Algo Futures - Trending Now - Strategies For Trading in High Frequency Markets - Issue 11 - 15-DeC-2013

STRATEGIES FOR TRADING IN HIGH FREQUENCY MARKETS
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$9.95 WEEKLY NEWSLETTER | ISSUE 11 SUNDAY, DECEMBER 15th, 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
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WEEKLY MARKET
Hello Traders, In this weeks market recap we will discuss the market developments that followed holiday rally to a new multiyear high at 1812. Along with the technical developments; i.e. the market structure, we will also comment upon the so-called fundamental factors that were associated with the market developments and financial medias headlines. Our goal is to provide our members with a thoughtful review of this weeks market activity and the insights you required to see beyond the miss-information consistently put forth by the financial media. Our members will be aware that auction market theory advocates that the market development occurs in a non-linear manner. In other words, price structure indicates that markets does not trade (auction) in a straight line. This view of market development is substantiated in the
historic data. For example, this year the broad benchmark S&P 500 has rallied to numerous multiyear highs. The S&P has sold off from Read more...
TRENDING N OW | FOR PROFESSIONAL TRADER USE ONLY | ALGO FUTURES | ISSUE 11 | 15-DEC-13
Daily Market Recap Videos .................................................................................................................... 2 Weekly Market Recap ............................................................................................................... 2 Mondays Market Recap ........................................................................................................... 2 Tuesdays Market Recap .......................................................................................................... 2 Wednesdays Market Recap .................................................................................................... 3 Weekly Recap (Cont. from page 1) .................................................................................................................. 4 Monday's Reference Points ..................................................................................................... 5 Daily Morning Briefing .............................................................................................................. 8 Monday's Market Development | Tuesday's Reference Points......................................... 11 Daily Morning Briefing ............................................................................................................ 16 Wednesday ............................................................................................................................................. 18 Tuesdays Market Development | Wednesday Reference Points ..................................... 18 Daily Morning Briefing ............................................................................................................ 23 Thursday .................................................................................................................................................. 26 Wednesday Market Development | Thursday Reference Points ...................................... 26 Daily Morning Briefing ............................................................................................................ 30 Thursday Market Development | Friday's Reference Points ............................................. 31 Daily Morning Briefing ............................................................................................................ 35 Asian Market Recaps............................................................................................................................. 36 Mondays Asian Market .......................................................................................................... 36 Tuesdays Asian Market ......................................................................................................... 37 Wednesdays Asian Market ................................................................................................... 39 Thursdays Asian Market ....................................................................................................... 41 Fridays Asian Market ............................................................................................................. 42 European Market Recaps ..................................................................................................................... 43 Mondays European Market ................................................................................................... 43 Tuesdays European Market .................................................................................................. 44 Wednesdays European Market ............................................................................................ 45 Thursdays European Market ................................................................................................ 46 Fridays European Market ...................................................................................................... 47
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Daily Market Recap Videos

Weekly Market Recap
Mondays Market Recap
Tuesdays Market Recap
Wednesdays Market Recap
Weekly Recap (Cont. from page 1)

every new multiyear high and in most instances pulled back to what had been the previous multiyear high. Indeed, the S&P 500, the DOW 30 and the NASDAQ 100 have sold off below every multiyear high in their history. This observation confirms there is no monetary benefit to be achieved by buying the high. However, every time the market makes a new record high in the headlines in the financial media implies this time it will be different. The headline, this time it will be different would suggest that the pattern of market development, which has been consistent throughout the history of the index, is about to change. Nothing could be further from the truth, as there is absolutely no evidence to support such an argument.
Monday's Reference Points
Coming Into this week

