NFP-Sidelined?

BarroMetrics Views: NFP-Sidelined?

Syria, the meeting with Xi Jinping, the Russian probe (& Rice)….! All vying for our attention. It’s easy to forget that there is a piece of news out tonight, 20:30 HK time that may push all of the geopolitical news aside, the NFP.

It’s important to bear in mind that the Trump rally has been attributed to a belief that he’ll be able to pass legislation that will reinvigorate the US economy. His failure to get consensus on the Ryan Health Bill shows how difficult the passing of tax reform, infrastructure spending, etc. will be.  The more that time passes without signs of progress, the more likely that US stocks will head South.

On top of all that we have seen two vacancies appear in the past few days:

  1. Daniel Trullo (voting member, dove),
  2. Jeffrey Lacker (non-voting, hawk).

Given this background, what sort of impact will today’s NFP provide? As always, it needs to be a number outside consensus range. Figure 1 shows the data from Nasdaq’s Economic Calendar. I have also included the ADP numbers that were released on Wednesday. Why?

There is an interesting relationship between the ADP and NFP: the NFP tends to follow the ADP progression of a month-to-month comparison. On Wednesday, we saw an ADP number of 263,000 for March down from last month’s 298,000 (Jan’s was 246,000). The 263,000 was much larger than consensus expectations. For this reason, the pundits are suggesting that we’ll see a larger than expected NFP of 175K.

My view is, given the decline this month in the ADP (from 298k to 263k), we are more likely to see an NFP  number below 235K (last month’s NFP). And, given that the FED is determined to raise rates, we’ll see a number closer to 175K. In effect, we’ll have a ho-hum number. Ah well, back to the geopolitical factors.

Let’s see what tonight brings.

FIGURE 1 NFP Consensus

LOOM – WARNING

A warning from my good friend, Joshua Fong:

“How’s it going?

Just a note of caution that it appears the app can read everything you type, including passwords etc, even when you are not recording. Just saying…”
I missed the warning when I looked at the software. My aplogies.
?

Journaling

BarroMetrics Views: Journaling

Baz was kind enough to provide a link to a free video utility, ‘Loom‘. Baz’s suggestion is it would be a useful tool for journaling. My view, it should be, but most retail traders wouldn’t use it. I think for three reasons:

  1. Journaling that acts as a learning tool is usually time-consuming, especially if the initial recording media is a video.
  2. Even if kept, most retail traders, don’t revisit to extract the info needed to improve.
  3. Even if they revisit and extract, often they don’t know what to extract.

The main function of keeping a psych and an equity journal: to have a database from which to extract lessons for future improvement. In a word, by keeping the journals, we know what to avoid and what to keep doing. In this way, we raise our skill level from ‘competent’ to ‘mastery’.

There are two steps in the process. First we ‘enter’ the data, second, we extract the lessons.

The ‘entry’ can take any form. We can write and take snapshots; we can video and extract the info, or we can use a combination of the two. What is important is we have the info, firstly to identify the qualitative factors (psych entries) that hinder our success and those that assist it; and secondly, to identify the objective factors (equity entries) that do the same thing.

With psych entries, we are looking at items such as the conditions under which we are likely to be disciplined and the conditions under which we won’t be e.g. following consecutive wins or losses.

With equity entries, we are looking for stats: Maximum Adverse Excursion, Average $ Win and Average $ Loss, Win and Loss Rate, etc.

Once have the info, you need to learn from the entries. For example, what has been the effect on my equity curve of ill-disciplined trading? It’s best that this info is displayed visually. Research shows visual lessons from trading journals have the best impact.

One of the main reasons I recommend Edgewonk is because it does all this seamlessly and mainly automatically. For a one-time payment of USD 169.00, it’s one of the best value tools around.

 

The US Divide

BarroMetrics Views: The US Divide

The article in the Wall Street Daily, “The Epic Divide in Consumer Sentiment” shows how divided the US is.

If you are a Democrat,  the Consumer Confidence is warning of a looming recession; if you are a Republican, boom times ahead!

I strongly recommend you read the piece and ask: “How will this divide affect the instruments I trade?”

 

 

A Nation Divided?

BarroMetrics Views: A Nation Divided?

Yesterday, I was watching CNN and Fox and could not help but be struck by the thought that, today, the US is hopelessly divided along ideological lines – Democrats and Republicans. Neither party or group seems to be willing to work towards getting the economy going and working past the Washington gridlock that passes for governing.

Let’s just take a quick gander at just one event: The nomination of Neil Gorsuch to the Supreme Court 

Gorsuch has been nominated to replace Antonin Scalia who died in February 2016. The Supreme Court is locked 4-4 since Judge Scalia’s death. By that I mean four of the judges are liberal, and four are conservative – think of it as a clash between judicial restraint (conservatives) and judicial activism (liberals).

Justice Scalia was a conservatist with a towering reputation and had placed a stamp on the Supreme Court during his tenure. With his death during Obama’s last term provided the Democrats with an opportunity to reverse the tide of decisions that they saw as going against them. (See for example The Simply Breathtaking Taking Consequences of Justice Scalia’s Death).

Unfortunately for the Democrats, the Republican-controlled Senate refused to hold hearings on Obama’s pick, Judge Merrick Garland because it was Obama’s last year in office.

That sets the context.

Let’s turn to the current situation.

Judge Neil Gorsuch is a judge in the Justice Scalia mold (See, for example In Judge Neil Gorsuch, an Echo of Scalia in Philosophy and Style). Yet in his nomination to the Denver-based 10 Circuit Court of Appeals, he had overwhelming Democratic support.

