Mixed Signals From The Fed Continue To Rule The Markets

Wall Street equities tumbled yesterday amid renewed worries about when the Federal Reserve might curtail its bond buying program. The sell-off comes one day after Dow closed at a record high as investors cheered upbeat reports on home prices and consumer confidence. But concerns that the Fed might scale back its stimulus policies as the economy improves weighed on the market on Wednesday. Dow Jones fell 106 points, or 0.7%, erasing the previous day’s gains.S&P 500 sank 0.7% and NASDAQ lost 0.6%. Stocks briefly pared losses on Wednesday afternoon following a speech by Boston Fed president Eric Rosengren. Echoing Bernanke’s comments, Rosengren said withdrawing stimulus too soon would hurt the economic recovery. But he reiterated that the Fed continues to monitor incoming economic data and stands ready to increase or decrease the pace of its bond buying. This morning Asian markets are taking cues from the US exchanges with the Nikkei and Hong Kong in the red.

Germany’s consumer confidence has improved from the last month. This supported the euro which moved up by 0.66% against the dollar, posting a positive close at $1.2941.  The US mortgage application declined to 8.8% from 9.80%. This supported the downside in the US markets and the dollar index. The dollar index fell 0.52% against the majors to settle at 83.66. Economic data anticipated from Europe in the form of economic, industrial and consumer confidence may support gains in the euro. The US will release its first quarter GDP data which is expected to improve and may limit the dollar’s losses in the NA session. Eurozone bonds fell across the board on Wednesday, on concern about a potential scaling back of US economic stimulus that has kept financial markets afloat. The European Central Bank, which shored up the eurozone last year, needs to act again to lift the bloc out of recession, the OECD said on Wednesday, calling for bold steps beyond just interest rate cuts.

Across the Pacific, Bank of Japan Gov. Haruhiko Kuroda said no financial system was immune to a possible crisis, and that the global economy hasn’t yet completely shaken off the effects of the global financial crisis. Mr. Kudora has spent the days since Thursday’s 7.3% decline in the Nikkei trying to explain the BoJ position and that bond yield gains were expected and within the banks estimates. He is trying to quell global worries over the aggressive monetary program adopted by the bank and the government.  The JPY is trading at 101.24 off its lows of 103. Exporters are hoping that the yen will remain weaker as they reap the profits and support record highs on the Nikkei. 

EUROPE UPDATES

        ROME--The European Commission Wednesday urged Italy to keep its budget deficit below 3.0% of gross domestic product in 2013, as it announced that Rome would be released from the European Union's Excessive Deficit Procedure.
        In an important addition, the Commission also recommended that Italy make budget-neutral efforts to shift the tax burden away from labor and business to consumption, property and the environment. It even noted that a property tax on primary residences that was temporarily suspended by the new government would need to be paid in full if the legislature can't agree on an overhaul of the national real estate taxation system.
        The Commission also recommended that Italy bolster provision of child-care service and even tweak the tax code so that second earners, someone other than the main earner in a household, aren't discouraged from seeking employment.
        It also urged Italy to find a solution for the non-performing loans on banks' balance sheets, as well as to further promote the development of capital markets--especially for equity--to help local companies access finance.
        The recommendations, like the decision to allow Italy to exit the Excessive Deficit Procedure, will be voted on at a future date but the Commission's decisions are typically approved.
        Dow Jones Newswires

        May 29, 2013 08:59 ET (12:59 GMT)

We all want to believe a recovery is here, but indicators are that it's not. We're getting swindled again by banks and politicians

After five years of unemployment, government deficits and financial struggle, every American wants to call it a recovery and call it a day. That's why some optimistic economic data this week seem to have messianic importance, in the ever-optimistic belief that higher consumer confidence and rising home prices will deliver us from economic evil.

But if evil has one power, it is the power of illusion, to mask reality. And, in this case, that is also the power of the positive economic data.

Take the consumer confidence numbers, which are measured every month by the Conference Board and act as one of the more foolish hinges on which to hang our hopes. Consumer confidence in May jumped to 76.2, on a scale of 100. In the popular interpretation, that indicates that consumers believe the economy is improving.