During the Thanksgiving rally, the headlines were the same. The benchmark S&P 500 is likely to continue rallying higher and higher. At started the week, we noted that the narrow trading range development observed during the holiday week along with the consistent lack of buying interest [buy programs waning] that accompanied each rally suggested the S&P had found a near-term top. On Tuesday (12-03-13), when the S&P broke down below what had been minor support (1798-1800) we indicated the likelihood that the S&P would selloff (pull-back) to prior support which we identified as (1784) the November low. We noted that in tents selling pressure could result in the S&P trading back down to major support at 1773, the November low. We also noted that, what had been support (1798-1800) would now likely the resistance and therefore a short opportunity would develop during a retracement. The media headline while the market was trading at the high was the appointed chairperson for the Federal Reserve Janet Yellen stated that she intended to continue the Federal Reserves monetary policy, started by the current chairman Bernanke. During the selloff, the media headline changed. The media announce that market dissidents were concerned that positive jobs data would lead to fed tapering. At Tuesdays low the financial media was stating that positive economic data would be interpreted as negative. After selling off to 1784 and pulling back to the November low, S&P futures rally back to 1800. Following the retracement to 1800, the S&P sold below Tuesdays low (1784) and traded down to a new low at 1777: 4 points above major support at 1773. During Wednesdays selling off 32 points below the prior record high (1812), a statistical high volume climax selling event occurred. After the climax selling, the price direction reversed. The previous sellers covered their short positions and the S&P auctioned up to 1796. Coming into Thursday session, we were expecting to see the S&P sell off a pullback at or near Trending Now | Algo Futures
1786-1784. Indeed the S&P auctioned down to 1782. During the sell-off price discovery found support and the S&P auctioned up off the low and retraced back to minor resistance at 17941796. On Friday, when the jobs data was announced, S&P futures initially sold down to 1785, auctioned up to 1803, pulled back to 1796 and rallied back to the high at the close (1805). The jobs data was positive, which according to the financial media was negative inasmuch as it contributed to the argument that the Fed to begin tapering sooner than later. The accepted view is that the Fed will begin tapering in March 2014. Market participants will receive further information regarding the Feds monetary policy at the December 17th and 18th FOMC meeting. According to the financial media market participants sentiment changed from fear of Fed tapering, to the economy is strong enough to continue without Fed support. Coming into Friday session we expected the S&P to auction back to 1800. The minor pullback to 1796 indicates how what had been resistance becomes support. What information do we gain from this weeks market development? What can we learn from the market behavior? First, this weeks market confirms that it in up market: i.e. 200 day price average advancing, the best opportunities are to buy the pullback, with the expectation of a retest of the high. Second, when the pause occurs at the high, when it becomes apparent that the buying interest is waning, be prepared to sell the high. We commented this week that the sell-off to Wednesdays low represented a rout of the trading range. Indeed, Wednesdays rally to 1800 followed by a breach of support below the prior days low (1784) and new low (1777) just above major support (1773) forced weak longs out of the markets. The short covering rally that followed indicated that the large financial institutions that accumulated the outstanding float. Wednesdays high was retested on in the overnight session prior to the pull -back (sell-off) to 1782. The rally back above 1800 indicates ultimately there was little or no concern regarding fed tapering. The fear of tapering was the cover story behind the ploy to route the trading range. On the point and figure chart, the key references points from last weeks session are numbered. Descriptions are provided using the standard annotations.
Coming into this week we would expect to see the S&P retest the multiyear high at or near 1812. There is the possibility of the market making a higher high trading up to 1820. Support levels are listed below. 1796-1798: minor (micro support) 1786: intraday support 1782: Support (Marco) 1777-1773: Major Support
1 # Bayesian Inference (12-08-13)

Sell the Retracement to the multiyear high 1812 Stops are likely located at or near 1814. The maximum likelihood expectation estimate is 1820. The risk is a break-out above 1812. A probe for stops up at 1814 is likely to be a part of the price discovery process. There is the potential for range extension up to the MLE at 1820. The expectation is that price will sell-off from the high and pull-back to 1800-1798. The order flow monitor will indicated when the buy programs ended. In determining the high, Trending Now | Algo Futures
the pause pattern should be looked for. In the event of a break-out above 1812-1814, the order flow monitor will indicate high frequency buying [HFT buy Surge] accompanying the exponential price structures. The slope of Kalman Filter will be up and the digital filters will be vertical exponential: higher highs, higher lows.

Buy the Pull-back at or near 1800-1798. On Friday, previous selling between1800-1798 occurred during the afternoon session and the S&P closed at or near the high. Fridays intraday low was at 1796. The risk is that the S&P will selloff back into last weeks trading range and auctioned back down to 1786- 1782. The expectation is that price discovery will find support on the pull-back to 1800-1798 and that the S&P will auction back to Fridays high and make a higher high, retesting the multiyear high. The order flow monitor will indicated when the sell programs ended [SPW]. In determining the pullback pattern, look for the pause pattern to develop at or near 1800-1798. Price discovery may include a retest of Fridays intraday low at 1796. In the event of a break-out above 1800-, the order flow monitor will indicate high frequency selling [HFT Sell Surge] accompanying the exponential price structures. The slope of Kalman Filter will be down and the digital filters will be vertical exponential: lower lows, lower highs
Daily Morning Briefing
Good Morning Traders,

S&P futures traded higher in the overnight session. The rally that started on Friday continued at the open of Sundays Globex session with S&P futures auctioning up to 1809, modestly below the multiyear high at 1812. In the previous session, US market advanced as a stronger-than-expected jobs report and Trending Now | Algo Futures
upbeat consumer sentiment data fueled hopes that the U.S. economy can withstand the winding back of Federal Reserve stimulus. According to the Labor Department, Fridays jobs numbers indicates the unemployment rate fell to a five-year low of 7 percent last month as payrolls swelled by 203,000 after a revised 200,000 increase in October. The November gain exceeded the 185,000 median forecast. The pickup in hiring is the biggest gain in three months. The improvement in hiring purportedly signals that companies are more confident demand will improve. Gains in wages and hours suggest American workers will have slightly more money to spend as holiday shopping gets under way. The payroll report puts the four-month average for gains at 204,000, and the six-month average at 180,000. The 200,000 jobs per month appears to be a number that everyone agrees shows the labor market is improving, and that progress is being made. Chicago Fed President Charles Evans, a supporter of record stimulus who votes on policy this year, said in April he wants gains of 200,000 a month for about six months before tapering. Atlantas Dennis Lockhart, who doesnt vote, said several months of gains exceeding 180,000 would make slowing appropriate. Fridays rally is being attributed to speculation the economy is strong enough to withstand a reduction in the Feds bond buying.
Coming into Mondays session