Today, the Senate Democrats will block Gorsuch’s nomination with a filibuster. The Republican’s have said if that happens, they will employ the ‘nuclear option’ and change the numbers needed for nomination from sixty (60) to a simple majority of 51. This tactic was first used by

This tactic was first used by the Democrats in 2013 to eliminate filibusters on executive branch nominations and federal judicial appointments except for those to the Supreme Court. The Republicans will now extend that option to Supreme Court nominations.  Given the House and Senate constitution, the nuclear option will guarantee Gorsuch’s nomination.

But, the battle has shown that there is little chance of the two parties coming together. This may have severe consequences on passing Trump bills that are not supported by some Republicans e.g. the Obama Health Care Repeal. One such bill is the Cross-Border Tax.

What does this mean for the stock market? The rally since the Trump election appears to be based on the sentiment that we’ll see the massive changes to lift US growth. This battle seems to say that this confidence is misplaced. How then will the stock market react when its expectations are dashed?

 

Wither S&P?

BarroMetrics Views: Wither S&P?

With Singapore seminar occupying most of my time, this blog has suffered. I’ll be looking to resume posting four times a week.

The S&P is, for me, in no man’s land.

After the Trump rally on Nov 9, I was looking for a parabolic wave 5 to end this structure.  That scenario was looking good until March 1. The subsequent down move was too strong for a parabolic wave.  So, I thought we might have seen a top – even though my price targets had not been reached. But, the move south from the reaction high at 2391.80 was too weak to be the start of a bear. And, so far, the move up has been anaemic.

I’m waiting for the market to give a signal in the form of a breakout above 2402 or breakdown below 2320.

Figure 1 shows the structure.

FIGURE 1 S&P 5-d and 18-d Swings

S&P Buy Triggered

BarroMetrics Views: S&P Buy Triggered?

Figure 1 shows the current position. On Monday, we saw a failed downside breakout. Today we saw an attempted upside breakout that did not quite measure up to my buy signal for three reasons:

  1. The close was too close to the middle of the range – I’d have liked a close at 2355 or higher (basis nearest futures month) – that would have provided a bullish acceptance bar.
  2. I wanted to see an acceptance bar above ‘A’ in Figure 1 (around 2356)
  3. On the 60-min chart: I don’t have a confirmed change in trend signal.  For me to say that the current downtrend in the 5-day swing has ended, I want to see confirmation of a change in trend in the 60-min, 5-period swing.
For all these reasons, I am still on the sidelines.

Let’s see what tomorrow brings.

FIGURE 1 ES Daily

S&P Sell?

BarroMetrics Views:  S&P Sell?

As expected, the preps in Singapore for the April 1 presentation is disrupting my blogging time.

Still, tonight I just had to post because the S&P in the European time zone is showing a bearish acceptance bar. If this continues into the US timeframe, we’ll have the signal I was looking for to confirm a top, a top that will mark a substantial decline – at least 15%.

Let’s see what tomorrow brings.

 

Presentations

BarroMetric Views: Presentations

My blog publication schedule may be disrupted March 22 to April 2.

I’ll be in Singapore for two presentations.

  1. On March 23, a presentation only for Oanda clients, the Elite Trader’s Club.
  2. On April 1, a public event – at UOB Kay Hian Auditorium, 8 Anthony Road:

“How to Leave the 90% Who Lose Money and Join the Winning 10%”!

At UOB, we’ll be looking to provide:

  • the knowledge needed to become successful and
  • the models needed to integrate that knowledge into a set of skills.

Also, there will also be some great giveaways:

  • Four high-quality books – among the best to help traders become better, and
  • A lucky draw for a mystery gift, one that has led to phenomenal improvement.

Needless to say, I expect the event to be highly successful. It’s certainly the case if our registrations are anything to go by. The auditorium holds 100, and we are more than half-full – we started the marketing just today!

If you’d like to attend, register at

http://www.barrometrics.com/ray-barros-trading-success-foundation

 

 

Learning from History?

BarroMetrics Views: Learning from History?

Is the mainstream press willing to learn from history? Judging from the Dutch and forecasts for the French elections, I don’t think so.

In the Dutch elections, the press was all agog about Wildes winning. Yet, in the polls, he was a long way behind; and if you surmised anything about Dutch electors, the probability of Wildes winning, on this occasion, was remote. After the result, the press proclaimed that sanity had been preserved and forecasted a similar result for the French.

Wait a minute guys and gals, didn’t Wildes’ party become the second largest party, netting 26 seats? I wouldn’t be writing off Le Pen on that outcome.

Turning to the French – first round April 23 and the second May 7.

The mainstream pundits are predicting a Le Pen-Macron win on April 23 and have all but written Le Pen off for the May 7 run-off (Google ‘who will win the French elections’ and you’ll see what I mean).

For the May 7 round, the Betfair Exchange has Macron odds-on to win at 20-21, with Le Pen at 13-5 (2.6-1).

The French polls remind me of Brexit and US elections all over again. The focus is off tangent. They seem to ignore the strong undercurrent of French sentiment against current French immigration policies. Le Pen is all for exiting the Schengen border-free zone while Macron is for keeping it. This is the most critical difference in their policies.

If Le Pen wins on April 23 and is at 2-1 or more for the May 7 elections, I’ll be tempted to have a friendly bet. At those prices, she is under the odds.