It's also an object lesson in the silliness of believing in the validity of consumer confidence. As history shows, countries and people have long been confident when they had no reason to be.

For instance, the consumer confidence numbers themselves are not as confident as they seem. As Michael Santoli at Yahoo Finance points out, the average consumer confidence number during a recession is about 79, and even with our recent boost, we're still lagging below that low bar.

There is more evidence that Americans lack psychic economic ability. The May data shows the highest measure of consumer confidence since February 2008. That was a time in which a housing crash was already well underway, and only a month before before Bear Stearns collapsed and confirmed that the country was in a financial crisis. At least six months before that, in August 2007, three major hedge funds invested in subprime real estate had to be bailed out by the French bank BNP Paribas, and the Federal Reserve and other central banks started pumping $300bn into the global banking system. Any collective confidence back in February 2008 was foolish and unwitting of the crisis that had already started in the higher rungs of finance.

Similarly, the idea of a strengthening recovery is out of step with some bubblicious activity, including the dubious and sudden rise in housing prices. 
Housing prices have risen at the fastest rate in seven years, as the Case-Schiller Index of national housing prices showed today. However, the sources of that rise - as with all sudden booms - are dubious. While house prices are rising, incomes, purchasing power and lending are not keeping up.

The housing recovery, for instance, seems to be just another stage of the foreclosure crisis. Note that the areas where house prices have risen the most - Arizona, Las Vegas and California - are all areas that were hurt most deeply by the housing crash. So pry between the boards of the housing recovery and the termites start crawling out. Here, you'll find some old villains of the last housing bubble, crawling on the same properties. There are the house-flippers and the financial institutions, the foreclosure players that regenerate whenever there is a boom.

In this case, they may be creating the boom themselves. House-flipping in California has reached levels not seen since 2005, according to the Wall Street Journal. This rise in price is, by all accounts, artificial. Housing, like all products, responds to the laws of supply and demand. When supply decreases - when there are fewer homes on the market - then prices will rise. This is what is happening now.

There is evidence that lenders are controlling the housing supply by reducing the number of houses for sale. Last year, AOL Real Estate's reporting suggested that as many as 90% of available properties were not even really on the market, but just polished for sale and being held back to keep supply low.

Then, last month, three major banks, including Citigroup and Wells Fargo, halted all their sales of homes in foreclosure; this also reduced the supply of homes on the market. The reduction in housing supply, then, is largely artificial, designed by the banks and institutions that hold thousands of houses and thus have the most to gain from higher house prices.

The result is what looks like a housing recovery to the rest of us, but is, in fact, something of a trap. Fitch, the ratings firm, issued a warning that the alleged recovery in housing is moving too fast and could reverse.

There is one thing that housing prices do accomplish, however: the so-called "wealth effect." Along with a booming stock prices, higher property values make people feel rich. This then encourages them to go out and spend money.

There are enough problems with the wealth effect idea, but let's leave it here: spending real money based on vaporous paper wealth is unwise. Household debt is still high and savings are still low, which has been a persistent problem in the US for years. Median household incomes have collapsed since the recession, indicating that most households are making do with less money.

According to Robert Reich: Another topic that's not being talked about: Half of working Americans now earning less than they did 10 years ago, adjusted for inflation.

This is nothing new; it's just more visible in this un-recovery. You can see by this handy income-distribution chart that over the past 44 years, middle-class incomes have barely budged. So it's fair to say that if people are spending more, they're likely to be shelling out money they don't necessarily have (in the form of credit cards, for instance).

That makes sense. There is a persistent unemployment crisis in the United States that has gone unaddressed by either Congress or corporate America. Around 12 million people are unemployed, about 40% of whom have been out of work for six months or more - rendering them unemployable in the near term. Poverty is rising so that nearly 15% of Americans are on food stamps. Ben Bernanke, the chairman of the Federal Reserve, didn't bother to pretend the recovery is particularly robust.

Still, why should we question good news? Even if a recovery is made of vapor, it can make people feel good. So why not believe in a recovery if it makes us feel better?

The reason to maintain skepticism of good times a-coming is that an economic recovery can – and is – used to package a lot of political snake oil. As long as people believe in a recovery, Congress can keep ignoring the unemployment and equality crises and enjoy ginning up imaginary problems like the plague of corporate tax rates. If Americans believe in a recovery, CEOs can keep claiming that they don't need to invest in the United States or hire American workers.