We expected to see S&P futures continue Fridays rally and auction up to re-test the multiyear high at or near 1810-1812. The most relevant Support levels are: 1800-1798: minor (micro support) 1786: intraday support 1782: Support (Marco) 1777-1773: Major Support
1 # Bayesian Inference (12-08-13) calls for:

Selling the initial Retracement to the multiyear high 1812. Stops are likely located at or near 1814. The maximum likelihood expectation estimate is 1820. The risk is a break-out above 1812. A probe for stops up at 1814 is likely to be a part of the price discovery process. There is the potential for range Trending Now | Algo Futures
extension up to the MLE at 1820. The expectation is that price will sell-off from the high and pull-back to 1800-1798, before attempting to move higher. We suggest that traders focus on the order flow monitor (events) during the initial retracement and wait for confirmation that buy programs have ended. In determining the high, the pause pattern should be looked for. An indication of the pattern can be seen at the overnight high (1809) followed by the pull-back (minor sell-off) to 1804. In the event of a break-out above 1812-1814, the order flow monitor will indicate high frequency buying [HFT buy Surge] accompanying the exponential price structures. The slope of Kalman Filter will be up and the digital filters will be vertical exponential: higher high, higher lows.

Buy the Pull-back at or near 1800-1798. On Friday, the selling between1800-1798 that had occurred during the initial retracement to the high was overwhelmed by demand in the afternoon session and the S&P closed at or near the high. The expectation is that price discovery will find support on the pull-back to 1800-1798 and that the S&P will auction back to Fridays high and make a higher high, retesting the multiyear high. The risk is that the S&P will sell-off back into last weeks trading range and auctioned back down to 1786- 1782. However, a sell-off back to prior support would appear to be the least likely outcome.
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Tuesday
Monday's Market Development | Tuesday's Reference Points
Hello Traders, S&P futures closed Mondays session above Fridays settlement (1805). At the open of Sundays globex session, the rallied that followed Fridays unemployment data, continued with S&P futures trading up to 1809. At Mondays open, S&P futures pulled-back (sold-down) to 1806. S&P futures re-tested the high (1811), but failed to attract new buying interest [buy programs waning] above the multiyear high (1812). Despite the lack of buying interest there was no initiated selling pressure. After trading in a narrow 2 point range, late-in-the-day price pulled back to re-test the opening range low (1806), before closing Mondays session at 1809. Stocks moved modestly higher during trading on Monday, adding to the strong gains posted last Friday. While the markets continued to recover from the pullback seen early last week, buying interest remained relatively subdued. The major averages closed only slightly higher, although the S&P 500 still reached a new record closing high. Trending Now | Algo Futures
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The major averages closed only slightly higher, although the S&P 500 still reached a new record closing high. The S&P 500 rose 3.28 points or 0.2 percent to 1,808, while the Dow inched up 5.33 points or less than a tenth of a percent to 16,025 and the NASDAQ edged up 6.23 points or 0.2 percent to 4,068.
Coming into Mondays session 1 # Bayesian Inference (12-08-13) calls for: Sell the initial Retracement to the multiyear high 1812. The expectation is that price will sell-off from the high and pull-back to 1800-1798, before attempting to move higher. Mondays session indicate remaining a seller during the initial retracement back to the multiyear high (1812) may not yield the expected outcome. The likelihood that S&P futures will auctions up to probe for stops at or near 1814, as well as Trending Now | Algo Futures
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range extension to the maximum likelihood expectation estimate at 1820. Therefore, Sell at the high caution is advised.
1 # Bayesian Inference (12-08-13) Sell the initial retracement at or near 1812-1814. The expectation is that price discovery will encounter lack of buying interest and selling pressure will auction price below the initial retracement to the previous multiyear high. The risk is a break-out above the current high (1812). The maximum likelihood estimate is located at 1820. Note: HF buying [HFT Buy Surge] will provide the alert that a break-out in under way. Therefore, do not know counter the break-out. There will be better resistance at or near 1820. Force on the order flow event: look for the buy programs waning. 2 # Bayesian Inference (12-08-13) Buy the Pull-back at or near 1800-1798. On Friday, the selling between1800-1798 that had occurred during the initial retracement to the high was overwhelmed by demand in the afternoon session and the S&P closed at or near the high. The expectation is that price discovery will find support on the pull-back to 1800-1798 and that Trending Now | Algo Futures
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the S&P will auction back to Fridays high and make a higher high, retesting the multiyear high. The risk is that the S&P will sell-off back into last weeks trading range and auctioned back down to 1786- 1782. However, a sell-off back to prior support would appear to be a less likely outcome. The order flow monitor will indicated when the sell programs ended [SPW]. In determining the pullback pattern, look for the pause pattern to develop at or near 18001798. Price discovery may include a retest of Fridays intraday low at 1796. In the event of a break-out above 1800-, the order flow monitor will indicate high frequency selling [HFT Sell Surge] accompanying the exponential price structures. The slope of Kalman Filter will be down and the digital filters will be vertical exponential: lower lows, lower highs. The informed traders can outperform an automated computerized trading program. The human brain, when properly trained can identify, recognize and memorize the redundant photo-typical pattern executed by the HFT computerized trading robots. The informed human traders using the computational tool for detecting the presence of the HF trading programs can buy pull-backs at key support levels and sell retracements at known resistance levels profiting more than the 3 ticks sought by the recursive HFT algo. The most relevant Support levels are: 1800-1798: minor (micro support) 1786: intraday support 1782: Support (Marco) 1777-1773: Major Support
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IN the NEWS According to Federal Reserve Bank of St. Louis President James Bullard the odds of tapering have risen along with gains in the labor market. The greenback strengthened to almost the highest level since May versus Japans yen. According to Commodity Futures Trading Commission Futures traders have increased netshort positions that the yen will decline against the dollar. Fed Meeting Fed policy makers will probably begin reducing $85 billion in monthly bond buying in March 2014. Speculations has increased that tapering could be announced at a Dec. 17 -18 FOMC meeting. A possible small taper might recognize labor-market improvement. Richard Fisher said Fed needs to begin tapering at the earliest opportunity, as the current pace of stimulus comes at a cost that far exceeds its purported benefits.
The fundamental view is that any tapering-related action on the part of the Fed will likely result in an initial sell-off. The sell-off is expected to be a temporary.
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Good morning Traders,

