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Tuesday, November 16, 2010

NeverLossTrading - Financial Market Evaluation: Stocks, Bonds, Futures, Currencies, Commodities

The rising US-Dollar is not based on internal strength but on Irelands banking problem in the Euro zone. What will come next?

1. Currencies

Today, November 16, 2010, the key market influencer was the US-Dollar. So why did we see the Dollar rising. Not because of internal strength, but because of financial trouble in the Euro zone. After Greece getting bailed out it looks now that Irelands Banking system need the support of Brussels, which increases the overall amount of Euro floating and by that the Dollar in relation increases.

If we look at the dollar value it is composed of:

Euro 57.6%

JPY 13.5%

GBP 11.9%

CAD 9.1%

S-Krona 4.2%

CHF 3.2%

Others 0.5%

So when the Euro Drops, the US-Dollar Rises

2. US Economic Indicators

Basically positive, even so on a small scale, but the rising dollar made the market tumble today:

The National Association of Home Builders said its homebuilder confidence index rose to 16 in November from a downwardly revised 15 in October. Economists had been expecting the index to edge down to 15 from the reading of 16 originally reported for the previous month.

The Labor Department said its producer price index rose by 0.4 percent in October, matching the increases seen in each of the two previous months. Economists had been expecting the index to increase by a more significant 0.8 percent.

Excluding a jump in energy prices as well as a modest drop in foods prices, the core producer price index fell by 0.6 percent in October after edging up by 0.1 percent in September. The drop came as a surprise to economists, who had expected core prices to increase by 0.1 percent.

Meanwhile, the Federal Reserve said that industrial production was unchanged in October after falling by 0.2 percent in September. Economists had been expecting production to increase by 0.3 percent.

3. Stock Market

Wal-Mart (WMT) reported third-quarter net income of $0.95 per share, topping estimates for earnings of $0.90 per share. Sales came in at $101.2 billion, short of consensus estimates for $102.43 billion for the quarter.Wal-Mart also forecast fourth quarter earnings of $1.29 to $.133 per share, above the $1.28 per share mark forecast on Wall Street.

Home improvement retailer and Dow component Home Depot Inc. (HD) posted third-quarter earnings of $0.51 per share, just above the $0.48 per share estimates for the period. Quarterly sales totaled $16.6 billion, above the $16.59 billion expected for the quarter.

4. Bonds and Notes

The big sell off on Bonds and Notes continues and might have found a potential bottom today. Interesting how the market exited bonds so rapidly even so a big demand will be generated by the Fed, buying back $600 billion in Bonds.

5. Commodities

On the front of commodities, the rising US Dollar did his dues and we are showing landslides to the downside: Gold, Crude Oil, Wheat, Sugar whatever you touch is on run down.

6. Conclusion

All securities cannot run into one direction, one side has to give: Bonds or Socks, Stocks or Commodities. The dollar strength is theoretical and might find a top at 80 Cents (/DX Dollar Index).

Under any circumstances it is a good time for day trading and even so the overall direction is down, there might be a good opportunity for a short term rise of Stocks and Commodities with a sell at the Thanksgiving Week.

Good Trading !

Monday, November 15, 2010

Government Spending Drove the Recent Stock Market Growth

Government Spending Drove the Recent Stock Market Growth

Looking at the last 3 stock market uptrend’s we see the following:

A) 1996 – 2000: The time of the .COM Boom. All known and explained

B) 2003 – 2007 The time of world economic growth boosted mainly by Asia/Chinas development

C) 2008 – today Markets are driven by massive government/deficit spending allowing for:

• Solid corporate earnings

• High unemployment

What is going to come next?

Let us first describe some key market facts:

The $600 billion of government money will flow into the market over the next 6 month. The stock market already advanced this action and so there will maybe be another little move to the upside, but not a massive one.

The technology companies who were the driver of the stock market growth: AAPL, NFLX, GOOG, AMZN are partially getting under pressure where to find new market places for their offering:

- How many more iPhones can you sell. So where is the next wave for Apple Computer.

- How many move videos can you consume while you have the internet, Xbox and movie on demand by the cable and satellite company. So why should Netflix grow?

- Google is getting under pressure by Facebook targeting the massive advertisement incomes Google made and with that one of the most overweight internet champions is having an interesting time ahead of them.

By having free money and being able to sell bad mortgages back to the government, Banks are comfortable in not lending. They enjoy a high margins with the loans they get serviced. Mature markets like Banking usually have a tendency for consolidation and with that big banks will not grow through business expansion, but acquisitions of local and regional banks. By banks not lending, growth through consumer and corporate deficit spending is limited.

Now we draw our conclusion:

We will enter a time of a sideways trend with high volatility, ending potentially in a bigger market revision, by all current growth being achieved through government spending that is not backed by the economy.

When we look at the VIX (Volatility Index)

We see a typical triangular pattern, which indicated a potential breakout in the first quarter of 2011.

