Numbers, Manipulation and the Commerce Department

By trader7757, 22 December, 2009, No Comment

Some days it is just plain hard not to laugh at the ridiculous manipulation of numbers the Commerce Department spews forth.  So you can imagine my astonishment this morning when GDP numbers were revised downward from the 2.8% growth rate reported last month, which had been revised downward from the original report of 3.5%.  We have finally settled on a mundane 2.2% annual GDP, since this is the final revision.  On a positive note, the current revision is still the highest GDP since the third quarter of 2007.

The talking point on government economic reports is always consistent, as we typically trumpet exceptional numbers on initial economic reports then quietly revise downward in following months.  The Commerce Department would say the numbers are revised as more information is gathered and a clearer picture of the economy emerges, and this is indeed a cogent argument.  The job of estimated the US GDP is a mammoth undertaking.   But that is not the problem, it has been a long time since I have seen numbers revised upward as oppose to downward.  Simple probability would suggest that they would make revisions both to the upside and downside as more information becomes available.

I suppose it isn’t politically correct to question the Commerce Departments veracity, but initial numbers released by the Department have to be treated with a grain of salt, as few people put much confidence in the bright picture often portrayed by the numbers.   This practice is nothing new and did not start under the Obama Administration, it’s been going on for years, and has reduced the Commerce Departments credibility significantly.  The market has simply learned to shrug off the glowing reports issued and continue trading with what the market offers to be true through independent pricing models and reports issued by individual corporations.

What ever happened to the maxim to “err on the conservative side?”  Even MSNBC, the bastion of spinning horrible news into “not quite as bad as you think” news has taken to shrugging off statistical surprises and recommends, from time to time, to wait for the revisions to give us a clearer picture.   Oddly enough, it is my opinion that the general public has a pretty good idea what is going on in the economy.

I was at Wal-Mart yesterday and happen to know the manager pretty well, and questioned him how Christmas season sales were going and he smiled and rattled off a stream of positive numbers over last year.  I didn’t need to ask, really, the throngs of people in Wal-Mart indicate a change in spending.   On the other hand, I questioned the local Macy’s manager about Christmas sales and he stared at his shoes and mumbled incoherent jabber about a late surge he expected to bring the numbers up to par from last year.  The logic is simple:   Wal-Mart is cheaper than Macy’s and people are spending less this year.  I do’t need the Commerce Department to tell me that fact, either.  I can see and feel it.

As always, I am thankful I am scalper and don’t have to depend upon government prognostication to support myself.

ES Emini Day Trading: Pivot-Fed Announcements-Commentary

By trader7757, 22 December, 2009, No Comment
ESH0
For 12/22/2009
How To Use
Symbol R1 R2 Pivot S1 S2
ESH0 1115.50 1122.75 1106.00 1098.75 1089.25

Fed and Fed Agency Announcements

GDP
[Report][Star]8:30 AM ET
Redbook
[Bullet8:55 AM ET

C

4-Week Bill Auction
[Bullet11:30 AM ET

Consensus Reports

GDP
Released on 12/22/2009 8:30:00 AM For Q3:09
Prior Consensus Consensus Range
Real GDP – Q/Q change – SAAR 2.8 % 2.7 % 2.5 % to 2.9 %
GDP price index – Q/Q change – SAAR 0.5 % 0.5 % 0.5 % to 0.5 %

Market Consensus Before Announcement
GDP for the second estimate for the third quarter growth was revised downward to an annualized 2.8 percent from the initial estimate of 3.5 percent. The third quarter increase, however, appears to have ended the recession which faded with a 0.7 percent dip in the second quarter. With the third estimate for the third quarter, the components facing potentially notable revisions are inventories and net exports. Turning to inflation, the GDPI price index was nudged down to a 0.5 percent annualized pace for the third quarter from the initial estimate of 0.8 percent.

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Another Sign the Armageddon is Upon Us

By trader7757, 21 December, 2009, No Comment

he central bank’s performance has sparked a great debate about its future as a regulator, pitting those who want to expand its role against those who want to strip its powers. It also has come under pressure from politicians seeking greater oversight of its primary job, adjusting interest rates to moderate economic growth.

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ES Emini Day Trading: Pivot-Fed Announcements-Commentary

By trader7757, 20 December, 2009, No Comment

ESZ9
For 12/21/2009
How To Use
Symbol R1 R2 Pivot S1 S2
ESZ9 1107.10 1111.80 1102.80 1098.10 1093.80

Fed and Fed Agency Announcements

6-Month Bill Auction
[Bullet11:30 AM ET

Highlights
After the boost to equities at Friday’s close from quadruple witching, will the gains reverse as trading returns to normal?

ES Emini Day Trading: Eight Habits of Successful Trading Scalpers

By trader7757, 19 December, 2009, No Comment

ES Emini Day Trading:  Eight Habits of Successful Trading Scalpers

Not everyone day trades in the same manner, but successful scalpers tend to share some similar characteristics.  Over the years, I have noticed that:

1.  A good scalper is familiar with the contract he is trading.  He has extensive experience trading the contract, and most scalpers will tell you that every futures contract has it’s own idiosyncracies that make it unique.  Trading a contract you are unfamiliar with can be fun, if you are trading low contract numbers and trying to learn, but it is a tough place to try and make money.

2.  A good scalper is in complete control of his trading account.  He does not overtrade or trade more contracts than his pre-set risk tolerance.  There is often a tendency among less talented scalpers to start trading larger contract amounts if they find themselves having a bad day.  A good scalper does not try to over compensate and stays within the parameters he lives by in his trading life.  Doubling down is not a good way to make up for successive losing trades.

3.  A good scalper is self-disciplined and stays within himself.  He has a system and his goal is to execute his system flawlessly.  He does not take on a risky trade that is not within the parameters of his entries, and he does not bail out of a trade that is still within his parameters if he starts feeling bad about the trade.  The ability to stay under control during difficult trading times is the hallmark of a great scalper.

4.  A good scalper has a solid understanding of his own ability.  Some markets are very difficult to trade, especially when the price action is whipshawing back and forth and there is no clear trend.  There are risky techniques to trade these markets, but they involve considerable risk which is probably outside the risk parameters of the scalpers.   Trading is not like Texas Hold ‘Em, you never go all in, and you never bluff.

5.  A good scalper realizes that the market is always right and he is always wrong.  This is a tough one to swallow, but when I make a losing trade, even though the set up was just exactly what I was looking for and the price started moving in the expected direction, then turns south and I get stop out, I am wrong.  The market is a constant, so it is always right.  It may not always be logical, but it is the ultimate decider of trading truth.

6.  A good scalper keeps track of his trading.  Most good scalpers keep a trading diary and perhaps even the daily chart for every day they trade.  I frequently go back six months and look at the things I did well and some of the things I did poorly.  It is part of the method of learning to trade to keep track of where you have been and revisit that place from time to time.  You don’t live in the past or dwell on your mistakes, you learn from your mistakes.

7.  A good scalper controls all the outside variables in his trading environment.  Many traders listen to music while they trade, some prefer silence, but very few listen to the trendy market television shows that blare out all sorts of speculation and rumor.  Scalpers trade the chart in front of them, and that chart contains all the information they need.  There is no need for some television talking head to skew your thinking, and it can happen.  The trading atmosphere should be away from the family, tv, radio anything that can distract, and the family should understand that while dad is trading he should be left to trade.

8.  And finally, a good trader has a healthy perspective on life.  He understands that as a scalper he does not have to worry about the broader trends effecting the economy or the world, at least from a trading standpoint.   He knows that all the information he needs is right there in the price action and indicators he has come to rely upon, and he trust his system to serve him well.  Trading isn’t everything in his life, but it is his income.  But trading gives him the time to spend with his children and family, his leisure time is enhanced, and he has a chance to make the world a better place instead of working long hours in the corporate life.

I am a long time retail and institutional trader who now only trades part time, usually in the morning. I enjoy writing informational articles about my style of trading so others may benefit.

I endorse a state of the art trading program for beginners at Trading Concepts, Inc It’s an awesome product that will have you well on your way to success. Plus, it has a money back guarantee…you have nothing to lose and thousands to gain.

ES Emini Day Trading: Pivot-Fed Announcements-Commentary

By trader7757, 16 December, 2009, No Comment

Tomorrow should be an interesting day, as I am sure the market will be keeping an eye on the jobless numbers. Along with the others indicators to be announced, especially if we get some mixed signals, the day might turn out a bit choppy.

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ES Emini Day Trading: The Perfect Day Job

By trader7757, 16 December, 2009, No Comment

Day trading allows you to get your life back from the 9-5 grind of a regular job. I get to spend more time with my family and children, along with having time for some of the leisure pursuits I have always dreamed of doing. Trading is not for everyone, but most people can be taught to trade with profitable results, and you only improve as you gain more and more experience.