A recovery allows real estate agents and banks to tell Americans that they can't borrow money for the home they want, that they can't participate in the housing market, while wealth private investors scoop up as much as they can. A recovery allows lawmakers to pretend that their destructive policies of deficit cutting and austerity were productive, rather than destructive.

A mythical recovery, in short, gives cover to a lot of irresponsible people hoping that Americans won't look behind the curtain.

There is a momentary discomfort in realizing that the recovery is weak. When the absurd illusion of a "better economy" is gone, lawmakers and CEOs may be forced to stop believing in the myth of a good economy and actually start working to create the reality of it.

Source: http://www.guardian.co.uk/commentisfree/2013/may/29/economic-recovery-not-real#ixzz2UgiyogKK

HEIDIMOORE

If you’re reading this you’re probably struggling to make money in the markets and maybe you've even recently experienced a painful losing streak. Right now, trading seems “hard” to you, you doubt if anyone out there really makes consistent money from trading, and maybe you even feel like you want to give up. I know that you might be feeling this way right now because above all else, I’m a trader too, and I've felt what you’re feeling before. How did I move past all these negative feelings and finally attain success in my trading? To put it quite “simply” (pun intended), I simplified every aspect of my trading.

Before we proceed, I know you might be thinking the whole “simplify your trading” thing sounds cliche and that you've “heard it before” from me, and whilst that might be true, it does not change the significance of it. Most traders are their own worst enemy in the market, and no matter how many different ways I say that, it’s important to accept it and then to change it. Here are three very simple steps to simplify and improve your trading that you can begin implementing right now…

Step 1:- Work on your attitude towards trading and life in general

One of my all-time favorite authors, Napoleon Hill, said that a “Positive mental attitude is the right mental attitude in all circumstances. Success attracts more success while failure attracts more failure.”

It’s one thing to hear the word “attitude”, people talk about it every day, but what does it really mean and how does it apply to your trading? A trader’s attitude refers to both his or her mental state of mind and the way he or she conducts their trading activities. It may sound slightly boring or even repetitive to hear someone say you need a “positive mental attitude”, but your attitude is probably one of thee most important factors that determines your trading results (both profits and losses).

Do you think when a person joins the Army, Navy or other armed forces that they are instantly going to conform and have their “shit” together? No new recruit enters the armed forces with the perfect attitude that they need to thrive there, they get shaped and molded over time through constant teaching from their superiors. When you enter the trading “battleground” it is no different; you are very unlikely to have the correct attitude and trading mindset right away. Instead, you need to make a DRAMATIC attitude shift; you can’t just sit around being the “same old you”; you have to reinvent yourself if you’re going to make it in this industry.

• What are the attitudes of great traders?

The attitude of a great trader is the result of someone with a generally happy life already. If you aren't happy at home you won’t make money trading at home (or trading at a CCD, or anywhere else for that matter). It sounds cliche, but you really need to “get your own house in order” first if you want to make money in the markets. People who aren't happy at home tend to think they will somehow “turn their lives around” by making a lot of money in the markets. However, as Napoleon Hill would agree with; your mindset and attitude determines your success or failure in any endeavor, and it’s no different with trading. Too many traders look to trading as a way to “fix” their lives or “escape” the job that they hate, but they are unaware that by looking to the market for these things they are already forging the wrong trading attitude and mindset.

Trading should not be something you view as a way to “fix” yourself or your life, but as a tool you can use to generate money AFTER you are already mostly happy and content…don’t look to the markets for your happiness, that’s something you have to find elsewhere. The reason why it’s so important to be content with your life prior to trading is because whatever you are feeling will generally be reflected back to you in your trading. If you’re angry, depressed or sad, you are not going to have enough self-control or self-respect to be able to stick to a trading plan or manage you risk properly.

Thus, great traders are people who already have their “shit” together for the most part. I’m not saying you should already be really wealthy before you start trading, I’m just saying you should be a generally happy person and not feel like you “need” to trade to fix something in your life or to be happy. The less you feel like you need to trade the less pressure you will feel and the more clear and crisp you mindset and attitude will be as you trade the market, and this gives you the best chance to make money.