As we know the VIX is inverse to the stock market and the breakout could be twofold:

- To the upside, with a downside revision of the stock market.

- To the downside, entering a sideways or growth market.

Looking at the trend over the last 60 months we would rather lean to a downside revision of the stock market with a rising VIX after the first quarter of 2011.

Hence we recommend to learn how to implement bearish and sideways market strategies to not get eaten up in the times ahead of us. as a premier institution for investor education has a fantastic program to prepare you not to lose but benefit in all market directions: up, down, sideways.

Good Trading,

Thursday, November 11, 2010

New Forex Regulations – Who takes the lead for Currencies: Futures or Spot?

With the new regulations for Forex that came into place the landscape for margin requirements changed (see our article: .
We made a first calculation comparing key features of the one towards the other investment vehicle.

See it yourself in the following table. There are various pros and cons, but they are pretty tight to each other now:

Some of the key pros and cons are:

EUR/USD Spot has the advantage of offering mini and micro accounts allowing the novice investors a playground where they can risk less money to test the markets. By offering more variability the spot market allows for better fine tuning on dollar investments.

Currency futures are regulated, there is always a trader on the other side of the contract. In the spot market, the market price is a theoretical calculation and your broker takes the other side of the trade, which is a scary thought for many investors.

All in all, spot and futures go hand in hand in their daily moves, while the spot market shows more spikes which can be an advantage or disadvantage.

Good Trading!

Friday, November 5, 2010

Deficit Spending Boosts the Stock Market

An interesting week got closed today November 5, 2010. After the FOMC meeting it got confirmed what we announce prior: The Fed is going to purchase $600 Billion of US-Securities through the second quarter of 2011. In addition it was announced that the Fed is planning to purchase $250 – 300 Billion in mortgages.

What does this mean:

An additional demand for securities enters the market and changes it. Money gets taken out of Bonds and Notes and needs to find a place to go and the stock market with high earnings of key players seems to be attractive for now.

Additional deficit spending and increase in the amount of dollars floating will sure keep the downward pressure for the dollar going. With a weakening, dollar commodities will see a nice surge and Gold at $1540/oz. is very thinkable.

The unfortunate part of this government sponsored stock market rally is, that it is not backed by any economy and with that might find its weak spots when the government bodies finished their buyback and bank relieve program.

At times we meet people complaining that the government should not get so much involved, and we always answer: take advantage of it with the right knowledge and care about what you have influence over, learn to trade the markets:

With the amount of money the Fed will spend, bad employment reports as we had them this week do not even affect on the market, but the problem is not going away and in the future we have to face that the US maneuvered into a long term 10% unemployment rate with no real preparation. The money used to buy back mortgages silly bankers granted prior will not help to put relieve to the huge unemployment challenge the US faces and when it gets obvious the markets might get ready for a bigger adjustment.

Looking across the pond we hear reports of filled order books in Germany and a reduction in unemployment. It looks like Europe is digesting their PIGS (Portugal, Ireland, Greece, Spain) while the us might be facing the PACAIL (PA,CA,IL) issue soon – by the way, PA is very comparable in its economy and population to Greece, not to talk about California.

Monday, November 1, 2010

Economy and Elections – What will happen to the Stock Market?

November 1, 2010 Let us take a moment and an outlook to what we see and what we expect:

Today’s News

  • Increased Chinese triggered by expansion of infrastructure projects: government spending or deficit spending.
  • The ISM Report (Institute for Supply Management) is showing that economic activity in the U.S. manufacturing sector unexpectedly expanded at an accelerated rate in the month of October to 56.9 in October from 54.4 in September. A growth that is in the range of any standard deviation and with that not much progress.
  • The Commerce Department reported that construction spending increased by 0.5 percent in September following a revised 0.2 percent decrease in August. Based on deficit spending.
  • The report also revealed that personal spending increased by 0.2 percent in September after rising by a revised 0.5 percent in the previous month. September's increase was short of expectations for a 0.4 percent increase.
Our Validity Check

At times with where little increases in the range of a calculation default lead to enthusiasm, we are looking at an index that tells us a comparison of bulk good shipped and booked, which usually gives an indication of what is coming in the next 3 months.


Because dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods, such as concrete, electricity, steel, and food, the index is also seen as an efficient economic indicator of future economic growth and production. The BDI is termed a leading economic indicator because it predicts future economic activity.

What do we see?

We are sloping down, which is not speaking for a great economic outlook.

As a result, be the elections how they are, the economy is still fragile and we are getting prepared for a market retracement in the near future and get ready for it:

How do we get ready:

Short term we are bullish:

Long Term we are:

- Not holding long term engagements in Equities

- Trading the Futures markets with defined stops

- Applying option income strategies above the highs of the indexes

- Trading currencies that will go with or against the stock market trend

You learn all this at: