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March 2012



Breaking News: Volatility

March 30, 2012 – Comments (0)

Breaking news: There has been a precipitous rise in both online poker activity and napping during early 2012, most notably between the hours of 8:30am and 3:15 pm CST.

From the financial floors to the computer screens, the trading universe has been bored, bewildered, and baffled by the lack of volatility. The markets have been on a slow upward grind with the intra-day trading ranges being historically small. For example, the majority of German & Bernanke-led explosion on Monday traded in a pathetic 4-point range until the late spike took hold. Tuesday was worse; it also had a ridiculously narrow intra-day range coupled with one of the lowest volume days in months if not years.

Is there any hope to break out of these depressing market conditions? It’s difficult to decipher considering the world isn’t really that much different from August-October 2011 when 30 point trading ranges were commonplace.

While the European Sovereign Debt crisis is no longer at code red, Portugal, Spain and Italy to name a few, have yet to emerge from the recession or lower their debt to GDP ratios and budget deficits. In a nutshell, they still have way too much debt (and growing) with too little economic growth (and shrinking) to really improve their situation.

Here at home the MF Global money still can’t be found, the “recovery” limps along with anemic job growth and a still-cratering housing market. Meanwhile, Benny & The Inkjets continue to print more money – or promise to print more money at the drop of a hat, just like lead singer Benny did Monday.

It’s ironic that this bull market is indicative of the more somnolent bear. Let’s hope volatility was hibernating this winter, and will soon join the spring bull or bear.

Trade well and follow the trend, not the so-called “experts.”

Best Trade to You,

Larry Levin
President & Founder - TradingAdvantage   [more]



Twilight Zone

March 22, 2012 – Comments (0)

Ben’s Twilight Zone Power Point

The market closed lower for only the second time in the last ten trading sessions, yet it can hardly be considered a pullback. Instead, it was just another lethargic trading day with mostly sideways action and light volume. It’s been about as exciting as watching paint dry. The entire daily range wasn’t even 10 points.

Moving from the dull to the downright delusional, Ben Bernanke gave a speech today in front of students from George Washington University's School of Business as part of a four-part lecture series explaining the role of the “Federal Reserve in the financial crisis.”

You can see the full power point outline here of his massive presentation.

Read more:

Of course Ben’s version of the Fed dogma is decidedly different, or shall we see, the diametrical opposite of the actual truth.

Let’s look at his two slides titled, “Policy Tools of Central Banks.”

• “Monetary Policy

-For macroeconomic stability: In normal times, central banks adjust the level of short-term interest rates to influence spending, production, employment and inflation. “

Somehow he forgot to add the sub-header, in not so normal times, the central banks print money to compensate for the global financial fiascos they helped cause.

• “Provision for liquidity

-For financial stability: Central banks provide liquidity (short-term loans) to financial institutions or markets to help calm financial panics, serving as the “lender of last resort”

Hmm, perhaps another oversight? Didn’t Ben mean to say that the Central Banks would provide liquidity to help calm the financial panics they had a large role in creating by perpetuating a cultural of regulatory laxity and irresponsible spending?

• “Financial regulation and supervision

-Many central banks, including the Federal Reserve, also supervise financial institutions. To the extent that supervision helps keep firms financially healthy, the risk of loss of confidence by the public and ensuing panic is reduced.”

Yes, he really does have the audacity to say that the fed serves as the protector of the public confidence AND that they act in a “supervisory” role in their relations with their banksters.

Really, these bullet points are taken verbatim from Ben’s presentation. The truth is in fact stranger than fiction.

Trade well and follow the trend, not the so-called “experts.”

Best Trade to You,
Larry Levin
Founder & President - Trading Advantage   [more]



To QE or Not to QE

March 14, 2012 – Comments (0)

There is a one-day FOMC meeting tomorrow where the #1 topic of discussion will be “to QE or not to QE.” Should the FOMC print more counterfeit money out of thin air? The answer certainly lies in how badly the banksters want it, and if inflation is creeping up. The good thing for the Fed is that as it watches inflationary pressure – it doesn’t bother to count prices that go up.

In anticipation of Tuesday’s meeting, JP Morgan says the following:

We expect a relatively uneventful outcome following tomorrow's FOMC meeting. We do not expect any balance sheet actions, nor do we anticipate any strong signaling that such actions are likely to occur at a subsequent meeting. Because tomorrow's meeting is a one-day meeting there will be no new economic projections or funds rate projections, nor will there be a post-meeting press conference. To the extent there is any news it is likely to come from changes in the wording of the FOMC statement. We believe there will be only a few minor tweaks to the statement. Perhaps the most significant is a change to the wording of the inflation discussion, to acknowledge that headline inflation has been pushed higher by energy prices. (My editorial comment: the Fed doesn’t count energy prices because they are always & forever “transitory.”) There could be some fairly small adjustments to the growth description: a little more cautious about consumer spending and maybe a touch more upbeat on the labor market, while still noting that the unemployment rate remains elevated. We expect no change to the late 2014 rate guidance. Lacker dissented at the last meeting and will probably do so again tomorrow. A case could be made that Williams will cast a dovish dissent, or even Raskin or Tarullo for that matter; though we think it's more likely that we see no dovish dissents tomorrow.

There “may” be some action in the morning; however, the late morning into the afternoon should be very slow. If anything unexpected is said in the statement, the market could be wild for 10-15 minutes after the release. If not, it will be as slow as the last FOMC statement.

Trade well and follow the trend, not the so-called “experts.”

Larry Levin
Founder & President - TradingAdvantage   [more]



The Grains Review For the week of March 12, 2012

March 13, 2012 – Comments (0)

Friday saw a very messy session with the WASDE report offering nothing bullish allowing the trade to open flat versus Thursday’s settle. Beans tried the downside briefly before news of Chinese buying corn hit the wires. This blew up all three markets even though the talk was completely unconfirmed. No one has seen anything from the USDA about corn or bean purchases. JCI Intelligence stated Chinese interest in option origin corn is for 2-3 cargos which is between 110-165 TMT, not the 600-800 TMT talked about on Friday. Still nothing seen on paper but this is the talk. The reason for the “talk” is the size of the 12/13 corn crop there. The government stands by their 192 MMT estimate. CNGOIC has a 185 MMT estimate while JCI has a 168 MMT estimate. Glad to see the margin of error over there is wider that the USDA’s right now. No one knows reality but there is one unavoidable reality in China. They have 1.3 billion people and millions are moving away from agrarian to urban lifestyles. This puts more stress on government food stocks which puts pressure on crop estimates to be more correct…which is a long shot. Their ending stocks numbers are in question as well with the current 58 MMT corn reserve number questioned by almost everyone…even bears like myself.

Another bearish factor on Friday that was ignored was Informa acreage coming in at 95.513 million, bean at 75.128 and wheat at 57.745 million. WOW, I guess we will literally plant from horizon to horizon. We will also plant in between highways, along drive ways and every other plot of land possible. These numbers are almost too big to be believed but it is noted that the trade continues to ignore all bearish information leaning on bullish sentiment and momentum instead of hard facts.

No matter what happens on the fundamental side, no matter what happens on the technical side, no matter what happens with crude and the USD if the market wants to move higher, it will obviously move higher. The sentiment remains bullish in spite of a great start to the domestic crop and improving outlooks for the South American crop. The sentiment ignores ProAgra stating the Ukraine crop is 45.66 MMT versus their previous estimate of 42.64 MMT. Their corn crop is estimated at 21.3 MMT versus 17.7 MMT. I guess the market doesn’t want to see this bearish impact either. Even if Argentina is estimated at 22 MMT, world stocks are ample with both Brazil and Argentina hitting the world export market as I write. I remain on the bearish side even more today than I was on Friday. As I see it, this ship is going to sink with a vicious day of reckoning on the horizon. There are too many in the trade without any knowledge of what’s going on. There are too many riding the momentum wave that when dissipated will leave a vacuum under the trade with no one willing to step up and buy it.

The overnight session was choppy leaving beans, corn and wheat in the middle of their ranges. KC popped a bit into the close leaving KWN-WN right around 39-cents. This is still value in spite of better weather in the HRW region expected in the next 10-days. The SRW crop is amazing from early reports making the spread interesting at the current stagnant level. Bean oil lost to meal in what remains a very choppy situation.

Heading into the day session to start the week there is limited momentum or direction. Crude is getting dismantled this morning trading at session lows as I write but this is a minimal impact if recent trends stay true. The markets are teetering but there is nothing to say they will fold today or this week. It all depends on China, sentiment not reality, crude values coupled to the Euro, South American harvest weather, North American planting weather and Chinese weather in their North Eastern planting region. We have minimal real data this week with export inspection sure to be of interest this morning at 10:30 CST, NOPA is out on Wednesday then export sales come out on Thursday. On the economic side we have the FOMC tomorrow with retail sales, jobless claims Thursday and the PPI, CPI on Friday. It will start choppy with a bearish underbelly exposed but no one seems poised for the killing blow. I remain bearish but I am licking many wounds right now.
Matthew Pierce
Grains Futures
Disclaimer: Trading in futures and options involves a substantial degree of a risk of loss and is not suitable for all investors. Past performance is not indicative of future results.  [more]



Trading Tip: Trade with a Plan – Using a Stop Loss

March 12, 2012 – Comments (0)

In my opinion, every trade you consider should be laid out ahead of time with a roadmap. A complete map should have an “off ramp” or a place where it makes sense to enter the market. It should also have exits for your destination (profits) as well as off ramps for emergency exits. This part of your plan will likely include stop orders.

Stop orders placed to potentially close an open position are called stop loss orders

A stop order is a contingency order. It is triggered only comes into play at the price level specified in the order. In other words if the market never trades at that price, the order will never become active. The caveat to this is the fact that the market can sometimes gap through your price, at which point the order would be executed at the best possible price. This unfortunately has the tendency to open up the trade to the possibility of getting filled at a far worse price than the one specified in the stop order. So, in summary, a stop loss order specifies a price level at a point and beyond where your order will be triggered to a market order.

Stop loss orders are like big signals where you will pull out of trade

Based on how they function, stop orders have very specific placements. Buy stop orders are placed above the current market price. Sell stop orders are placed below the current market price.

See image at :


They work when the market trades at or through the specified stop price level. Once the price is hit, it becomes a market order and is executed at the best price available. Here is an example of a stop loss for an open long position (one that was initiated by buying a contract):

Sell one December e-mini S&P futures contract at 1335.00 stop.

The mechanics of this trade would work in a straightforward way. It would have to be placed below the price level the market is trading at so for this example, assume the market is trading at 1338.00. Normally, I recommend placing a stop loss order 3 points or less from the current market price. So if a long market position was initiated at 1338.00, this stop was placed. If the market starts to trade lower and hits 1335.00, then the sell stop would be triggered and the order would be filled as a sell at the market.
If the market price gaps lower, say 1330.00, the stop loss would still be triggered and the order would be executed at the best possible price. That might mean any price at or below the 1330.00 point. You can see how the gap is something to be aware of.

The same concept applies to a buy stop order. Consider the same example as a buy stop.

Buy one December e-mini S&P futures at 1335.00 stop.
The order would have to be placed above current market price, so keeping with the idea of 3 points or less, assume the market is trading at 1332.00. If the market trades higher, against your open short position (a trade initiated by selling a contract), the order would be triggered once it touches or moves higher than 1335.00.

Traders can use a stop loss order and trail it behind an open position as the market moves in their favor

Stop loss orders don’t go away if the market is moving in your favor. You can trail them to keep them within 3 points or less of the price level the market is trading at. In this way, you can actually try to use your stop loss to protect unrealized profits on an open trade. As long as the position does not get closed by getting filled on your limit order (Secret #2), you could keep rolling or trailing the stop loss order. Additionally, if you close out your position in a way other than through your stop order, don't forget to cancel your stop.

In this way, stop loss orders remain a key component of any trading plan. They are like a safety net, and they can help you try to keep emotion out of your trade. Knowing when to cut your losses and exit a trade can help traders keep things in perspective. Too often people can fall into a trap of holding an open trade that is moving against them, hoping that the market will turn back in their favor. Making a roadmap and sticking to it can help you avoid this pitfall.

Larry Levin
President & Founder- Trading Advantage  [more]



Moral Hazard

March 08, 2012 – Comments (2)

Before we get to the moral hazard piece, I have to mention rollover. Thursday is the first day of rollover, which is when the March ES futures contract changes (rolls) to June. We call it “top step” in the pit. In the past we would trade the new June contract on its first day (Thursday) but now we will wait until next Monday. The reason for the change is that volume will stay quite heavy in March until next Monday, which gives us the best chances for good trades.


The following is a response I gave to a question about our “moral hazard” comment that ends each of our emails. The gentleman that asked wanted my insight as a seasoned trader and financial commentator and not that of an egghead economist. You see, the man that asked is running for Congress and wanted a different point of view. Boy, did he get it.

Moral hazard is a term that describes how people/companies will take crazy risks that they would otherwise not undertake because they know they will not be held accountable if the crazy risk turns sour.

An excellent example is how Congress and the president of this country NEVER – EVER - put a banker in jail no matter what his crimes are. Oh sure, occasionally a patsy is sent to jail, but we all know that the bosses will NEVER go there. What's more, since they know that they will never go there and that the SEC never asks them to admit to guilt, they continue to commit crimes in their regular course of business to make that extra buck or two, or two million.

JP Morgan bankrupted Jefferson County Alabama with horrendously bad swap arrangements - committed bribery - was found guilty - and paid a fine. Jefferson County is BANKRUPT...and JPM paid a fine to the SEC. Officials of JPM even bribed the Mayor and the Mayor went to jail. Did the bankers that initiated the bribe go to jail? Of course not - they just paid a fine.


They know that even committing bribery to force, then secure, a ridiculously overpriced sewer project that even put the town into bankruptcy will NOT send them to jail. And since they know this, they will do it over & over & over again: Moral Hazard, indeed.

My specific comment at the end of each email pertains to the risk removed by Paul Kanjorski's committee that allows the bankers to get away with murder yet again - metaphorically. Congress forced the Financial Accounting Standards Board (FASB) to relax the accounting rules for the banking industry's real estate portfolio.

Before April 2nd 2009, banks had to mark the value of the real estate portfolio to the current value of the homes (mark-to-market). Prior to 2009, values were increasing and they were happy to "follow the rules." When the housing depression hit, they got off the hook again (remember, they had already been bailed out) when Kanjorski's committee forced FASB to remove this provision of GAAP accounting standards and allow bankers to use "mark-to-model" accounting standards. I like to call these new standards "mark-to-myth" or "make-it-up-as-you-go-along" accounting.

This, of course, is a joke. Bankers can use an in-house "model" that they say will value a house in the future at X price, which is any price they want. Can you do that? Can you walk into a bank and ask for a loan...using your home as collateral that you know is 30% LESS than your purchase price? Mark-to-market accounting says today's market is 30% less than what you paid so you have no collateral in the home - and the banker throws you out of his office.

Once out of the banker’s office, which you bailed out in 2008, you realize that you didn't get a chance to explain so you walk back in. You kindly make clear "But sir, you fail to realize that I value my home at the original purchase price - JUST LIKE YOU DO. I am using your very own 'mark-to-myth' accounting standards. We are alike, aren't we?"

When the banker controls his laughter, you are thrown out again. The bankers are not only above the law; they change the very law at their whim because the spineless clown-posse in Washington DC will do whatever they want, as soon as they are told.

Because of this type of moral hazard (no accountability), bankers went right on breaking the law in 2009, 2010, 2011, and continue today with the Robosigning frauds. Why would the bankers care if they are caught breaking the law? They never go to jail and all fines are but chump change to the original bounty of said scam. Moreover, all fines paid are now in their "costs of doing business." The cost of buying the SEC and Congress is as normal to them as the cost of redecorating an office building.

Without SEVERE punishment of their never-ending crime sprees, the crimes will never end. And this is the moral hazard embedded for looking the other way, small SEC fines, and changing FASB standards to make them happy.

Trade well and follow the trend, not the so-called “experts.”

Best Trade To You,

Larry Levin
President & Founder - TradingAdvantage   [more]



Trading Tip #9: The Double Stop Reversal

March 05, 2012 – Comments (0)

Stop orders are often used to try to protect profits. Take the stop order to another dimension and use it to reverse your position and open another trading possibility!

When you place a stop order, it is only activated if the market trades at or through the stop price. These stop prices are often key technical levels.

If the market is breaking an important technical barrier, why not double the order and try to play the movement?

Daytraders can use this technique to play trading sessions with wide ranges. Position traders can use the double stop in wider parameters, and target areas of historic support or resistance.

Let's run the typical stop order scenario. A trader puts in an order to buy a contract. They are now long. They place a stop loss order below their entry price, usually at a key technical level. If the market moves higher, they are seeing a gain on their position. If the market moves too low, it will trigger their stop and close the position with a sell order.

If the sell off in the market was triggered by bad news or it was the result of a trend reversal, what better moment could there be to reverse a position? This sets up a new potential trade opportunity if that stop level was based on a key technical area, rather than a simple point-based risk level.

Run the same scene with double the stop order. When the market moved lower and triggered the sell stop, if it was two sells instead of one, the trader would be short one contract, positioned to play any continuing downside move.

When a market breaks a key technical level, it might be signaling the trend shift and indicating that the opposite position should be played due to the momentum likely to carry forward the market from the technical break.

The use of stop loss or contingent orders may not limit losses. Certain market conditions may make it difficult or impossible to execute such orders. Prices may gap through the stop price.

Take a look at this example of a double stop in action:

See image at :

Past performance is not necessarily indicative of future results.

When you place your new stop after the double stop is triggered, look for those areas of previous support to become the new levels of resistance and vice versa. Use these as a possible guide for your new order placement. Aim just outside these levels so there is sufficient room in case the market retests that area.

Double stops can be used in moments when a trend might come to an end or the market may be poised for a reversal, like those that follow key economic reports.

Using a double stop order is a way to take advantage of the market sentiment that is taking out your original position. It is just one way to try to play a breakout or reversal. This is a technique that can be employed when unknown factors come out into the light or when the rumor becomes news and is contrary to market expectations.

Best Trades to you,

Larry Levin
Founder & President- Trading Advantage   [more]

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