• How to develop the right trading attitude

Attitude develops out of routine…in fact, everything develops out of routine…cigarette smoking, gambling, etc…all of these things develop from a repetitive routine, and repetition turns into habit and habits are very hard to break, as you probably know.

The good thing about attitudes is that just as we can develop bad ones from routinely doing bad things, we can also develop good attitudes from good routines. For example, if you try to surround yourself with positive thinking people, you will probably start to become more positive yourself. Changing your attitude towards trading and life in general begins with changing your negative self-destructive routines. Whatever these self-destructive routines may be (you know what they are), the sooner you begin to change them the sooner you will start developing the attitude you need to become a successful trader.

Changing your attitude towards trading and life is totally within your control. Much of the reason you’re probably losing money now in the market is because you have a bad attitude as the result of self-destructive habits and routines. Feeling angry at the market and over-trading because you feel like you need to make back lost money is a really bad attitude and will result in even more losses in the end.

If you reinforce positive trading routines you’ll become addicted to them and this will naturally grow the right trading attitude. Do whatever you need to do to make this happen…put yourself around successful traders more often (whether it’s online or offline), learn from mentors like myself, become sickeningly disciplined and almost obsessive about changing your attitude and you will soon see improvement in your trading.

Step 2:- Become a “Miser” trader

Sometimes being a “cheap” or “tight” with your money, is a good thing, sometimes not. In regards to trading, it’s typically a good thing because it simply means you’re being conservative with your capital and not wasting it on stupid trades that you know aren't part of your trading strategy.

There have been scientific studies that show that women typically make better traders and investors than men because they are less likely to make testosterone-fueled trading decisions that men tend to make. Unfortunately for the ladies out there, men seem to be more attracted to trading and I feel like many women who would be good traders miss out on the opportunity because of the stigma that trading is a “man’s” profession. Ladies, this is your wake-up call…you have a NATURAL ADVANTAGE in trading the markets, get interested!

In fact, most men who lose money in the markets do so because they take too big of risks, in other words they aren't frugal like more women tend to be. Don’t get me wrong, I’m not saying that women don’t take risks, because clearly you have to take on risk if you want reward and many women do indeed do this. However, women do tend to make more calculated trading decisions and tend to be more frugal with their trading capital than men, and this is a very good thing that works to their advantage.

Thus, the second step to simplifying your trading is to be a “tight” in the markets. Be very careful with your money and don’t ignore the risk of losing your money every time you trade. The way to build your trading account is to do it slowly over time; you hit a big winner here or there and it pushes your equity curve higher, the key is that after these winners you have to be very careful and “tight” with your trading capital so that you don’t give all your profits back…then eventually you’ll hit another nice winner. This is how to successfully grow a small trading account over time, but it can’t be done if you’re not a tight-ass with your trading capital.

Step 3:- Give complex trading methods a “wide berth”

Finally, perhaps the easiest step to simplifying your trading is to just ditch complex trading methods like Elliot Wave Theory, Gann, Indicators, the position of the stars, etc, etc. These trading methods are not necessary and they will probably hurt your trading performance much more than help it. It’s always been amusing to me that the easiest part of trading…analyzing the chart and finding a high-probability entry, is the part that traders make the most complex. It’s critical that you trade with a simple strategy like price action so that you aren't unnecessarily confusing yourself and so that you can see clearly what’s happening on the chart. Trading in a simple de-cluttered manner like this is critical not only to accurately see what the price action on the chart is doing, but also to develop the correct trading mindset and attitude that we talked about earlier.

If you are currently using a complicated trading method and you want to simplify your trading, follow the steps discussed above and checkout my trading course for more information.

Market in a small range trade accordingly

Gold prices were up after weak economic data from China raised fears of stagnant growth in the world’s second largest economy and boosted gold's safe haven appeal. Chinese data since the beginning of the month has been on the lackluster side, missing high expectations as Chinese official’s projected much higher growth rate after its recovery. Officials had great expectations after the economy had turned around. Gold is trading at 1392.75 this morning remaining on a positive note as the US dollar eased to trade at 83.75 after topping 84.40 range on Thursday. The performance of China’s manufacturing sector, measured by HSBC’s purchasing managers index, was shown to be worse than expected at 49.6 rather than forecasts of 50.4. China’s factory activity shrank for the first time in seven months in May as new orders fell, a preliminary survey of purchasing managers showed, adding to concerns that a recovery in the world’s second-largest economy is sputtering.

