after slower growth in 2011
- Forecast based on market rates at 0.6% in Q3 2011, 0.7% in Q4 2011 and 1.2% in Q4 2012
- Spending review contained little news on economic outlook
*- Growth in recent quarters stronger than expected
*- Sees economic growth moderating in 2011, and picking up in 2012
- Unclear when exports will rise as strongly as expected

The main content of King's speech was then reported:
(UK) BoE gov King: UK recovery is dependend on the world economy; Output level like to remain weak
- Difficult to judge inflation outlook.
- Commodity prices and weak sterling to push up near term CPI.
- Level of output likely to remain weak.
- Has not changed view on economy since Comprehensive Spending Review (CSR).
- Largest risk is from external environment; exports have not picked up as thought they might.
- Decline in sterling may impact trade.
- BoE not pressured by foreign central banks to avoid QE.
- Has confidence in Fed reserve; critism of QE2 move by the Fed is bizarre.
- Not accurate to say MPC disagree on impact of budget cuts; people should not be nervous on range of MPC views; all MPC members believe there will be a modest recovery.
- UK housing market not the top on list of worries, the world economy is; UK housing surprisingly buoyant.
- Sees some signs of weakness in house prices; only 5% of home owners in negative equity.
- Comments from BoE members Posen and Miles should not be viewed as favoring CPI overshoot v undershoot.
- Commodities not showing impact from US QE2.

In the Profitmongers live Futures and Forex News Trading Room, we could not spike trade the initial 50 pip spike seen on the GBPUSD when the news first hit the wires. Automated language processing computers can analyse this news text faster than us humans can read it...I will have to dig out a link which gives a peek at the kinds of things some advanced quants are doing in this field. However it does not take a Ph.D in Computational Linguistics to see that after this initial spike there was a pullback to the 50% retracement. Then the GBPUSD's price started to move up off around the 1.6020 level, putting in a strong 1 minute up bar about 5 minutes after the release. This is where we got a live forex trading signal to buy the GPBUSD. Initially heading back to the former spike highs at 1.6045, it quickly hit the mid-handle level of 1.6050 where we covered half and moved up our stoploss to breakeven. So 30 pips in basically 4 minutes. Prices then went sidewise for at least 15 minutes, reaching as high as 1.6065, during which a confirmation of news yesterday concerning Chinese interest rates came in, which the People's Bank of China (PBOC) announcing a hike of 0.5% in the Reserve Ratio Requirement. Generally higher Chinese Rates equals stronger USD, so we covered the rest here, and it may have even been a signal to short...but the move was short-lived as this was expected anyhow. Regardless the GBPUSD came back down to the former spike high of 1.6045 giving potentially another entry long, this time reaching the 161% fibonacci extension of the intial spike, and after another slight pullback, reaching the 1.6100 handle.....all in all a fabulous afterspike opportunity regardless and an excellent day with the earlier gains on the EURUSD during the London Open.

Norway CPI - fibonacci afterspike

Always good to keep an eye out on the Scandinavian News - the Norwegian and Swedish Kronas (NOK & SEK). This morning an hour after London opened the CPI figures for Norway came out. Normally a deviation of about 0.2 would have been good for a taking a news spike trade using the Secret News Weapon auto-click software. There are 4 figures that come out on this release, monthly and yearly figures for headline and underlying. There is not a reliable source of past price action for this release, but generally the monthly number is the one to follow. The headline y/y number did have a -0.2 deviation, but the other 3 were just -0.1, so at least all the figures agreed. There was also a PPI number which also came out negative. The numbers did trickle in over the news feed, so waiting for all the numbers to come out was the safest option. Here are the numbers:


*(NO) NORWAY OCT CPI M/M: 0.1% V 0.2%E; Y/Y: 2.0% V 2.2%E
- Oct CPI Underlying M/M: 0.0% v 0.1%e; Y/Y: 1,0% v 1.1%e
- No revisions

*(NO) NORWAY OCT PRODUCER PRICES INCL.OIL M/M: 0.5% V 0.1%E; Y/Y: 18.0% V 19.7% PRIOR

Initially the EURNOK shot up 100 pips, this pair can have quite a wide spread, even on an ECN broker, the spread is 25 pips, and some bucketshop it can be worse. However a fib drawn over the initial spike shows a very nice 61% pullback and then extension to the 161% for nearly 150 pips....this would be worth paying the spread.

London Open Trade in Profitmongers Room

We bought the EURUSD just after the London Open this morning Wednesday Nov. 10th. EURUSD had a big drop yesterday during the New York session, and although a further drop is possible, it seemed more likely that some retracement was due. So far this week the USD has gained some after the good Non-Farm Payroll numbers this past Friday, also with last wednesday's FOMC out of the way, the amount of QE2 is now clear. The initial reaction to the FOMC was to sell the USD and the EURUSD nearly reached 1.4300, however the market has been anticipating this move by the Fed, and most of this QE2 was already priced in. Additionally there has been a refocusing of the markets attention back to the problems in europe, with the situation in Ireland in particular focus. The eurozone peripheral bond spreads (Greek-to-German,Irish-to-German,Portugal-to-German) have been widening, and yesterday saw the 1st drop in 3 month Euribor fixing in 31 sessions, and today we saw this drop continue.

Just before London opened there was news that the Bank of India was seen in the market buying EURUSD. Yesterday they were seen buying the Euro as it dipped from 1.3880 to 1.3825, actually coming in at 1.3850. The rally then got going after the UK Industrial Production was out of the way, and reached 1.3970 by the early New York open. So today they came in around 1.3785, but we were not going to jump in right away after them...instead the EURUSD dropped to 1.3765 and put a nice long lower wick candle 11 minutes after the open and started to move up off this...this is where we bought and targetted the handle, taking profit along the way and moving up our stop loss.

API Petroleum Inventories - Crude jumps higher

We reported the move on the Crude Futures last week on this news data. It has been giving great news trades. Unfortunately we was not around to trade this last night as it is release just around dinner time here in London. However it really should be focused on more, but since the data does not always get released on time, perhaps it is best handled with a straddle or bracket order. This number is seen the evening before the main numbers out of the Department of Energy or DOE, which are the most important weekly energy inventory numbers. This number can often give the market a clue as to what the DOE will report the next day, however the numbers frequently come out conflicting with 1 high and the other low, and DOE takes preference - it is a bit like

Tuesday, November 09, 2010 21:30:05
*API PETROLEUM INVENTORIES: CRUDE: -7.4M V +1ME; GASOLINE: -3.5M V -1ME; DISTILLATE: -4M V -2ME; UTILIZATION: 84.3% V 82.1%E
- Cushing crude inventory: -950K to 31.86M barrels

Risk aversion had hit the markets during the New York session and equities & commodities were all lower and the US Dollar was stronger...This report occurs about half an hour after the New York Stock Market close, so liquidity can be low, but it is not watched by many, and as you can observe in the chart. A bracket order 10-15 pips above the market, or possibly entering after the initial 10 second bar would have still yielded the trade at least 40 ticks without 1 red bar. The numbers show that there was a draw on petroleum inventories, expected at +1 but coming in at -7.4, a very big deviation. Less supply equals higher prices and that is why the Crude Oil Futures Contract went higher.