S&P futures are relatively unchanged overnight. After auctioning up to re-test the multiyear high at or near 1812 in the previous session, buying interest above the record high continues to be lacking [buy programs waning]. On Monday, S&P futures traded in a narrow range between 1812 and 1806. Coming into Mondays session 1 # Bayesian Inference (12-08-13) called for: Sell the initial Retracement to the multiyear high 1812. The expectation is that price will sell-off from the high and pull-back to 1800-1798, before attempting to move higher. Comments from St. Louis Fed President James Bullard voicing support for a small tapering beginning next week appears to have dampened investor sentiment. Based on labor market data alone, the probability of a reduction in the pace of asset purchases Trending Now | Algo Futures
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has increased according to Bullard. The risks associated with the Federal Reserve's unprecedented support measures are beginning to outweigh further benefits, Richmond Fed President Jeffrey Lacker said. Our view remains that the US market will sell-off following an official announcement by the FED that tapering will begin. Thus far, we have held Janet Yellen view that tapering will start in March of 2014. Next week's Federal Reserve policy meeting will provide market participants with fresh clues about the stimulus outlook. Mondays narrow range session indicated remaining a seller during the initial retracement back to the multiyear high (1812) may not yield the expected outcome. We remain concerned that during Tuesdays session S&P futures will auctions up to probe for stops at or near 1814. In the context of Tuesdays probability range there is the possibility of extension up to the maximum likelihood expectation estimate at 1820. Therefore, Sell at the high caution is advised. S&P futures continue to encounter lack of buying interest above 1812-1810. 2 # Bayesian Inference (12-08-13) continues to call for: Buying the Pull-back at or near 18001798 On Friday, the selling between1800-1798 that had occurred during the initial retracement to the high was overwhelmed by demand in the afternoon session and the S&P closed at or near the high. The expectation is that price discovery will find support on the pull-back to 1800-1798 and that the S&P will auction back to Fridays high and make a higher high, retesting the multiyear high. The risk is that the S&P will sell-off back into last weeks trading range and auctioned back down to 1786- 1782. However, a sell-off back to prior support would appear to be a less likely outcome. The order flow monitor will indicated when the sell programs ended [SPW]. In determining the pullback pattern, look for the pause pattern to develop at or near 1800-1798. Price discovery may include a retest of Fridays intraday low at 1796.
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Wednesday
Tuesdays Market Development | Wednesday Reference Points
Hello Traders,
The major US equity indexes ended the session lower on Tuesday. The Dow 30 closed at 15973: () down - 52 points (-0.33%). S&P 500 close at 1802: () down -5 points (0.32%). The NASDAQ close at 4060: () down -8 points (+0.20%). 173 (34%) of the S&P 500 stocks end the session above their prior days close, while 322 (64%).
Tuesdays Market Development

