Algo Futures Trending Now Issue 7 - November 17th, 2013

STRATEGIES FOR TRADING IN HIGH FREQUENCY MARKETS
Trending Now
Weekly Reacp
Hello Traders, Coming into this week the broad benchmark S&P 500 had sold-off below the most recent multiyear high at 1773 (1030-13) and pulled back to 1747 (1101-13). During the October 30th sell-off, we noted the market structure indicated that below the multiyear high (1773) initiated selling accelerated at the 1764-1762 price level. This week S&P futures encountered minor resistance as price auctioned and sold-off following several retracements to the 1764-1762 price level.
Algo Futures
WEEKLY NEWSLETTER | ISSUE 7 SUNDAY, NOVEMBER 17th, 2013 STRATEGIES FOR TRADING IN HIGH FREQUENCY MARKETS Analysis Prepared By: www.FollowTheBots.com Algorithms Powered By: www.sceeto.com Published By: www.AlgoFutures.com
FOR PROFESSIONAL TRADER USE ONLY
INSIDE THIS ISSUE

Similarly, we noted that the Follow-theBots volume analysis indicated support was located at the 3 day low going back to October 21st and re-tested on October 23rd at or near 1736. On Wednesday (11-06-13), S&P futures traded above minor resistance (1764) Read More...
THIS WEEK IN TRADES

MONDAY.3
Mondays Market Structure.....................3 Daily Morning Briefing............................5
TUESDAY6
Mondays Recap | Tuesdays Market Structure...................................................6 Daily Morning Briefing............................9
WEDNESDAY10
Tape Reading Lesson | Review of Price Sequence During Pullback

Lets review the price sequence during the pullback to 1758 (#5) and see what elements of the price structure would assist in determining S&P futures were not going to continue selling off and the low was likely to hold at 1758. 1766. The inflection point where the supply demand curve turned negative is indicated on todays chart.
2.) The breakdown below minor support
Tuesdays Recap | Wednesdays Market Structure.................................................10 Daily Morning Briefing..........................12 Wednesdays Recap | Thursdays Market Structure.................................................13 Daily Morning Briefing..........................15 Thursdays Recap | Fridays Market Structure.................................................17 Daily Morning Briefing..........................19
THURSDAY .13
FRIDAY17
ASIAN MARKET RECAPS20 EUROPEAN MARKET RECAPS26 DAILY MARKET RECAPS.30
1.) . The
exponential decline that preceded the third pullback to minor support (1762) started from the upper edge of the linear regression channel (#3) at 1768. The selling pressure accelerated at
(1762) paused after price traded two
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Market Insights Trending Now

Weekly Recap (Cont. From Page 1)
and auctioned up to 1770. On Thursday, S&P futures went on to re-test the multiyear high auctioning up to 1775 the initial Follow the Bots maximum likelihood estimate and the approximate location of stops loss orders above the previous high (1773). After trading up to probe for stops at 1775, S&P futures routed the trading range. S&P futures sold below the prior days low (1755), below the previous weeks low (1747); ended the session at 1747. On Friday, the selling pressure and subsequent rout of the trading range continued. S&P futures traded below Thursdays close and auctioned down to 1736, the price level the Follow the Bots volume analysis indicated as support, coming into the week. We have previously described a rout of at trading range as a ploy; i.e. a tactic intended to frustrate an opponent. The opposite of a rout is a rally. As rout relates to trading the market behavior can be understood as follows. This week we brought to our members attention the fact that the American Association of Individual Investors (AAII) Bulls to Bears ratio indicates investors are more bullish now than they were in late May and mid-July, when the market sold-off dramatically: i.e. rout of the trading range. An over bullish conditions is consider a bearish condition, because when all buyers have bought there are no buyers left. The NYSE margin debt is at a record high. As of September 2013 NYSE margin debt stood at a new record high of $401.2b and exceeded the prior high from April of $384.4b. The risk therefore is if the market drops and triggers margin calls, investors do not have cash and would be forced to sell stocks to meet the margin calls. This would exacerbate an equity market sell-off: i.e. a rout of the trading range. So, from a technical perspective, last week market conditions were ripe for a rout of the trading range.
Algo Futures | Trending Now Weekly Edition | Issue 7
In other words, a chaotic and disorderly retreat from the high would cause weak buyers (on margin) the opponent to abandon their position. This is a very clever tactic (ploy) used by those who are in a position to can manipulate a market. The starting point is typically a sensational news story to get more media attention and affect public opinion: i.e. the Feds is going to stop (taper) its accommodative monetary policy (QE). The Follow the Bots computational model measures a rout of the trading range by 2 times the daily average: approximately 32 points in the S&P 500. Thursdays sell-off, from 1775 to 1743 was 32 points. It should be noted that a decline of this scale occurs to often to be classified as an anomaly, outliers. Therefore, such events have to be factored into ones trading model. Following Thursday sell-off and the continuation we observed during Friday session, S&P futures reversed direction. The concerns regarding the Fed tapering vanished. The good news is bad news media headline; turn to very things is fine. Once S&P future traded down to the overnight low (1736), completing the rout of the trading range, price auctioning up through the prior days range. Previous sellers (large financial institutions) bought back their short (covered) and the S&P rallied into the close, ending the session at 1766. On Friday, support held at 1736. S&P futures traded above the prior weeks support (1747 and re-tested the overnight high at 1752, before pull-back to Thursdays low (1743). There was no re-test of the blow-out low at 1736. Follow the re-test (pull-back) to 1743, the short covering began. The slope of the Kalman filter turned up or the 14 tick range sample (chart) and S&P futures traded up to Thursdays breakdown point at 1762. The was a minor pause, but late in the day, the short covering continued into the close.
Sunday, November 17th, 2013
MONDAY
Mondays Market Structure
Coming session into Mondays From the 1762 price level the maximum likelihood expectation estimate is 1782. Stops are now located approximately at 1777. The same criteria, discussed last week with regards to a break-out apply. When the buy programs waning occur at the high and the digital filters turn down, probability favor the high is in. The minor pull-back target is 1762. The1762 over-under level is the weakest support level. Remember, Fridays up move was a short covering rally. There was not time spend at the low. The rout of the trading range blew out the long and the way down and burned the short on the way up. It was a chaotic, disorderly retreat. This means no one had time to get long at the low. Therefore, price could sell-off and pull-back all the way to the low. However, there are structural decision point on the path up to Fridays close. The scale of the pull-back and the reaction to the pull-back will determine the next outcome. For example; Bayesian Inference #1 S&P futures sell-off from Fridays high (1768) and pull-back at or near 1762. What happen next? IF; during the pull-back (sell-off) the selling pressure ends (sell programs waning, up-turn in the digital filters) and price discovery holds support, the next outcome (expectation) is likely to result in a re-test of Fridays high (1768) Furthermore, IF price auctioned back to Fridays high (1768) is that a sign of strength or weakness? Has the short covering run its course? The outcome will be determined by the reaction to the
What did this weeks rout of the trading range mean? First we heard good news is bad news and then we heard good news is good news. The focus is what did the price action tell us? First, Wednesdays rally to 1770 sold-off. Thursdays rally to 1775 sold off. Not only was there risk buying the minor pull-back (1762), there was risk buying the previous weeks low (1747). Then, there was no resistance at the long liquidation levels, 1762-1764. So is the S&P going to rally back to the multiyear high (1773-1775) and go on to make a higher high? The answer is possibility so. And what will happen at when the S&P make a higher high? It will sell-off from that high, just as it has sold-off form every other high. Currently, where is support? The same place it had previously been 1736. Above Fridays low the minor support levels are 1744, 1754 and 1762. The minor lows are more or less where they had previously been. There difference is only the previous minor lows are now fractals of what there were before. Study the Kalman Filter chart. You can see that the 1762 is still an over-under level. In other words, to the extent S&P futures hold support above 1762, the likelihood is a re-test of the high.