The flash HSBC Purchasing Managers’ Index for May fell to 49.6, slipping under the 50-point level demarcating expansion from contraction for the first since October. The final HSBC PMI stood at 50.4 in April.

Gold rose sharply towards $1,400 per ounce, as investors sought its safe-haven status after the dollar and equity markets were hit by a slew of weak manufacturing data that indicated stagnant global economic growth.

Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,018.57 tons, as on May 23. ETF investors remain sidelined, and without their support it will be difficult for gold to hold on to the gains. Earlier in the week gold tumbled to test the 1321 resistance level and was unable to break through giving investors some support as they pushed gold to trade over 1400.

Silver holdings of ishares silver trust, the largest ETF backed by the metal, declined to 10,022.95 tons, as on May 22. Silver is trading at 22.513 and remains in the green this morning as investor take advantage of low prices and the weaker US Doller to grab up the commodity.  The US dollar slumped and the yen soared on Thursday, as expectations that the Federal Reserve could soon reduce its bond purchases sparked cascading sell-offs in Japanese markets, resulting in a fierce short squeeze in the yen.

The US dollar index, a gauge of the greenback’s movement against six other major currencies, dropped to 83.723 from 84.251.

Copper futures fell the most in 3-weeks on COMEX, after manufacturing shrank for the first time in 7-months in China, the world’s biggest user of the metal. Copper futures for July delivery closed down by 2.3% at $3.304 on the COMEX division of the NYMEX. Copper prices were down after weak Chinese manufacturing activity adding to fears that recovery in the top metals consumer was weakening which could hurt demand for industrial metals. Manufacturing activity in the United States grew at its slowest pace since October, which further put pressure on prices. Base Metals are expected to move in a range due to continued supply concerns from mines which can cape the prices from falling further.

Gold is trading at 1386.05 gaining 6.35 in the Asian session. This is the usual course of action, gains in the morning to give these back in the European session. Gold futures declined by 1% in the international market as equities market rallied, driven by encouraging US home sales and consumer confidence data which reduced bullion’s safe haven appeal.

Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,012.25 tons, as on May 28. As long as hedge fund managers and money managers remain out of the markets and the ETF’s continue to decline their holding there is little help for gold to return to and uptrend. Gold’s only support seems to be traders betting on the FOMC decisions at their June meeting.

The US Doller outperformed most of its peers on Tuesday, as data showed Americans are the most confident about economic prospects in past 5-years. Ongoing positive eco data, the more likely that the Fed might begin tapering its asset purchases in the near term.

Silver recovered in early trading to 22.29 supported by the climb in gold, but more so on the strength of the US economy and the hopes for increase demand for industrial metals. Copper climbed with other base metals, after strong US housing and consumer confidence data lifted prospects for rising demand in the world’s biggest economy although gains were capped by a stronger dollar and concerns over Chinese growth. This morning the IMF downgraded its outlook for China, lowering its growth for 2013 from 8% to 7.7% based on global demand for Chinese exports. Copper is trading at 3.304.

Crude oil prices traded positively supported by worries that the escalating war in Syria might spark more strife in the Middle East, which accounts for almost a fifth of the world’s seaborne crude oil supplies while positive data’s from US added further support. Crude oil is trading at 94.81 this morning after closing above the 95 price level. Traders will wait for inventory data from the EIA which was delayed a day due to the Memorial Day holiday in the US.  US data today, includes mortgage applications and the Fed’s Redbook. Crude oil traders will be closely watching for the API releases. The API is expecting a decrease in crude stocks by 1.2million barrels.

Natural Gas gave back close to 8 cents over the past day to trade at 4.22 after its break above 4.30 triggers many sell orders. Natural gas futures dropped for the third session in a row, as forecasts for below-normal Mid-west temperatures early next month signaled reduced demand for electricity to power air conditioners.