After rallying to the multiyear high at or 1812 during Mondays session, the S&P 500 e -mini futures contract sold below Mondays record high close. Overnight, the S&P re-tested the high trading up to 1811 but failed to attract renewed buying interest. Prior to the open, the S&P futures sold down to 1802, at or near, Fridays late -in-the day pullTrending Now | Algo Futures
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back level (1800). Selling pressure eased and the S&P futures auctioned up to 1807, filling the gap at Mondays close. During the afternoon session S&P futures re-test the low, trading down to 1801. Selling programs waned and the S&P auctioned back to Mondays low at or near 1806. Tuesdays US trading range was a mere 7 points. Though 64% (322) of the S&P components traded below their previous days close, t he selling pressure was insufficient drive the S&P below the psychological 1800 price level. Never-the-less Tuesdays session lacked any indication of serious participants, either on the buy or sell side. The rate of trade, as measured by trade speed (number of trades and volume of trades) were all below average. There was statistical high volume at the low (1801-1802) indicating responsive buying. Coming into Mondays session we posted the following trade commentary 1 # Bayesian Inference (12-08-13) called for: Sell the initial Retracement to the multiyear high of 1812. With the expectation that price would sell-off from the initial retracement to the multiyear high (1812). 2 # Bayesian Inference (12-08-13) continues to call for: Buying the Pull-back at or near 1800-1798. With the expectation that the initial pull-back at or near the 1800 price level would be met with buying interest. What is a Trading Strategy? Follow the Bots' trading strategies are based on the market structure; i.e. previous buying interest and selling pressure. A strategy is plan of action designed to achieve a desired result, such as achievement of a goal or solution to a problem. The art and science of strategic planning consist of using resources in the most efficiently and effectively. The term strategy is derived from the Greek word for generalship or leading an army. See also tactics. In analyzing strategic plan, the Chinese strategist Sun Tzu emphasized the importance of positioning. The decision to position a trade must be based on both objective conditions and
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the subjective beliefs of other, competitive actors in that environment. A trading strategy is not planning in the sense of working through an established list, but rather that it requires quick and appropriate responses to changing conditions. Planning works in a controlled environment; but in a changing environment, competing interest collide, creating unexpected situations. In the context of the Bayesian Inferences posted in the Follow-the-Bots market structure commentary the targeted price levels are referenced as at or near. The at or near comments reflect the changing environment, wherein competing interests, other market participants may be similarly think to buy or sell at a targeted level. In such a case a quick and appropriate response is required to address the changing conditions. Trading is rarely ideal, is the sense that price auction exactly to the desire target. However, by thinking, assessing and comparing the reference points, a trader can calculate his chances of entering and exiting within the approximate location. IF; as was the case with todays pull-back, the ideal entry point is 1800 and price auctions down to 1801, the traders must be prepared to act on his or her discretion. The most important factor in a trading strategy is whether or not course of action makes sense. Current Strategic Preparation In todays context, in preparation for the trading day, a prepared trader would be able to readily answer the following questions in the heat of the battle (during their trading) 1) Did the S&P just break-out above the 1800 price level? 2) Did the S&P just auction up to re-test the multiyear high (1812). 3) How did the market behave during the previous rally to 1812? 4) Where did price sell-off to during the initial pull-back & is it reasonable to expect a similar pattern of development? 5) What is the risk associated with the trade strategy? 6) What is the potential reward? 7) How would the risk be managed? The circumstances associated with selling the initial retracement to the multiyear high (1812) fall into the category of strategic analysis. We suggest reviewing the previous development that occurred during the November rally up to 1812 and consider the outcome at the prior high. (See Chart below) Traders who rely on market structure must train themselves in the art and science of pattern recognition. Note - Market development consists of proto-typical redundant sequences of rallies, pauses, Trending Now | Algo Futures
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pull-back and retracements.
Coming into Wednesdays session