retracement back to Fridays high. IF price fails to auction back to Fridays high and the buying interest ends (buy programs waning, overlapping of the micro 5 tick range samples, followed by initiated selling (HFT sell surge), the likelihood that the short cover rally has run its course increases. The probability favors a pull-back (sell-down) to 1762. The second pull-back would be a sign of weakness? Currently, the short at 1768 is currently valid. S&P futures are up 32 points above Fridays low. However, IF price hold support at 1762 and auction back to 1768, probability favors a re-test of Thursdays high and the possibility of a higher high. Bayesian Inference #2. If price fails to find support at or near 1762, i.e. no selling programs waning, no upturn in the digital filters, what happens next? Then, probability would favor S&P futures will continue selling off and potential pull-back at or near 1754. If support holds at 1754 (selling programs waning, up-turn in the digital filter, etc.) and price auctions up to above 1762, buying interest is initiated at 1762 and continues (no buy programs waning, no down turn in the digital filters, etc.): Than what happens next? How would the price action be gauged under the above circumstances? Would the price structure described above be a sign of strength or weakness? IF, as in the above example, where price pull-back to 1754, an average daily range (17 points) extension could conceivably result in the S&P trading up to 1770-1771, as it did last Wednesday. Bayesian Inference #3. However, after selling off to 1754, IF the retracement stalls below 1762-1764 (buy programs waning, down-turn in the digitals filters, the following sell-off (pull-back) to 1754 could result in a lower low; i.e. a sell-off to 1744. These are the generic potential outcomes to Fridays really. Note that in each scenario the estimate of the next development is dependent on the reaction to the price discovery during the subsequent pull-back and retracement. Why the emphasis on price discovery? The reason is in all of the above scenarios, price is the mechanisms where by market participants value (traded price) of the underlying security. Therefore, price discovery (buying interest and selling
pressure) will ultimately determine the outcome of the market development. Market Structure, the previous support and resistance levels, provides the context in which the trader can determine what is the most likely; the continuation of the current development or the least likely; reversal of the currently development. The most recent example of the price discovery mechanism is the market development that followed Fridays sell-off, pullback to 1736. The market structure (prior distribution) indicated S&P futures found support at 1736, during a 3 day consolidation period going back to October 21st. After the initial climax selling at 1736, wherein S&P future traded back up to the overnight high at 1751-1752, the pullback to 1743 witnessed the selling programs ended and the buy programs subsequently auctioned S&P futures above the overnight. IF, the sell-off was going to continue, S&P futures would have sold back down below 1743 and re-tested the 1736 low. IF, during the re-test of the low initiated selling occurred: i.e. more supply than demand, S&P futures would have traded lower. Possibility sold down to the prior multiyear high at 1727. This is considered the standard generic interpretation of the market development. We repeat this interpretation over and over again for the purpose of formalizing our members with these patterns. As new traders come to recognize the pattern are self- similar through the trading range, i.e. a previous highs, previous lows, re-tests of multiyear high, pull-back to weekly lows, applying the appropriate trading strategy become natural. This weeks economic data was ultimately viewed positive. The surprisingly strong growth in payrolls and better than expected GDP growth in Q3 was a plus for the market. Fridays reaction seemed to indicate market participants altered their views of the Feds tapering. The US dollar held firm, while US Treasuries dropped and yields rose. The ECB cut rates to a record low of 0.25%. In the week ahead we will expect see continued discussion on the Feds tapering timetable. Therefore, we will continue to monitor correlations between US Treasuries and the US Dollar. As noted earlier, I will post some information on Modern Monetary mechanism in the market commentary section of the website, for you to consider when evaluating the Feds policy.
Daily Morning Briefing
Good Morning Traders, Overnight, S&P futures sold down below Fridays high 1768 and pulled back to 1762. On Friday, we witness S&P futures rally back up through the trading range, following a climax sell-off, wherein the broad benchmark Index pulled back to the October 23rd low (1736). During the short covering rally that ensued, S&P futures paused at 1762-1763, before continuing higher into Fridays close. The 1762-1764 price level had been a minor resistance level during last weeks session. S&P futures broke-out above 17621764 on November 6th and traded up to re-test the October 30th multiyear high at 1773. We had observed long liquation between the multiyear high (1775) and the 1764 price level during last Thursdays selloff. However, on Friday, previous sellers covered their short positions into the close. In Sundays market structure commentary we noted Bayesian Inference #1 IF: S&P futures sold-off from Fridays high (1768) where would price pull-back to? 1762. What happen next? IF; during the pull-back (sell-off) the selling pressure ended, as indicated by the following order flow events: sell programs waning, overlapping of the micro 5 tick range bars, resulting in an up-turn in the digital filters; Then price discovery would indicate holds support. The next outcome (expectation) is likely to result in a re-test of Fridays high (1768) We asked the questions: IF price auctioned back to Fridays high (1768) is that a sign of strength or weakness? Has the short covering run its course? The outcome will be determined by the reaction to the retracement back to Fridays high. At the time of the post (Sunday night), we stated the short opportunity at 1768 was valid. S&P futures are up 32 points above Fridays low. However, IF price hold support at 1762 and auction back to 1768, probability favors a re-test of Thursdays high and the possibility of a higher high. Now, lets look at the overnight developments. #1: the pause prior to Fridays close indicated market participants are not sure IF they are going to cover their short positions above 1762. S&P futures have traded above the over-under level at 1762. #2: price pulls back to 1758 and initiated buying occurs. The slope of the micro digital filter and Kalman Filter turns up. There is another exponential run up to 1768: 10 points. #3: The computerized buy programs end. The order flow monitor detects buying programs waning. The micro 5 tick range sample overlap (horizontal development):

the upward momentum has stalled. The micro digital filters turn down and S&P futures sell-off below 1768 and pull-back to 1762-1763. # 4: During the pull-back the selling programs end: sell programs waning. The micro 5 tick range samples overlap indicting the downward momentum has stalled. The micro digital filters turn up. The Kalman filter flattens and turns up. S&P futures auction back up to re-test the high at 1768. Price discovery is the mechanisms where by market participants determine value (the traded price) of the underlying security. Therefore, price discovery (buying interest and selling pressure) will ultimately determine the outcome of the market development. How to you gauge the overnight development? Thus far, the price structure indicates the continuation of the Fridays rally. The next obstacle is Fridays high. A break-out above Fridays
high and price is on the path to re-test the multiyear high at 1773-1775. In the event, buying interest fades during the re-test of Fridays high, the outcome of the second pull-back to overnight low 1762-1763 may not be as favorable.
TUESDAY
Mondays Recap | Tuesdays Market Structure
Hello Traders The major US Indexes traded lower on Thursday. The Dow 30 closed at 15781: () up + 21 points (+0.14%). S&P 500 close at 1771: () up + 1 points (+ 0.07%). The NASDAQ close at 3919: () up + 0.50 points (0.01%). 255 (51%) of the S&P 500 stocks end the session above their prior days close, while 241 (48%) declined. S&P futures traded with a narrow range on Monday, primarily due to the Veterans Day holiday. Trading in S&P 500 stocks was 20% below the 30-day average.

S&P futures had pulled back to 1762 overnight. At Mondays open, price down tick to the bottom of the polynomial regression channel (1764) and retraced back to Fridays high (1768). Price discovery probed up to 1770 before the computerized trading programs (bots) ceased executing to the buy-side: () up + 6 points. We also posted Bayesian Inference #3: IF, during the re-test of the high, the order flow events indicate the computerized buy programs ended: i.e. buying programs waning and the micro 5 tick range sample overlap (horizontal development) indicating the upward momentum has stalled and the micro digital filters turn down and S&P futures sell-off below 1768 and likely pullback to 1762-1763. The initial part of the sequence occurred when S&P futures probed for stops at 1770, 2 points above Fridays high (1768). However, S&P futures sold down to 1766, after which the trade activity was limited to the narrow 2 point trading range sequence. During the prolonged market marker sequence, trade opportunity was limited. The situation was unchanged into the close. Thus coming into Tuesdays session: The development at Mondays the high (1768-1770) do not materially alter the market conditions relative to Fridays close. Therefore the trade opportunities, along with the Bayesian inference from Sunday still apply. Bayesian Inference #1 Resistance is now located at Mondays high 1770-1768. What happen next? IF; during a retracement to Mondays high, the order flow events continue to indicate price discovery is unable to attract buying interest (buy programs waning), the micro 5 tick range sample indicate the upward momentum has once again paused (horizontal development), S&P futures are likely to sell-off below Mondays high and re-test support at 1764-
The U.S. bond market is closed. Mondays Market Development S&P futures sold off below Fridays high (1768) and pulled back to re-test support at 1762 in the overnight session. At Mondays open (1764), S&P futures re-test Fridays high and extend last weeks traded range by 2 points, auctioning up to 1770. Price discovery failed to attract renewed buying interest at the high (buy programs waning). The price sequence paused. The micro 5 tick range series overlapped, the digital filters turned down and price pulled back to 1766. S&P futures spend the remained of the session trading in a 2 point range. The up 2 points, down 2 point market maker sequence continued into Mondays close (1768). Thus, the benchmark ended the unchanged. broad index session
Trade opportunities Coming into Mondays session we posted the following Bayesian Inferences. Bayesian Inference #1 IF: S&P futures sold-off from Fridays high (1768) where would price pull-back to? 1762. What would happen next? IF; during the pull-back (sell-off) the selling pressure ended, as indicated by the following order flow events: sell programs waning, overlapping of the micro 5 tick range bars, resulting in an up-turn in the digital filters; Then price discovery would indicate support at 1762 holds. Buy the pull-back to 1762-1763 The next outcome (expectation) is likely to result in a re-test of Fridays high (1768). Indeed this outcome developed at Mondays open.

