Trade Team Update

Today was what we call the calm before the storm... not a whole lot of volatility or liquidity in the market as the banks are likely waiting for bigger data tomorrow and throughout the rest of the week...

Just a few things to re-cap... the Dow made some more weird moves today which also helped keep the EUR/USD in standstill mode, plus the 10-year yield made a 12-point move to the topside, which was USD supportive against the EUR.

This morning's housing data came as no surprise at all -- some of the worst data since 1999... and the only reason we slightly beat expectations was because median home prices dropped from $207,000 to $201,000 month-over-month.

Homeowners are slashing prices to move inventories, and for reasons like that the dollar will not be able to gain on the euro with better than expected headline numbers -- and this is a valuable lesson of why we do not typically "trade the news" or trade a specific data number... we have to do things how the banks do them, which is dissect the data, break it down, look at all data points, and come to a proper conclusion and evalutation on a bigger picture scale...

Making a knee-jerk reaction to a number and making a knee-jerk trade based on a number or a deviation of a number is about one of the stupidest things you could do in this market... it's not always about the headline number and taking a trade off of that will just get you stuck in a dumb trade most of the time...

Some people who don't understand how we do things and how we trade the market accuse of just being "news traders." That couldn't be further from the truth -- being a fundamental trader is not the same thing as being a news trader -- not even remotely close, not even in the same ballpark or in the same universe...

Tomorrow's Fundamentals:

In case you hadn't noticed, tomorrow is a mega, massive fundamental day... lets take a look at the most important stuff for tomorrow...

First up to bat is German IFO -- IFO is incredibly important tomorrow because this data will show the overal sentiment and views from various businesses, manufacturers, retailers, construction companies, wholesalers, etc. in the Eurozone's largest and most important economy. We'll get to see if those firms are concerned about economic conditions in the Eurozone or if they have a peachy outlook on the future...

Based on some data we've seen the past few weeks, I believe we could see a bit of downside surprise with this IFO... specifically, Industrial production and output has slipped this year. Plus, German workers are demanding wage hikes. But what would be positive for the euro is if those firms are still freaking out about inflation, which is normally the case in Germany...

I can't predict exactly how the data will print, but based on my research, we should see the data come in softer than the previous month...

Next up to bat is PPI -- with inflation now just starting to come back into focus in the U.S., PPI will be incredibly important tomorrow... if producers and manufacturers are paying more for the materials they need to produce, those prices get based on to the consumer, and this price instability causes inflation, and inflation is GREAT for a currency!

It's my belief we could see USD+ PPI number print and possibly even a USD+ upward revision to last month's PPI number... again, I'm not in the business of making predictions, but based on my research of the markets and inflation specifically, if the truth is to be told tomorrow, PPI has to come in as expected or hotter than expected...

Next up to bat is Case-Shiller Price Index -- this is not so much of a market mover and will not come under too much scrutiny tomorrow, but it's a respected piece of data, so of course we need to watch it and analyze it... bottomline, it should show what we and the markets already know about the housing situation -- I do not expect any upside surprises on that one.

Next up to bat is Consumer Confidence -- is the consumer confident? Heck no. The consumer is not borrowing money and not putting goods on credit -- they are either maxed out or freaked out or put out...

Once again, based on what I see happening in the consumer and retail sector, there's really not much optimism or hope -- that being said, if we see something like an upside surprise with this data and a hot PPI print, I believe the USD could certainly get some love tomorrow...

Batting at the bottom of the order -- House Price Index, Richmond Fed, and Fed Kohn speaking... but, who really cares, we got PPI tomorrow!!!

Seriously though, Kohn is going to talk about economic conditions and possibly about monetary policy... so, prepare accordingly... the Fed has been bi-polar on growth and inflation...

EUR/USD Trading:

There's no real price action to gauge the market with, we're in too tight of a range... I'm headed into tomorrow's cavalcade of news by not taking on any new trades I can't get out of by the time Europe opens... practicing strict risk and money management for tomorrow...

I urge you not to get yourself into an overleveraged situation tomorrow -- there's a higher probability we could see heightened volatility and price swings, so trade smart should this play out in the markets...