Bayesian Inference 2 # (12-08-13): Buying the Pull-back at or near 1800-1798. The initial pull-back (sell-off) below the re-test of the multiyear high has occurred with Todays sell-off to 1801. The S&P has auctioned back to 1806. This Bayesian Inference must now be updated and the new information gleaned from todays session must be incorporated into the expectation: potential outcome. On Monday, the S&P pulled back to 1806. Therefore, there exists the possibility that buyers at Mondays low may exit their long positions. Additionally, sellers at Mondays low may continue to defend their short positions. Hence, the expectation (potential outcome) of a retest of the multiyear high (1812) is contingent upon, sellers abandoning their short positions and buyers maintaining their long positions at the 1806-1807 price level. Trending Now | Algo Futures
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In the event, S&P futures fail to auction above Mondays low (1807-1806) and sell-off (pull back) to todays low (1801) the situation is no longer viewed as the initial pullback. The situation would be deemed the second pullback and or re-test of support. When a pattern or period of consolidation develops each successive pull-back (sell-off) increases. Therefore, buyers at todays low are advised to remain cautious. With regards to Bayesian Inference 1 # (12-08-13) Sell the initial Retracement to the multiyear high 1812. A retracement back to the multiyear high would now be deemed as second retracement or a re-test of the prior high. Each successive retracement (rally) increases the potential of a higher high. Stop loss orders are still likely to be located at 1814. The maximum likelihood expectation target remains 1820. The statement is not to suggest it is guaranteed S&P futures will break out above the prior multiyear high. During the late November rally there were several attempts to extend the trading range above the initial high at1809. Each attempt resulted in only modest range extension. And on November 29, when the S&P auctioned up to 1812, after pausing at the high almost 2 hours, the S&P sold down to 1802. Thus, the order flow of events detected at the high are extremely important in calculating the likelihood of a break-out and continuation of the rally. Therefore we suggest that our members focus on the order flow monitor during the retracement to 1812 and discern whether or not the computerized buy programs have waned [BPW] or initiated buying is present [HFT Buy Surge].
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Good Morning Traders, Overnight S&P futures traded up to 1807-1808 encountered resistance [BPW] and sold down through Tuesdays narrow trading range. The overnight selling pressure end [SPW] when the S&P trade at 1800-1799. Minor buying interest so presence at the estimated minor support level and S&P future traded back up to Tuesdays close (1804). In yesterdays market structure commentary we noted the Tuesdays session lacked any indication of serious interest, either on the buy or sell side. The rate of trade, as measured by trade speed, number of trades and volume of trades were all below average. The weakness during Tuesdays session prompted us to alert our members that there exists the possibility that buyers at Mondays low may exit their long positions. Additionally, sellers at Mondays low may continue to defend their short positions. Hence, the expectation (potential outcome) of a retest of the multiyear high (1812) is contingent upon, sellers abandoning their short positions and buyers maintaining their long positions at the 1806-1807 price level. Tuesdays weak session brought into question whether or not S&P futures would auction back to re-test the prior multiyear high. During the late November rally, we noted there were several attempts to extend the trading range above the initial high at1809. Each attempt resulted in only modest range extension. And on November 29, when the S&P auctioned up to 1812, after pausing at the high almost 2 hours, the S&P sold down to 1802. Thus, the order flow of events detected at the high are extremely important in calculating the likelihood of a break-out and continuation of the rally. Overnight, during the retracement to 1807-1808 to order flow monitor detected the computerized trading programs ceased trading to the buy-side [BPW]. The reverse pattern appeared at the overnight low (1800-1799). Both situation indication the value of the order flow monitor in detecting the excursion of the computerized trading algorithms. Order flow events in combination with the market structure reference point provide traders a valuable tool set for analyzing market behavior and identifying entry and exit points.
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Coming into Wednesdays session S&P futures have failed to auction above Mondays low (1807 -1806) and have sell-off (pull back) to modestly below Tuesdays low (1801). The situation is no longer viewed as the initial pullback, but is deemed the second pullback and or re-test of support. The general rule is that each successive pull-back (sell-off) increases to possibility of a lower low. Therefore, buyers at low are advised to remain cautious. That said # 2 Bayesian Inference (12-08-13) continues to call for: Buying the Pull-back at or near 18001798: with the expectation that the re-test of the low will continue to be met with buying interest. As we stated yesterday, trading is rarely ideal, is the sense that price auction exactly to the desire target. The traders must think, assess and compare the response of other traders at reference points and calculate his chances of entering and exiting within the approximate location. The most important factor is a trading strategy is whether or not the course of action makes sense. In todays context the trader must answer the question: did the S&P just break -out above the 1800 price level? Did the S&P just auction up to re-test the multiyear high (1812). How did the market behavior during the previous rally to 1812? Where did price sell-off to during the initial pull-back. Is it reasonable to expect a similar pattern of development? What is the risk associated with the trade strategy? What is the potential reward? How would the risk be managed? The circumstances associated with selling the initial retracement to the multiyear high (1812) fall into the same category of strategic analysis. We suggest reviewing the previous development that occurred during the November rally up to 1812 and consider the outcome at the prior high. (See Chart) Traders who rely on market structure must train themselves in the art of pattern recognition. Market development consists of proto-typical redundant sequences of rallies, pauses, pullback and retracements. # 2 Bayesian Inference (12-08-13): Buying the Pull-back at or near 1800-1798. The initial pull-back (sell-off) below the re-test of the multiyear high has occurred with Todays sell-off to 1801. The S&P has auctioned back to 1806. The inference must now be updated and the new information gleaned from todays session must be incorporated into the expectation: potential Trending Now | Algo Futures
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outcome. A re-test of the low duri9ng Wednesdays open could result in a lower low. With regards to 1 # Bayesian Inference (12-08-13) Sell the initial Retracement to the multiyear high 1812. Buying interest [HFT Buy Surge] must be present during the retracement back to 1807-1808, in order for the S&P to re-test the multiyear high. A retracement back to the multiyear high would now be deemed as second retracement or a re-test of the prior high. Each successive retracement (rally) increases the potential of a higher high. Stop loss orders are still likely to be located at 1814. The maximum likelihood expectation target remains 1820.
Thursday
Wednesday Market Development | Thursday Reference Points
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Hello Traders, The major US equity indexes ended the session lower on Wednesday. The Dow 30 closed at 15843: () down - 129 points (-0.81%). S&P 500 close at 1882: () down -20 points (1.13%). The NASDAQ close at 4003: () down -56 points (+1.40%). 48 (9%) of the S&P 500 stocks end the session above their prior days close, while 448 (89%) declined.
Wednesday Market Development S&P futures sold off through the last weeks trading, selling into the close, trading down to 1779. After trading up to re-test the multiyear high at 1812 on Monday, S&P futures breached minor support at 1800, as well as last Thursdays low at 1782. The financial media headlines attributed the decline to concerns regarding Fed Trending Now | Algo Futures
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tapering. Last week the financial media headlines were market rallys as positive data eases concerns of Fed Tapering. So, which headline is correct? Are either of these headlines valid? Or, are both headlines false? If neither of these headlines is valid, i.e. basic fundamentals do not matter, what is the underlining factor that drives the market up one day and down the next? Is it a valid assumption to view financial media headlines as mere ploys? A ploy is a cunning plan designed to turn a situation to one's own advantage. If media headlines like, market rallys as positive data eases concerns of Fed Tapering and sell-off through the trading range next day on the premise market participants are concerned about Fed Tapering, what value are such headline? Are these headline news? Or are such headlines miss-information? The obvious fact is that market participants who bought the high based on Fridays he adline lost money. Traders who bought Thursdays low at 1782, the low prior to Fridays headline saw their positions turn negative. This obvious fact informs the astute market observer of the critical need to keep ones own council. If you can make money buying a 33 point decline below a high two days before, what kind of market are you dealing with? Certainly, rallies are not to be trusted. Are rallies are to be sold? The question is can the pull-back be bought? In the context of today sell-off, what has been major support (1773), the November 21st low, the prior November 7th high (the previous multiyear high) is the last remaining support level. A breach of this major support level wipes out gains for the past two months. Hence, the 1773 is the KEY support level. A break-down below 1773 will indicate a double top at the 1812 high. Astute observers will note there was no short covering rally during todays session.
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#1 Bayesian Inference (12-11-13) Sell the retracement: Where? How about at 1784, 1794, 1800 and 1812? All of the about levels are possible candidates for selling retracements. The issues as we observed last week is the risk of short covering. Short covering is one of the major tools of the major financial institutions. First, the major financial institutions own the major of the S&P 500 companies. The major financial institutions are the only market participants with the capital to buy the S&P up from 1777 to 1812 and turn around a selling it back down to 1773. This fact must be understood by all traders. Jim Dalton in his classic book Minds over Markets describes short covering as the most deceptive form of market development. Why? The reason is no new capital enters the market during a short covering rally. Second, focus on the major Support and Resistance levels. Retails traders will find it difficult to be profitable trading narrow ranges. Support and Resistance levels from the perspective of the large financial institutions are equal to an average daily ranges: 17 to 23 points. At the major support and resistance levels the likelihood of pull-back and retracement increases. In other words, when major support is breached or resistance is penetrated there is a greater likelihood of a retracement backs to resistance and or a pull-back to support. Thus, positions (entries) at those trade locations can be managed. Whereas, a trade locations in the middle of the trading range is less likely to prove to be manageable. Trending Now | Algo Futures
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#2 Bayesian Inference (12-11-13) Buy the Pull-back at or near 1773 The risk is a breach of support during the initial pull-back. The next support level is 1750; 23 points below the November 20th low. The expectation is a retracement up to 1882-1884.