1762. Alternatively, IF buying interest resumes the structures of the price sequence will exhibit an exponential factor. The element of the price sequence, i.e. the 5 tick range bar series, will indicate higher highs. Initiated buying (HFT buy surge) will accompany the re-test of the high. S&P futures break-out above Mondays high and auction up to re-test the multiyear high at 1775-1775. Stops are now located approximately 2 points above Mondays high. The maximum likelihood expectation estimate is located at 1782. Furthermore, IF price auctioned back to Mondays high (1770) it is a sign of strength. The short covering may not have run its course? The outcome will be determined by the reaction to the retracement back to Mondays high. IF price fails to auction above Mondays high and the buying interest ends (buy programs waning, overlapping of the micro 5 tick range samples, followed by initiated selling (HFT sell surge), the likelihood that the short cover rally has run its course increases. The probability favors a pull-back (sell-down) to 1762. Bayesian Inference # 2 The second pull-back to 1762 will be a sign of weakness, i.e. lack of buying interest at the high. However, IF price hold support at 1762 and auction back to Mondays high, it will be the third time that price has auctioned up to 1768-1770. In that case, probability favors a re-test of Thursdays high (1775) and the possibility of a higher high. Bayesian Inference # 3 If price fails to find support at or near 1762, i.e. no selling programs waning, no upturn in the digital filters, what happens next? First the price sequence will exhibit an exponential factor: lower lows, lower highs. Price may only pause at 1762. IF; initiated selling (high frequency sell surge) accompanies the
re-test of 1762; then, probability would favor S&P futures will continue selling off and potential pull-back at or near 1754. Bayesian Inference #4 If support holds at 1754 (selling programs waning, up-turn in the digital filter, etc.) and price auctions up to above 1762, buying interest is initiated at 1762 and continues (no buy programs waning, no down turn in the digital filters, etc.): Than what happens next? How would the price action be gauged under the above circumstances? Would the price structure described above be a sign of strength or weakness? IF, as described in the above example, where price pull-back to 1754, the pull-back would be equal to an average daily range (17 points). Therefore, the likelihood that price discovery at 1754 will encounter support would increase. There would be minor resistance at or near 1764-1762, as a result of the break-down. A retracement back to 1764-1762 would have to overcome the minor supply, in order for the S&P to auction back up to Mondays high. However, after selling off to 1754, IF the retracement stalls below 1762-1764 (buy programs waning, down-turn in the digitals filters, the following sell-off (pullback) to 1754 could result in a lower low; i.e. a sell-off to 1744. These are the generic potential outcomes which are likely to develop coming into Tuesdays session. Note that in each scenario the estimate of the next development is dependent on the reaction to the price discovery during the subsequent pull-back and retracement. Price discovery is the key mechanisms where by market participants determine value (the traded price) of the underlying security. Therefore, price discovery (buying interest and selling pressure) will ultimately determine the outcome of the market development. Market Structure, the previous support and resistance levels, provides the context in which the trader can determine what is the most likely; the continuation of the current development or the least likely; reversal of the currently development. The above descriptions are the standard generic Follow the Bots interpretation of the market development.c,vkxjnvx
Good Morning Traders, Overnight, S&P futures traded within the parameters of Mondays trading range. AT the close of Mondays session we noted: 1.) The development at Mondays the high (1768-1770) do not materially alter the market conditions relative to Fridays close. Therefore, the Bayesian inferences from Sunday still applied. Bayesian Inference #1 Resistance is located at Mondays high 1770-1768. 1762 is the intraday profit target on the short at or near 1770. So, what could happen next? S&P futures could break out above Mondays minor resistance (1770-1768) auction up to the mold year high at 1775. We describe price structure typically associated a breakout, major element of sequence the initiated by at the high. IF buying interest resumes the structures of the price sequence will exhibit an exponential factor. The element of the price sequence, i.e. the 5 tick range bar series, will indicate higher highs. The event market participants continued to display lack of interest auctioning the S&P above Mondays high; we described potential price structure as follows:
IF; during a retracement to Mondays high, the order flow events continue to indicate price discovery is unable to attract buying interest (buy programs waning), the micro 5 tick range sample indicate the upward momentum has once again paused (horizontal development), S&P futures are likely to sell-off below Mondays high and re-test support at 17641762. IF price fails to auction above Mondays high and the buying interest ends (buy programs waning, overlapping of the micro 5 tick range samples, followed by initiated selling (HFT sell surge), the likelihood that the short cover rally has run its course increases. The probability favors a pull-back (sell-down) to 1762. Bayesian Inference # 2 The second pull-back to 1762 will be a sign of weakness, i.e. lack of buying interest at the high. However, IF price hold support at 1762 and auction back to Mondays high, it will be the third time that price has auctioned up to 1768-1770. In that case, probability favors a re-test of Thursdays high (1775) and the possibility of a higher high. As indicated by the trade dispersion during the overnight session, as well as general slope of the Kalman filter, the price structure is exhibiting the characteristics of consolidation at the high. Trading range is extremely narrow.

Support at 1762 is critical from the perspective of continuation of Fridays trend. A break down below 1762; i.e. initiated selling during the pullback, will increase the probability S&P futures will auction back into Fridays trading range and pulled back to 1754. Buy the pullback at 1762 The long opportunity remains the same, with the expectation S&P futures will retest Mondays high and potentially going on to auction up to the multiyear high (1775). However, buyers at 1762 are advised to be cautious. Determine your risk parameters and manage the long entry accordingly. In the event, If price fails to find support at or near 1762, i.e. no selling programs waning, no upturn in the digital filters, what happens next?
First the price sequence will exhibit an exponential factor: lower lows, lower highs. Price may only pause at 1762. IF; initiated selling (high frequency sell surge) accompanies the re-test of 1762; then, probability would favor S&P futures will continue selling off and potential pull-back at or near 1754. The above development will call for exiting the long position and being prepared to sell the break-down below 1762. If one is not prepared to sell the breakdown, then following the break-down below 1762, consider selling the retracement. If one is on interested in selling the retracement, then look for support at 1754. Buyers at the low, at or near (1762), caution advised.
WEDNESDAY
Tuesdays Recap | Wednesdays Market Structure
Hello Traders, The major US Indexes traded mixed on Tuesday. The Dow 30 closed at 15750: () down -34 points (-0.21%). S&P 500 close at 1767: () down - 4 points (-0.24%). The NASDAQ close at 3919: () up + 0.13 points (0.00%). 201 (40%) of the S&P 500 stocks end the session above their prior days close, while 291 (58%) declined. Tuesdays Market Development On Friday, S&P futures reversed the prior days declined. Following the climax selling down to the October 23rd low (1736), the price path reversed direction and the broad benchmark index short covered through the trading range. After auctioning up to 1768, S&P futures extended the rally up to 1770 during the below average volume holiday trade. The retracement up to 1770 failed to attract buying interest (#1). The computerized buying programs ceased executing to the buy-side. The upward momentum stalled. The horizontal price sequence pattern indicated the lack of up-side momentum, the direction of the Kalman filter turned down and S&P futures sold off below the 1770 high and pulled back to 1662: () down -8 points. After selling off below the high (1770), the initial pull-back to minor support at 1762 was accompanied by the computerized selling program waning (#2). Initiated buying entered the order flow and S&P futures auctioned up above minor support (1762) and retraced back to the high, trading up to 1768: () up + 6 points (#3). The lack of upward momentum, synonymous with lack of buying interest, S&P future sold back down to minor support (1762) for the third time. As we noted in Mondays market commentary, as third pullback would like result in a breach of support. S&P futures would likely make a lower low and potential auction down to the next structural support level at 1754. Indeed, the 3rd pull-back breached support. The initial breach paused after probing 2 points below the prior low, to the approximate location where stop loss orders are typically located.
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Price retraced (up-ticked) back to prior support (1763), encountered responsiveness selling pressure (#4) and price retested the low (1760) and made a minor lower low (1758). During the sell-off to the 1758 (#5), the computerized trading programed ceased executing to the sell-side (sell programs waning). The down-ward movement in the price structure paused. Initiated buying (HFT buy surge) entered on the up-tick and S&P futures auctioned back into the trading range. The slope of the digital filters turned up. The Kalman Filter turned up. S&P futures traded up to 1766: () +7 points (#6). The trade activity that developed during todays session falls within the descriptive scenarios outlined in the Bayesian inferences posted in Sundays weekly recap and reiterated in Mondays market structure commentary. In Tuesdays Morning Briefing we noted: 1.) The development at Mondays the high (1768-1770) do not materially alter the market conditions relative to Fridays close. Therefore, the Bayesian inferences from Sunday still applied. Bayesian Inference #1 Resistance is located at Mondays high 1770-1768.
So, what could happen next? Bayesian Inference #2 S&P futures could break out above Mondays minor resistance (1770-1768) auction up to the mold year high at 1775. Bayesian Inference #3 Continued lack of buying interest above Mondays high (1770-1678) would result in S&P futures pulling back to retest support at 1762. Bayesian Inference #4 IF; following the retest of support at1762, should the retracement back to Mondays high continue to indicate a lack of upside momentum, then a 3rd pull-back would increase the likelihood of a lower low. A break down below 1762; i.e. initiated selling during the pullback, will increase the probability S&P futures will auction back into Fridays trading range and potentially pullback to 1754. With the exception of the pull-back target (1754) the 3rd retest of the 1762 minor support level resulted in a breach of support. Coming into Wednesdays session The current market condition is described as consolidation at
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the high. At Tuesdays close, S&P futures had not auction back above the previous high (1768-1770). After hours during the retracement back to 1776 order flow events indicated (buy programs waning). Thus, S&P futures may not be ready to auction above resistance at 1770. Indeed, S&P futures may pullback and retest support at todays low and or at prior support 1762. Market may continue to consolidate within the parameters of the two day distribution: the high 1770, the low 1758.
The current trading range is still less than an average daily range. We would expect to see a re-test of the low (1758-1759) in the overnight session or at Wednesdays open before S&P futures attempts to move higher. Potential for a lower low in the event of initiated selling (HFT sell surge) occures during the price discovery phase. Market participants are anxious to hear the views of Janet Yellen, Fed Chairman Bernankes nominee, on monetary policy. Thus, the US markets may remain in consolidation until the past foreword regarding the Feds tapering becomes clear.

Good Morning Traders, Now that Fridays short covering rally that followed the climax selling at the October 23 low (1736) has run its course, i.e. lost it upward momentum the broad benchmark S&P 500 index is now in search of support. Buying interest faded following the rally up to 1770-1768. Yesterday S&P futures pulled back to 1758 and auctioned up to 1765. The retracement to the 1765 price level encountered a lack of buying interest (buy programs waning). Overnight S&P futures sold off from Tuesdays retracement high (1766) and pullback to retest Tuesdays low (1758). Selling pressure accompanied a retest of the low and S&P futures have traded down to the minor support level, identified at the start of the week at 1754. The slope of the polynomial regression channel is down. The Kalman filter is declining. S&P futures are now 17 points below Mondays high (1770) at/or near the mid-point of the trading range: Mondays the high 1770, Fridays low 1736. We would expect to see S&P futures attempt to hold support during the initial pullback to the midpoint of the trading range. The first level of the hidden Markov chain: maximum likelihood expectation estimate level is located at 1775: the second level is 1747. Minor resistance is located at 1766-1764. Tuesdays low (1758) is the initial up-tick (retracement) obstacle that buyers will have to overcome. In the event S&P futures failed to auction above yesterdays low during the initial opening range retracement attempt, we would expect to see the overnight low at the 1754 price level re-test at the open. As Fridays rally was in our estimate a major short covering affair and as we noted little or no time was spent at Fridays
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low, support is in fact down at 1736. Last Thursdays low (1743) equal to minor pull-back level observed during Fridays opening range pullback represents the second most desirable support level. However, the scale of Fridays short covering rally indicates the broad benchmark index is likely to find support at the midpoint of the trading range (1754-1751) and attempt to retrace back to the high (1766-1768-1770). It should be noted that a great deal of uncertainty continues to surround the prospect of the fed tapering. Concerns that the U.S. Federal Reserve may start reducing its bond-buying program in the foreseeable future is also likley to keet investors on the sidelines ahead of Fed deputy chief Janet Yellens testimony to the US Senate Banking Committee on Thursday.
THURSDAY
Wednesdays Recap | Thursdays Market Structure
Hello Traders, The major US Indexes traded higher on Wednesday. The Dow 30 closed at 15821: () up + 70 points (-0.45%). S&P 500 close at 1782: () up + 14 points (-0.81%). The NASDAQ close at 3965: () up + 45 points (1.16%). 436 (87%) of the S&P 500 stocks end the session above their prior days close, while 58 (11%) declined. Wednesdays Market Development On Friday (11-08-13), following a rout of the trading range during the previous session, S&P futures staged a major short covering rally through the prior trading range. A short covering rally consists of event where previous sellers buy back the positions they previously sold. No new capital enters the market during a short covering rally. In the context of Friday short covering event, the reversal through the trading range followed a rout to the trading range during the previous session. Therefore, the event can be best understood as part of broader tactic employed by major financial institutions to shake out the weak long (margin traders).
The financial media is typically on hand to provide some halfbake rational. In this case the cover story revolves around the Feds tapering it Bond purchase program, QE. The first of such rout that were comment on in recent times goes back to the June 19th sell-off. These types of events are part of the normal trading environment. They are not anomalies. Follow Up On Sundays Bayesian References The market structure following Fridays rally indicated several minor support levels which we identified in Sundays Weekly Recap.
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Our comments indicated the approximate mid-point of the developing trading range at or near 1754 was the likely pullback target. # 1: Yesterdays S&P futures pull-back to 1758, before rallying back up to 1766. Overnight the retracement up to 1776 encountered a lack of buying interest. S&P futures soldoff below the 1776 retracement high and pulled back to Tuesdays low. #2 : Selling pressure accompanied the pullback and S&P futures sold down below yesterdays low (1758) and pull-back to the approximated mid-point of the developing trading range at 1754; the pullback target indicate (identified) in Sundays weekly recap. # 3: At Wednesdays open, S&P futures auctioned up above the overnight low and traded back to 1762. There was no rest of the overnight low. The price sequence stalled and the market traded in a narrow range; i.e. the typically 2 point up / down market maker algorithm. After approximately 2 hours of non-directional algorithmic trading, S&P futures traded above Tuesdays close (1765) and auctioned up to previous multiyear at or near 1773. # 4: The price sequence stalled again for next 2 hours, until just prior to the close, when S&P futures brokeout above the previous high (1773-1775) and rally up to a next multiyear high at 1782. Fed Watch Wednesdays rally is attributed to comment by Janet Yellen which suggests the Federal Reserve will maintain it QE stimulus program. Yellen, nominated to be the next chairman of the central bank, said the economy and labor market are performing far short of their potential and must improve before the central bank can begin to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases monetary stimulus. Yellens remarks confirm her commitment to the central banks strategy of attempting to boost the economy and lower 7.3 percent unemployment, more than four years after the economy began to recover from the longest and deepest recession since the Great Depression.
Coming into Thursday session As indicated in the historic data market development exhibits a pattern of nonlinear price structure. In other words, in an up-trend price advances (rallies) and corrects (pull-backs), in a down-trend price declines (sell-off) and recovers (retraces). Gauging the scale of a rally is not an exact science. Statistically approximation is the best tool we have to estimate the potential scale. In the context of todays session we began by identifying the starting point of the rally. There are two potential reference points to take into consideration: the overnight low (1754) and the mid-morning low at 1762. The Follow the Bots computational model used the maximum expectation algorithm to estimate the potential range extension. This algorithm estimate the potential range development by projection the probably range derived from historic data samples. There are two estimates that must be considered: the extreme price excursion level and the maximum likelihood estimates. Using the mid-day 1762 price level as the starting point initial up-side MLE estimate is 1785. The extreme price excursion estimate is 1792. As indicates the chart, the recent examples of new multiyear highs going back to June illustrate the non-linear pattern where the initial advance (rally) is followed by a pull-back (correction). This pattern can be observed going back to the inception of the S&P 500 index. Therefore, it is not question of will the S&P pull-back from it new multiyear high. It is a question of when will it pull-back off it multiyear high. So, before you let your mind get all enamored with today break-out, dont let your mind forget about Thursdays sell-off.
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Bayesian Inference #1 | Wednesdays break-out above the previous multi-year high (17731775) has yet to exhibit the secondary response to the primary direction. The secondary response is a normal part of the non-linear market development. The initial MLE price estimate is at or near 1785. The buyer is at risk above the 1782 price level. Bayesian Inference #2 | The initial pull-back target is at or near the previous high 17731774. Note: the minor down-tick during the pause prior to break-out occurred at 1770 and during the Mondays holiday session S&P future encountered resistance at 1768 Thus, the 1770-1768 price level represents the previous best short location. In other words, there was no significant buying interest above 1768. Therefore, a pull-back to 1770-1768 is a decision point. If, during a pull-back to 1770-1768, the Order Flow Monitor
indicates, Sell Programs Waning a long opportunity is likely to develop. Todays rally temporarily paused at 1777. This temporary pause qualifies as a minor support level and may prove to be the initial pull-back level. In that case, where support hold during a pull-back to 1777, the short at 1783-1882 is likely to be challenged and S&P futures may continue to advance up to the extreme price excursion estimate 1792.