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ES Emini Day Trading: Pivot-Fed Announcements-Commentary

By trader7757, 16 December, 2009, No Comment
ESZ9
For 12/16/2009
How To Use
Symbol R1 R2 Pivot S1 S2
ESZ9 1114.58 1120.42 1109.92 1104.08 1099.42

Fed and Fed Agency Announcements

Housing Starts
[Report][Star]8:30 AM ET
Current Account
[Report][Bullet8:30 AM ET

Consensus Analysis

MBA Purchase Applications
Released on 12/16/2009 7:00:00 AM For wk12/11, 2009
Prior Actual
Purchase Index – W/W Change 4.0 % -0.1 %

Highlights
MBA’s purchase index slipped 0.1 percent in the Dec. 11 week with the refinance index up 0.9 percent. Mortgage rates remain extremely low, at 4.92 percent for 30-year loans. Housing starts for November will be released at 8:30 ET this morning and are expected to show a gain following a drop in October.

Consumer Price Index
Released on 12/16/2009 8:30:00 AM For November, 2009
Prior Consensus Consensus Range Actual
CPI – M/M change 0.3 % 0.4 % 0.2 % to 0.6 % 0.4 %
CPI – Y/Y change -0.2 % 1.9 %
CPI less food & energy 0.2 % 0.1 % 0.1 % to 0.2 % 0.0 %
CPI less food & energy – Y/Y change 1.7 % 1.7 %

Highlights
The consumer price report for November was calming on most financial markets despite the rise in the headline number. Both the headline and core numbers were much less inflationary than yesterday’s scary PPI numbers. Headline consumer price inflation jumped 0.4 percent in November after gaining 0.3 percent the month before. The November headline matched the consensus forecast. Core CPI inflation-in contrast with yesterday’s core PPI run up-eased to 0.0 percent (no change) after a 0.2 percent increase in October. The consensus had called for a 0.1 percent rise.

The headline number was boosted mainly by a 4.1 percent surge in energy costs after a 1.5 percent gain in October. Gasoline was up 6.4 percent, following a 1.6 percent gain the month before. Food price inflation was soft in November with a 0.1 percent rise-the same as in October.

Within the core, declines in shelter indexes offset increases in costs for new and used motor vehicles, medical care, airline fares, and tobacco. Shelter costs declined 0.2 percent in the latest month, led by a 1.5 percent drop in lodging away from home. Owners’ equivalent rent dipped 0.1 percent. Hotels-including resorts-continued to engage in heavy discounting. High unemployment is keeping rent soft in general.

Year-on-year, headline inflation increased to plus 1.9 percent (seasonally adjusted) from minus 0.2 percent in October. The core rate was unchanged in November at up 1.7 percent. On an unadjusted year-ago basis, the headline number was up 1.8 percent in November while the core was up 1.7 percent.

Inflation is still high at the headline level but it is not as severe as earlier indicated by the PPI for November. A flat reading for the CPI core suggests that a sluggish economy is keeping underlying inflation tame for now.

Housing Starts
Released on 12/16/2009 8:30:00 AM For November, 2009
Prior Consensus Consensus Range Actual
Starts – Level – SAAR 0.529 M 0.575 M 0.540 M to 0.600 M 0.574 M
Permits – Level – SAAR 0.552 M 0.584 M

Highlights
Housing starts looked good for November but most of the gain was largely a comeback and then some in multifamily starts-a volatile component. The single-family component posted only a partial rebound. Construction companies picked up the pace of groundbreaking for new homes as housing starts in November rebounded 8.9 percent, following a revised 10.1 percent plummet in October. The November pace of 0.574 million units annualized came in right at the market forecast for 0.575 million units and was down 12.4 percent on a year-ago basis. The latest comeback was led by a 67.3 percent rebound in multifamily starts, following a sharp 29.5 percent plunge in October. Meanwhile the single-family component edged up 2.1 percent after a 7.1 percent fall the month before.

By region, the November rebound in starts was led by 16.4 percent rebound in the Northeast with gains also seen in the South, up 12.3 percent; Midwest, up 3.0 percent; and West, up 1.9 percent.

Homebuilders are modestly optimistic about ramping up the pace of construction as housing permits in November rebounded 6.0 percent after falling 4.2 percent in October. October’s pace of 0.552 million units annualized was down 24.3 percent on a year-ago basis.

Today’s housing starts report is good but should be seen in the context of October’s weak numbers. The two months together indicate that housing is in a slow recovery. The bad news is that the recovery is slow. But the good news is that the housing construction recovery is slow-anything more robust at this point would not be sustainable.

FOMC Meeting Announcement
Released on 12/16/2009 2:15:00 PM
Prior Consensus
Federal Funds Rate – Target Level 0 to 0.25 % 0 to 0.25 %

Market Consensus Before Announcement
The FOMC announcement for the December 15-16 FOMC policy meeting is expected to leave the fed funds target rate unchanged at a range of zero to 0.25 percent. However, traders will be watching to see if the “extended period” language is qualified with any additional wording regarding the future path of the fed funds rate. Traders also will look for updates on the Fed’s view of the recovery and on the Fed’s plan for unwinding balance sheet expansion.
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