S&P future traded low in the overnight session, extending its losses from Wednesday. The S&P breached major support at 1773, trading down to 1769, before auctioning back to 1777. While the breach of the support was 4 points below the previously low, the retracement up to 1777 suggests the breach represents minor range extensions. S&P futures are likely to pause at the low and consolidate before moving significantly lower. The 1773 support level, the November 21st low, the prior November 7th high (the previous multiyear high) is the last remaining support level in the upper trade cluster. A breach of this major support level wipes out gains for the past two months. There is the outside possibly that the selling pressure will continue below the overnight low (1670-1769). IF, price breaches the overnight low, then traders will have to be prepared to sell the breakdown. Even in declines, markets do not sell-off forever. The prior low (1773) and the minor range extension are the current long entry point. Some traders may prefer to forgo looking to support and focus on selling the retracement. #1 Bayesian Inference (12-11-13) Sell the retracement: Where? How about at 1784, 1794, 1800 and 1812? All of the about levels are possible candidates for selling retracements. Traders must be aware of the situation we observed last week: i.e. short covering. As we noted in last night commentary; short covering is one of the major tools of the major financial institutions. Trending Now | Algo Futures
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First, the major financial institutions own the major of the S&P 500 companies. The major financial institutions are the only market participants with the capitol of buy the S&P up from 1777 to 1812, turn around a selling it back down to 1773 and than short cover back up into the trading range. Therefore, in the context of the overnight low (1770-1769), the 1784 price level is the earliest short level worth consideration. At Wednesdays close ithe 1782-1780 was the high volume settlement level and is the minimum likely retracement target. Contract roll-over starts today. .
Thursday Market Development | Friday's Reference Points
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Hello Traders, The major US equity indexes ended the session lower on Thursday. The Dow 30 closed at 15739: () down - 104 points (-0.66%). S&P 500 close at 1776: () down -6 points (0.38%). The NASDAQ close at 3998: () down -5 points (+0.14%). 183 (36%) of the S&P 500 stocks end the session above their prior days close, while 309 (61%) declined. The advanced declined statistics suggests the selling pressure may not be over. In the News The financial media contributed the S&P sell-off to speculation that Federal Reserve will cut stimulus as early as next week as economic data improves. However, today there was a strong reverse barometer indicator. CNBC Squawk on the Street commentator Jim Cramer went on the record saying now is the time for investors should take profits. Yes, you heard it right, at the low Cramer public declared take profit at the low. Oddly enough, Cramers comment contradicts his view from last week when the S&P traded above 1800. At that time Cramer expressed the media miss-information that the positive economic data eased investors concerns regarding tapering. Additionally Huntington Asset chief investment officer Randy Bateman, $15 billion under management, commented that of market starting to come to terms with whether this good economic news is enough for the Fed to start its tapering process. The sell-off is likely in anticipation of the FOMC announcement next week. Pioneer Investment Management fund manager John Carey, $200 billion under management says, economic news has been generally pretty good and the Fed has supposedly has been waiting for better economic news before starting to cut back on stimulus. There was an expectation a few weeks ago that the Fed might wait until February or March. But now with good economic news, its starting to seep into the market that the Fed could start tapering as early as this month. The Fed will probably start reducing its $85 billion of monthly bond purchases at its Dec. 17-18 FOMC meeting. However, todays data indicated applications for unemployment benefits jumped last week from an almost three-month low. Data last week showed the jobless rate fell to a five-year low and the economy expanded in the third quarter at a rate faster than initially estimated. So whats the correct interpretation of the data? Fact: US economic growth is chronically slow and likely to remain below historic norms for an indeterminate period of time: Ben Bernanke.
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Fact: US manufactory jobs have been outsources to Communists China. Those jobs were previously the high paying jobs. Those jobs are not likely to return. Fact: The rally is US equities had been driven by FED stimulus. The beneficiaries of the FED stimulus have been the wealthiest 10% of the population, with even greater gains going to the top 1%. Remember: we just witnessed the S&P 500 sell-off from its retracement to the multiyear high at 1812, and trade down to 1772: 40 points (2.2%) on concerns of FED tapering. What is likely to happen when the FED announces the end of the stimulus program? Will the market rally or will it sell-off?
Thursday Market Development