Good morning Traders, S&P futures continued to trade higher in the overnight session, auctioning up to the Follow the Bots maximum likelihood expectation estimate at 1785. The order flow monitor detected buy program waning as S&P futures traded up to 1785. The price sequence exhibited the characteristic pauses pattern, the digital filters turned down and S&P sold down to 1780: () -5 points. The pull-back to the 1780, currently the lower edge of the polynomial regression channel has stalled. In Wednesdays Market Structure commentary Bayesian Inference #2 We noted that Wednesdays rally temporarily paused at 1777 and that the temporary pause level (1777) qualifies as a minor support in the context of the current break-out to the new multiyear high. In a developing trading range scenarios where support hold above the 1777 pause level, we would expect to see short at 1783-1885 challenged and S&P futures may continue to advance up to the extreme price excursion estimate 1792. However, the Follow the Bots Gaussian model currently indicates 1770-1768 is the more desirable pull-back target. IF; during a pullback (sell-off) to 1770-1768, Order Flow Monitor indicates, Sell Programs Waning and the price sequence pattern confirms a pause in the selling pressure, a long opportunity is likely to develop, with the expectation of a re-test of the high. Fed Watch
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Federal Reserve chairwoman-designate Janet Yellen indicated the U.S. central bank is in no rush to pare economic stimulus measures. In remarks prepared for a Senate hearing on Thursday, Yellen said that the Fed has more work to do as unemployment is still high. Her comments that the U.S. economy and labor market are performing far short of their potential suggested that the Fed will keep its stimulus in place for longer than expected. Federal Reserve chairman nominee Janet Yellen comments that there is more work the Fed to do to bolster the economy and labor market as unemployment is still high, contributed to a bullish global sentiment. The Fed have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession, Yellen said in remarks prepared for Thursdays confirmation hearing before the Senate Committee on Banking, Housing, and Urban Affairs. Gains in manufacturing and housing have helped drive modest economic growth this year, but unemployment remains too high for the Fed to consider significantly scaling back its $85 billion a month in asset purchases, she warned. Asian stocks closed higher.
Japans Nikkei Stock Index climbed to a 5-1/2 month high on speculation the BOJ will increase its stimulus measures after Japan Q3 GDP slowed from Q2. European Markets are trading higher. The Euro Stoxx 50 index of Eurozone bluechip stocks is gaining 0.69%. The Stoxx Europe 50 index, which includes some major U.K. companies, is adding 0.70%. The DAX index gained 0.9 percent and Switzerlands SMI added 0.6 percent. The French CAC 40 and the UKs FTSE 100 rose 0.8 percent each. In commodities December Crude is trading at $93.83 per barrel :() down -$0.05. December gold is trading at $1283.3 a troy ounce: () up + $14.90.
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USD/JPY is up +0. 73% at a 2-month high as the slowdown in Japan Q3 GDP undercut the yen and bolstered speculation the BOJ will increase its asset purchases to stimulate growth.
December copper is () down -0.47% at a 3-1/4 month low. The dollar index is up +0.26%. EUR/USD is down -0.38%.
FRIDAY
Thursdays Recap | Fridays Market Structure
Hello Traders. The major US Indexes traded higher on Thursday. The Dow 30 closed at 15876: () up + 54 points (+0.35%). S&P 500 close at 1790: () up + 8 points (+0.48%). The NASDAQ close at 3972: () up + 7 points (0.18%). 376 (75%) of the S&P 500 stocks end the session above their prior days close, while 120 (24%) declined. Thursday Market Development On Wednesday, S&P futures broke-out above the 1774, the November 7th multiyear high. Wednesday rally continued in the overnight session. S&P futures initiated extended the trading range up to 1785 (#1). At Thursdays open S&P futures sold-off from the overnight high and pull-back to (#2). In Wednesdays Market Structure commentary we noted: Bayesian Inference #2 Wednesdays rally temporarily paused at 1777 and that the temporary pause level (1777) qualifies as a minor support in the context of the current break-out to the new multiyear high. During the pull-back (sell-off) price discovery encounter support at the 1777-1778 price level (#2) down -7 points. The proto-typical pause pattern associated with successful can be observer at todays low. Following the pull-back, S&P futures auctioned up to re-test the overnight (1785): + 7 points. The buy-side run that followed the pull-back to 1777 continued higher and S&P futures auctioned up to 1789 (#3). During the rally up to 1789, the Order Flow Monitor detected buy program waning. Price sold down from the upper band of the polynomial and pullback to the Kalman Filter estimate at
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or near 178401785, the prior overnight high. Following the pullback to the Kalman Filer estimate the price sequence stalled. The 2 points up | down sequence of the market maker algorithm dominated the auction over the next 3 hours (#4). 11-14-2013 3-59-47 PM Late in the day, a modest buy-side bias development and S&P futures traded up to 1789 into the close. Coming into Fridays session In the context of current break-out and Thursdays range extension the maximum likelihood estimate is now located at what was the extreme price excursion 1793-1794, at the start of the break-out. Bayesian Inference #1 Sell the Rally (counter-trend) The range extension up to the maximum likelihood estimate (1793-1794) is likely to encounter a lack to buying interest, similar to what we observed during the initial run up to 1985. We would expect to S&P futures pullback (sell-off) from the 1793-1794 MLE.
Bayesian Inference #2 Buy the Pull-back Minor support at 1784, the Wednesdays overnight high and Thursdays mid-day pull-back level is only like to hold support as long as the buying interest is still dominate. In other words, once the scale of the development trading range is established and price has auctioned up to where the buying interest is no longer willing to bid the market higher, the secondary response will counter the uptrend. This is the nature of the dual auction mechanism, the non-linear price structures with develops are the Supply and Demand eventually finds equilibrium: balance. Bayesian Inference #3 Buy the Pull-back Price discovery informs the astute market observer about the underlying market sentiment of the market participants. Previous price levels where supply (selling pressure) and demand (buying interest) play a key in the price discovery process. The RUN up to Thursdays high started at the 1762 price level. The previous multiyear high (1774-1773) is current the important down-side reference point. Previously, the best short location was between 1773 and 1768. The prior supply levels are 17 to 23 points below the current high. Previous seller at the 1773-1768, who have as yet to cover their positions are now disadvantaged. Similarly, buyers who failed to anticipate the break-out are likely to enter on the initial pull-back to the previous high.
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Good Morning Traders, S&P futures traded higher in the overnight session auctioning above Thursdays high 1789 and trading up to the Follow the Bots computational maximum likelihood estimate at or near 1793. The Order Flow Monitor detected buy programs waning during the up-tick to 1792.75. However, there has been no down side follow through and the price sequence is currently limited to the 2 point up | down market maker algorithm. Overnight S&P future pull-back to 1788-1787, before extend the trading range modestly higher. As we noted coming into Fridays session In the context of current break-out and Thursdays range extension the maximum likelihood estimate is now located at what was the extreme price excursion 1793-1794, at the start of the break-out. Bayesian Inference #1 The range extension up to the maximum likelihood estimate (1793-1794) is likely to encounter a lack to buying interest, similar to what we observed during the initial run up to 1985. We would expect to S&P futures pullback (sell-off) from the 1793-1794 MLE. The question is sell-off to where? Currently the Kalman Filter estimate is at 1790 and down-tick of 2 points is not considered a sell-off. The overnight low (1788-1887) is still only a minor 5 points reaction to the overnight rally to yet another new multiyear high. We would expect to see S&P futures pull-back and re-test the minor mid-day market maker aglo range between 1786-1784. However, the extreme duration of the 2 point up | down market maker algorithm, which has currently lasted over 2 hours (up-tick 1792, down-tick 1790) makes the outcome uncertain. While there is obviously no buying interest abov3 the 1793 MLE at this time, there is no indication of selling pressure either. Yesterdays comments regarding the minor support levels are unchanged from the previous post. The market has rallied to a point where the buyer is at risk and the minor support levels are only likely to be valid as long as the sentiment remains extremely bullish.
Tape Reading Lesson | Review of Price Sequence During Pullback (Cont. from page 1)
points below the prior low. The probe two points below the prior low is typically associated with taking out stop loss orders.
3.) The uptick (#4) back to the prior support level (1763) was
(#5).
7.) The price path reversed. S&P futures traded exponentially higher, auctioning back to the upper band of the polynomial regression channel (#6) to the inflection point where the down move accelerated.
the short opportunity, with the expectation of a retest of the low and the potential of a lower low.
Note that during the retracement to prior support (1763) the slope of the Kalman filter was descending.
4.) During the subsequent lower low (1758) the order flow of
events indicated the computerized sell programs ended (sell programs waning). The price sequence failed to maintain the exponential factor: i.e. lower high, lower low.
We have been endeavoring to describe price sequence typically associated with break-outs and break-downs and highlighting the major element of sequence so that our members can identify the pattern.
5.) The micro five tick range samples overlap. 6.) The Gaussian digital filters turned up and high frequency
initiated buying (2 HFT Buy Surges [HFT-BS], a Strong Tape Imbalance [STI], and an Equities High Frequency Trading Reversal [EQ-HFT-REV]) occurred on the downtick to 1759
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ASIAN MARKET RECAPS
Mondays Asian Market
Asian stocks turned in a mixed performance on Monday. Signs of steady economic growth in China and a positive lead from Wall Street Friday helped to limit overall losses to some extent. Chinese shares snapped a three-session losing streak after the latest batch of economic data released over the weekend pointed to signs of stabilization in the worlds second-largest economy. The benchmark Shanghai Composite closed 0.2% higher, to trade at 2,109. Hong Kongs Hang Seng rallied 1.4%. Chinas industrial production grew 10.3 percent year-overyear in October, slightly faster than the 10.2 percent increase in September, while growth in retail sales was solid, yet flat at 13.3 percent. Fixed asset investment rose 20.1 percent in the year through October, almost steady compared with the 20.2 percent increase in the year ended September. The consumer price inflation rose 3.2 percent to an 8-month high in October, but held within the 3.5 percent official target, providing room for policymakers to focus on maintaining growth. The data brings in some cheer to the party leaders, who have gathered in Beijing to hash out fresh round of reforms for the economy. Xinhua news agency reported that the third plenum meeting of the 18th Communist Party of China, kicked off in the capital on Saturday, will discuss major issues concerning comprehensively deepening reforms. Japanese shares rallied, with a weaker yen and encouraging earnings reports from companies such as Citizen Holdings and Credit Saison underpinning sentiment. The Nikkei average rose 1.3%, while the broader Topix index added 0.8%. According to the Ministry of Finance, Japan saw a current account surplus of 587.3 billion yen in September, topping
expectations for a surplus of 400.8 billion yen following the 161.5 billion yen surplus in August. The Bank of Japan reported that total bank lending excluding trusts rose 2.3 percent year-over-year in October, matching forecasts. Australian shares edged lower as tapering worries coupled with reports that China might introduce a nationwide property tax to rein in skyrocketing real estate prices overshadowed upbeat housing finance data domestically. The benchmark S&P/ASX 200 slipped 0.3%, to trade at 5,387, with banks pacing the declines following recent sharp gains. Transurban declined 0.4 percent after it agreed to buy all the debt of Sydneys Cross City Tunnel from the Royal Bank of Scotland for A$475 million The rural services firm said it expects a full-year loss of more than $500 million for its recently concluded fiscal year. Orica soared 11.6% as the chemicals maker lifted its full-year profit forecast despite subdued market conditions. Dexus Property Group added a percent after the company and the Canada Pension Plan Investment Board reached an agreement to buy all the outstanding units in Commonwealth Property Office Fund for an estimated A$2.83 billion or $2.66 billion. According to the Australian Bureau of Statistics, the total number of housing loans in Australia climbed a seasonally adjusted 4.4 percent in September compared to the previous month, standing at 51,480. The figure beat forecasts for an increase of 3.5 percent following the downwardly revised 4.0 percent contraction in August. South Koreas Kospi closed 0.4 percent lower at 1,977, extending losses for the sixth consecutive session due to foreign fund selling. Samsung Electronics ended its downward trend to close 1.3% higher on bargain hunting after losing 6 percent in the previous week. New Zealand shares fell notably on Fed tapering concerns. The benchmark NZX-50 slipped 0.6%, to trade 4,922, with 30 of its components retreating. Fonterra Shareholders Fund units shed 2.9 percent after the diary giant announced it has taken a $157 million provision against inventories because of rising input costs.
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U.S. stocks rallied on Friday, reversing loss occurred in the previous session. The Labor Departments monthly jobs report showed the U.S. economy added a surprise 204,000 jobs in October despite the 16-day partial federal government shutdown. Another report showed a modest increase in personal spending matching estimates, while consumer sentiment unexpectedly dipped to a near two-year low in November.
According to Statistics New Zealand, the total value of credit card transactions jumped a seasonally adjusted 1.1 percent in October compared to the previous month. That follows the upwardly revised 0.3 percent monthly contraction in September, which was originally reported as -0.4 percent. Singapores Straits Times was moving up 0.3% and Malaysian shares were largely unchanged. Key benchmark indexes in India, Indonesia and Taiwan were down between 0.5% and 0.8%. According to data from the Department of Statistics, Malaysias industrial output grew 1% in September from a year earlier, much slower than an upwardly revised 2.7 percent gain in August. Economists expected the rate of growth to accelerate to 2.5 percent.
Tuesdays Asian Recap

Asian stocks ended mixed on Tuesday. Chinas Shanghai Composite rose 0.8%, to trade at 2,127. The healthcare and insurance sector were up ahead of the policy announcements from the Communist Partys third plenum expected later in the day. Hong Kongs Hang Seng was down 0.7%. After data from the Banking sector showed Chinas new bank lending hit a 10-month low in October, a sign that the central bank has moved to a slightly tighter stance to keep inflation under control and rein in lending. Tokyo shares rallied, with the yens slide against the dollar and solid earnings results contributed to positive sentiment. The benchmark Nikkei average jumped 319 points or 2.2%, to trade at 14,589, adding to Mondays 1.3% rally. The broader Topix index climbed 1.7%. According to Japans consumer confidence index, consumer sentiment unexpectedly deteriorated in October, after improving in the previous month, latest data showed. The headline consumer confidence index dropped to 41.2 from 45.4 in the previous month, the Cabinet Office said. Economists were looking for an improvement to 45.5. Australian shares posted marginal gains as investors adopted a cautious stance amid uncertainty about the timing and pace of Fed tapering. Domestic data showing a drop in business confidence also dampened investor sentiment. The benchmark S&P/ASX 200 Index edged up 0.1%, to trade at 5,393. According to a survey by the National Australia Bank, confidence among Australian businesses fell sharply in October as firms started to reassess their future plans in the wake of continued weakness in operating conditions and changed political climate. The business confidence index fell to 5 from a three-and-a-half year high of 12 in September. The big Australian banks fell across the board with ANZ, Commonwealth, NAB and Westpac falling between 0.1% and 0.8%. Seven Group Holdings declined 1.6% as it lowered its earnings guidance and announced additional job cuts at its WesTrac mining equipment business. Incitec Pivot soared 8% after the fertilizer and explosives maker posted a net profit after tax of $372 million for the 12 months to September, down from $510.7 million in the previous year. South Koreas Kospi average rose 0.9 percent on bargain hunting, snapping six days of losses.
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According to the Bank of Korea export price index contracted 1.9 percent in October compared to the previous month. That follows the 2.4 percent contraction in September. On an annual basis, export prices dropped 4.6 percent after shedding 4.7 percent in the previous month. New Zealands benchmark NZX 50 index slipped 0.1%, to trade at 4,916, with 25 of its components retreating. Chorus dropped 2.2% on renewed worries over price regulation and Vector, which opposed antitrust approval being given to dominant mobile operators; declined 2.7 percent while SkyCity Entertainment Group. Mainfreight advanced 2.1^ after the logistics firm reported a 51 percent increase in first-half profit, helped by a settlement from the former owners of the Wim Bosman group and improved performance in Asia and Australasia. According to the Real Estate Institute of New Zealand home prices rose to a new record high in October, while the sales volume declined indicating that sales were not as high as would be normally expected at this time of the year, data published by showed.
Singapores Straits Times was down 0.2% Key benchmark indexes in, India, Indonesia and Malaysia were down between 0.5% and 1.4%, while the Taiwan Weighted average gained 0.2%. U.S. stocks Indexes are relatively largely unchanged overnight. Following Friday massive short covering rally US stock have pause at their highs. The Dow advanced 0.1% to close at a fresh record high. A lack of any major economic news and the Veterans Day holiday resulted in a thin volume for the day. Market participants waited for speeches by major Federal Reserve officials due this week for clues about the outlook for U.S. monetary policy. Bernankes nominated successor, Janet Yellen, will give her views before the U.S. Senate on Thursday, with investors waiting to see if she will drop any hints on the timing of stimulus tapering.
Wednesdays Asian Market

Asian stocks declined on Wednesday. Chinas third plenum meeting failed to outline steps to curb state dominance of the economy, saying markets would play a decisive role in allocating resources. Weak data on Japanese core machine orders and renewed concerns that the U.S. Federal Reserve may start reducing its bond-buying program in the foreseeable future also kept investors on the sidelines ahead of Fed deputy chief Janet Yellens testimony to the US Senate Banking Committee on Thursday. Chinas Shanghai Composite index ended down 1.8%, to trade at 2,088. Chinas Communist Party of China issued a vaguely-worded communique issued at the end of a four-day meeting of party leaders pledged to build an open and unified market with orderly competition before letting the market decide the allocation of resources. While outlining a number of key economic reforms for the next decade, the Communist Party of China said China will relax investment restrictions and accelerate construction of free trade zones. Hong Kongs Hang Seng index declined 1.9%, to trade at 22,464. Tokyo stocks fell modestly on profit taking, with the yens recent depreciation capping losses. The benchmark Nikkei edged down 0.2%, to trade at 14,567. The broader Topix index finished 0.1% lower at 1,204. Citizen Holdings dropped 1.7% on profit taking, East Japan Railway declined 2% and Hitachi shares shed 2.1%.
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The Kospi average fell 1.6%, to trade at 1.964, its lowest level since September 6. According to data from Koreas Office of Statistics the unemployment rate remained stable at seasonally adjusted 3 percent in October despite an increase in job creation. On an unadjusted basis, the jobless rate rose marginally to 2.8 percent from 2.7 percent a month ago. New Zealand shares ended little changed, with the benchmark NZX-50 closing up 3 points at 4,919. On the economic front, the rising imbalances in New Zealands housing market were the main threat to the countrys financial system, Reserve Bank of New Zealand Governor Graeme Wheeler said while releasing the latest financial stability report. High levels of debt in the household sector relative to both historical and international norms increase the risk of a future house price correction that could result in significant financial system stress, he said. Indias Sensex was down 0.4%, Indonesias Jakarta Composite was losing 1.5%. Malaysias KLSE fell 0.7%, Singapores Straits Times was declining 0.4% and the Taiwan Weighted average dropped 1.1%. U.S. stocks traded mostly lower overnight as investors digested some disappointing company earnings and weighed conflicting comments from Federal Reserve officials about the outlook for monetary policy. The Dow and the S&P 500 slipped around 0.2% each, while the tech-heavy NASDAQ closed just above the unchanged line.
According to a report released the Cabinet Office, core machine orders in Japan contracted a seasonally adjusted 2.1 percent in September from the previous month, - coming in at 802.1 billion yen. The headline figure missed forecasts for a decline of 1.8 percent following the 5.4 percent increase in August. On an annual basis, core machine orders climbed 11.5 percent - also shy of expectations for a 12.5 percent increase. According to the Bank of Japan Board Member Miyao, Japans economy continues to recover moderately but downside risks to recovery are slightly larger than upside risks. The downside risks are due to structural problems in emerging economies and lingering U.S. fiscal problems, he told business leaders in Matsumoto, central Japan. Australian shares fell sharply as investors liquidated their existing holdings to invest in new share issues, including a $600 million offering from media conglomerate Nine Entertainment. The benchmark S&P/ASX 200 fell 1.4%, to trade at 5,319, its biggest loss in six weeks. In economic releases, a measure of consumer confidence in Australia rebounded this month on the back of low interest rates and rising home prices. The headline index from Westpac Bank and the Melbourne Institute climbed 1.9% following the 2.1 percent decline in October. The surveys reading of economic conditions over the next 12 months rose 0.4 percent, while conditions over the next five years rose 0.5 percent.
Thursdays Asian Market

Asian stocks rebounded from six-week lows on Thursday. Federal Reserve chairwoman-designate Janet Yellen indicated the U.S. central bank is in no rush to pare economic stimulus measures. In remarks prepared for a Senate hearing on Thursday, Yellen said that the Fed has more work to do as unemployment is still high. Her comments that the U.S. economy and labor market are performing far short of their potential suggested that the Fed will keep its stimulus in place for longer than expected. Tokyo stocks rallied to a near six-month high despite data showing slowing growth in the September quarter. The Nikkei jumped 2.1%, to trade at 14,876. The broader Topix index advanced 1.2%. The yen weakened to a two-month low versus the dollar after Finance Minister Taro Aso said the nation must retain the option to intervene in currency markets. According to final estimate published by the Ministry of Economy, Trade and Industry, Japans industrial output grew only 1.3 percent in September from August. The preliminary data showed a 1.5 percent rise in production. Preliminary data from the Cabinet Office showed that Japans gross domestic product expanded 0.5 percent in the third quarter of 2013 compared to the previous three months.
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That beat forecasts for an increase of 0.4 percent, although it slowed from the 0.9 percent gain in the second quarter. On an annual basis, GDP climbed 1.9 percent, topping expectations for a 1.7 percent gain. Chinas Shanghai Composite rose 0.6%, to trade at 2,100, led by gains in healthcare stocks on expectations of higher government expenditure over the next decade. Hong Kongs Hang Seng added 0.8% to end the session at 22,649. Australian shares rebounded on optimism that global central banks will keep in place their ultra-loose monetary policies in place for the time being. The benchmark S&P/ASX 200 index advanced 0.7%, to trade at 5,355, following Wednesdays 1.4% decline, with banks pacing the gainers after several days of losses. According to a monthly survey data from the Melbourne Institute showed Inflationary expectations among Australian consumers dropped slightly in November to a level below the Reserve Bank of Australias 2-3 percent target band. The expected inflation rate fell to 1.9 percent from 2 percent in October. South Koreas Kospi average closed 0.2% higher, to trade at 1,968, rebounding from a more than twomonth low hit yesterday. The Bank of Korea today kept its benchmark interest rate steady for a sixth straight month, citing signs of moderate recovery and benign inflation. Consumer inflation eased to a fresh 14-year low of 0.7 percent in October, staying well below the central banks target rate of 1.5 to 3.5 percent, official data showed.
New Zealand shares joined the regional rally after Yellens accommodative comments. The benchmark NZX-50 edged up 0.2%, to trade at 4,927, with 22 of its components advancing. Air New Zealand ended flat after the government said it has yet to decide on when it would reduce its stake in the national carrier. According to Statistics New Zealand, the total volume of retail sales in New Zealand rose a seasonally adjusted 0.3 percent in the third quarter of 2013 compared to the previous three months, Statistics New Zealand said. That missed forecasts for an increase of 0.9 percent following the 1.5 percent gain in the second quarter. Indias Sensex was up 0.7%, Indonesias Jakarta Composite index was rallying 1.7%, Malaysian shares were up marginally, Singapores Straits Times was up 0.7% and the Taiwan Weighted average closed up 0.4%. U.S. stocks advacned overnight. The Dow and the S&P 500 reaching fresh record closing highs, as investors cheered strong thirdquarter results from department store retailer Macy and awaited a speech from Fed Chief Ben Bernanke on Thursday. The Dow rose half a percent, the tech-heavy NASDAQ gained 1.2 %and the S&P 500 advanced 0.8%.
Fridays Asian Market

Asian stock markets are mostly trading notably higher on Friday. Soon to be Chairman of the Federal Reserve Janet Yellens testimony before the Senate Banking Committee has contributed to global rally in equities as market participants hope the U.S. Federal Reserves asset purchase program will continue for a significant period, In the Australian market, financial, industrial, energy consumer discretionary and telecommunications stocks are among the notable gainers. The benchmark S&P/ASX 200 index, which declined to 5,340 in early trades, is currently up 48.9 points or 0.9%, to trade at 5,404. The broader All Ordinaries index is up 45.3 points or 0.8% at 5,397.3, well off the days low of 5,338.8. In the currency market, the Australian dollar opened weak against the U.S. dollar. Around noon, the local unit was quoting at US$0.9323, down 0.3 percent from Thursdays close of US$0.9352.
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Among other markets in the Asia-Pacific region, Shanghai, Hong Kong and South Korea are up sharply. Taiwan is also trading notably higher, while Indonesia, Malaysia, New Zealand and Singapore are up with modest gains. On Wall Street, stocks rallied higher on Thursday, reflecting a positive reaction to Janet Yellens testimony at her confirmation hearing before the Senate Banking Committee. With the upward move on the day, the Dow and the S&P 500 once again reached new record highs. The Dow rose 54.6 points or 0.4% to 15,876, the NASDAQ edged up 7.2 points or 0.2% to 3,972 and the S&P 500 climbed 8.6 points or 0.5% to 1,790..
The Japanese market opened on a rousing note, with the benchmark Nikkei 225 index rising past the 15,000 mark for the first time in nearly six months. The dollars rise against the yen contributed to the bright opening. The Nikkei index, which opened at 14,994, was up 262.8 points or 1.8%, to trade at 15,139.2 when the morning session ended. Automobile, banking, steel, non-ferrous metals, machinery, real estate, retail and precision instruments shares got off to a buoyant start and were mostly up sharply at the break. In the currency market, the U.S. dollar traded above the 100 yen-range in early deals in Tokyo. The yen is currently trading at 100.25 to the U.S. dollar.
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EUROPEAN MARKET RECAPS
Mondays European Market
The European markets are trading modestly in positive territory on Monday. Survey data from the Confederation of British Industry showed that optimism among U.K. small and medium-sized manufacturers about the business situation rose at the fastest pace since records began in 1988. Driven by robust domestic and foreign demand, the total new order balance rose for the first time since July 2012 to 17 percent during three months to October, the SME Trends survey revealed. The Euro Stoxx 50 index of Eurozone bluechip stocks is adding 0.06%. The Stoxx Europe 50 index, which includes some major U.K. companies, is gaining 0.08%. The DAX index, the French CAC 40 and the UKs FTSE 100 are up around 0.1% each. The Switzerlands SMI is advancing 0.3 percent. Novartis is up 0.9 percent in Zurich. The pharmaceutical giant announced a definitive agreement to divest its blood transfusion diagnostics unit to Barcelona, for $1.675 billion. U.S. futures have thus far held their gains from Friday, but
have not gone on to make higher high. In the previous session, a major short covering rally ensued follow Thursdays rout of the trading range. The Labor Departments monthly jobs report showed the U.S. economy added a surprise 204,000 jobs in October despite the 16-day partial federal government shutdown. The Dow rose 1.1 percent to hit a record closing high, the tech-heavy NASDAQ jumped 1.6 percent and the S&P 500 advanced 1.3 percent. The Asian stocks turned in a mixed performance after unexpected strong U.S. jobs data heightened expectations the Federal Reserve would begin tapering its stimulus program sooner rather than later. In commodities December Crude delivery is trading at $94.37 per barrel: () down - $0.23. December gold is trading at $ 1281.2 a troy ounce: () down - $3.40.
Tuesdays European Market

The European markets are trading lower on Tuesday. Sentiment was also impacted by corporate earnings news. The Bank of France said it expects the economy to expand 0.4 percent in the fourth quarter, based on the monthly index of business activity. The survey said business confidence among manufacturers improved unexpectedly to 99 in October from 97 in September. It was forecast to remain unchanged. House prices in the U.K. increased for the eighteenth consecutive month in September, and at a slightly faster rate than in the previous month, data released by the Office for National Statistics showed. An indicator of the performance of the British economy rose sharply in September, indicating that the ongoing recovery will continue in the coming months, survey data published by the Conference Board showed. The leading economic index advanced 1.5 percent sequentially to 107 in September. The Euro Stoxx 50 index of Eurozone bluechip stocks is down 0.30%. The Stoxx Europe 50 index, which includes some major U.K. companies, is down 0.43%. The DAX index of Germany and Switzerlands SMI are losing 0.2%. The French CAC 40 and the UKs FTSE 100 are falling 0.3% each. The Asian stocks ended mixed. Chinas Shanghai Composite rose 0.8%, to trade at 2,127.
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December Crude delivery is trading at $94.74 per barrel: () down $0.40. December gold is trading at $1281.4 a troy ounce: () up + $0.30.
Hong Kongs Hang Seng was down 0.7%. The benchmark Nikkei average jumped 319 points or 2.2%, to trade at 14,589, adding to Mondays 1.3% rally. The broader Topix index climbed 1.7%. US Stocks indexes are relatively flat in the overnight session. Fed Chairman Bernankes successor, Janet Yellen, is scheduled to give her views before the U.S. Senate on Thursday. Yellens speech is expected to provide market participants will get fresh insights about the outlook for U.S. monetary policy. In commodities
Wednesdays European Market

The European markets are trading lower on Wednesday. European investors remained cautious amid a mixed bag of earnings news. According to data from the Office for National Statistics British unemployment claims declined more than expected by economists in October, while the jobless rate edged lower in the three-months to September. The Euro Stoxx 50 index of Eurozone bluechip stocks is losing 0.35%. The Stoxx Europe 50 index, which includes some major U.K. companies, is down 0.45%. The DAX index is losing 0.2%, while Switzerlands SMI is lower by 0.1%. The French CAC 40 and the UKs FTSE 100 are declining 0.3% and 0.8%, respectively. In Frankfurt, utility E.ON reported lower profit for the first nine months of the year, amid a 5 percent drop in revenues. Further, the firm cut the upper end of its full year forecast for EBITDA and underlying net income. The stock is down 0.5 percent. Construction giant Hochtief reported a sharp decline in thirdquarter consolidated net profit, while operational earnings grew from last year. The company said it looks ahead with confidence to the remainder of the year, and reaffirmed its guidance for 2013. The stock is up 2.4%. In London, ICAP is gaining 5.8%. The inter-dealer broker expects annual profit before tax to be marginally ahead of the prior year. Danish brewer Carlsberg reported higher profit for the third quarter, helped by tight cost control, even as revenues declined amid weak volume development in Eastern Europe. The firm said its earnings expectations for 2013 are unchanged, even as it cut its Russian beer market outlook. The stock is up 2.4% in Copenhagen. The Asian stocks fell broadly after Chinas third plenum meeting failed to outline steps to curb state dominance of the economy, saying markets would play a decisive role in allocating resources. U.S. traded lower in the overnight session. In the previous session, the Dow and the S&P 500 slipped around 0.2% each, while the tech-heavy NASDAQ closed just above the unchanged line. In commodities December Crude is trading at $93.22 per barrel: () up +$0.18. December gold is trade at $1274.9 a troy ounce: () up +$3.70.
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Thursdays European Market
The European markets are trading higher on Thursday. Federal Reserve chairman nominee Janet Yellen comments that there is more work the Fed to do to bolster the economy and labor market as unemployment is still high, contributed to a bullish global sentiment. The Fed have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession, Yellen said in remarks prepared for Thursdays confirmation hearing before the Senate Committee on Banking, Housing, and Urban Affairs. Gains in manufacturing and housing have helped drive modest economic growth this year, but unemployment remains too high for the Fed to consider significantly scaling back its $85 billion a month in asset purchases, she warned. The Eurozone economy managed to expand in the third quarter, flash estimates from Eurostat showed. Gross domestic product was up 0.1 percent, down from the 0.3 percent quarterly growth posted in the preceding three months. The German economic growth came in line with expectations, at 0.3 percent quarter-on-quarters, but down from 0.7 percent in the second quarter, Destatis said.
France, the second largest Eurozone economy, shrank 0.1 percent in the third quarter from the previous three months, the statistical office Insee said. Economists had expected GDP to remain flat, following the second quarters 0.5 percent rebound. U.K. retail sales volume dropped 0.7 percent month-on-month in October due to a notable 1.3 percent fall in non-food store sales, the Office for National Statistics said. The drop in sales volume follows a 0.6 percent rise in September. It was forecast to remain flat in October. The Euro Stoxx 50 index of Eurozone bluechip stocks is gaining 0.69%. The Stoxx Europe 50 index, which includes some major U.K. companies, is adding 0.70%. The DAX index gained 0.9 percent and Switzerlands SMI added 0.6 percent. The French CAC 40 and the UKs FTSE 100 rose 0.8 percent each. Asian stocks rebounded from six-week lows. U.S. futures traded higher in the overnight session. In the previous session, the Dow rose half a percent, the techheavy NASDAQ gained 1.2 percent and the S&P 500 advanced 0.8 percent. In commodities December Crude is trading at $93.83 per barrel :() down -$0.05. December gold is trading at $1283.3 a troy ounce: () up + $14.90.
Fridays European Market

The European markets are trading above the higher on Friday. EU Economic and Monetary Affairs Commissioner Rehn said The gradual recovery is underway in Europe, and that challenges remain for Spain and Ireland. According to final data from Eurostat, inflation in the Eurozone slowed to 0.7 percent in October, as initially estimated, from 1.1 percent in September. The rate was the lowest since November 2009 and remained below the European Central Banks target of below, but close to 2 percent for the ninth month in a row. The Euro Stoxx 50 index of Eurozone bluechip stocks is losing 0.07%. The Stoxx Europe 50 index, which includes some major U.K. companies, is up 0.22%. The DAX index and the French CAC 40 are fractionally higher. The UKs FTSE 100 is adding 0.3%. The Switzerlands SMI is up 0.1%.
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Todays Empire report will be watched carefully since it will be the first data available for the U.S. manufacturing sector for November. The markets will be hoping for a pickup in manufacturing orders and confidence following the resolution of the October U.S. government shutdown. The October import price index is expected to show declines of -0.5% m/m and -1.7% following the Sep report of +0.2% m/m and -1.0%. On a year-on-year basis, import prices in September fell by -1.0% on both an overall and ex-petroleum basis. The Oct import price report is likely to add to talk about belowtarget inflation that will likely keep the Fed from tapering QE3 until early 2014. The core PCE deflator in September was only at +1.2%, which is well below the Feds 2.0% inflation target and just 0.3 points above the record low of +0.9% posted in Dec 2010. In commodities December Crude delivery is trading at $93.81 per barrel: () up + $0.05. December gold is trading at $1281.80 a troy ounce: () down- $4.50.
Most Asian markets ended higher amid hopes that the U.S. Federal Reserves asset purchase program will continue, following Janet Yellens testimony before the Senate Banking Committee. U.S. futures traded higher in the overnight session. In the previous session, the Dow rose 0.4%, the NASDAQ advanced 0.2% and the S&P 500 gained 0.5%. Economic Data Octobers industrial production report is expected to show a modest increase of +0.2%. Industrial production showed strong increases of +0.4% in August and +0.6% in September, but the gains in manufacturing production were more muted at +0.5% in Aug and +0.1% in September. Todays report may be skewed lower to some extent by the Oct 1-16 government shut-down, which hurt the defense industry in particular. The U.S. manufacturing sector remains relatively positive despite the October U.S. government shut-down. The ISM manufacturing index in October showed an unexpected +0.2 point increase to a 2-1/2 year high 56.4, marking the fifth consecutive monthly gain. In addition, the ISM new orders in October rose by +0.1 point to the strong level of 60.6, although that was still down by -2.6 points from the 2-1/2 year high of 63.2 posted in August. The Empire manufacturing index is expected to show a +3.48 to 5.00, reversing part of the -4.77 point decline to 1.52 seen in October.
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Algo Futures Trending Now Issue 7 - November 17th, 2013

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INSIDE THIS ISSUE

THIS WEEK IN TRADES

Tape Reading Lesson | Review of Price Sequence During Pullback

ASIAN MARKET RECAPS20 EUROPEAN MARKET RECAPS26 DAILY MARKET RECAPS.30

(1762) paused after price traded two

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 7

Sunday, November 17th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 7

Market Insights Trending Now

Sunday, November 17th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 7

Sunday, November 17th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 7

Market Insights Trending Now

Daily Morning Briefing

Sunday, November 17th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 7

Sunday, November 17th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 7

Market Insights Trending Now

Sunday, November 17th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 7

Sunday, November 17th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 7

Market Insights Trending Now

Daily Morning Briefing

Sunday, November 17th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 7

Sunday, November 17th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 7

Market Insights Trending Now

Sunday, November 17th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 7

Daily Morning Briefing

Sunday, November 17th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 7

Market Insights Trending Now

Sunday, November 17th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 7

Sunday, November 17th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 7

Market Insights Trending Now

Daily Morning Briefing

Sunday, November 17th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 7

Sunday, November 17th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 7

Market Insights Trending Now

Sunday, November 17th, 2013

Market Insights Trending Now

Algo Futures | Trending Now Weekly Edition | Issue 7

Sunday, November 17th, 2013

Algo Futures | Trending Now Weekly Edition | Issue 7

Market Insights Trending Now

ASIAN MARKET RECAPS20 EUROPEAN MARKET RECAPS26 DAILY MARKET RECAPS.30