Thursdays was contract rollover. The S&P cash index traded down to 1772, while the March S&P futures contract traded down to 1765. Volume in the March contract was typically light. We would expect to see volume normalize next week. The sell-off that started Wednesdays continued in the overnight session. The futures contract rollover altered the reference points.The Low in the December contract was consistent with 1772 our previous reference point, whereas the low in the forward contract was 1765. In the S&P Cash Index (December contract) the retracement high was 1782. In the March contract the high was 1778. On Monday, when the forward contract has had time to settle in, we will update the references points to
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reflect the forward contract levels. The price levels where statistical high volume traded were 1769-1786. The volume traded at the close and price down-ticked as a result (selling volume). Earlier in the session, relatively high volume traded at 1767-1766. The volume at the low was traded at the ask (up-tick) and the S&P futures auctioned up off the low.
Coming into Fridays session

Thursdays close, along with the advance:decline ratio, indicated weakness. While the Cash index had support at the 1772 (Dec contract low) and the close was above the low. However, the forward contract closed at the low. This divergence could be related to rollover or it could be future traders are more bearish.
#1 Bayesian Reference (12-12-13) | Buy the pull-back at 1767-1765: todays low (March contract).
The expectation is that S&P futures will consolidate at the low. The likelihood is that price will auction back to the high (1778) and make a higher high (1782). The risk is that the sell-off will continue to auction the S&P lower. The next support level is down at 1754, the November 13th low. In the context of the current decline (down - 47 points) from Mondays retracement back to the multiyear high (1812), a sell-off to 1754 would be less likely, then a retracement back to Thursdays high (1778). However, if S&P futures auction back to Thursdays high and fail to make a higher high (1782), the likelihood of a lower low increases. In the event of a breach of what is still major support: i.e. 1772 in the Cash Indexes (1772 in the December contract), the trader must be prepared to sell the break-down below 1767-1765. IF, the opportunity to sell the break-down below 1765 is missed, than look to sell the retracement at 1767-1765. The Sell the Retracement strategy follows the break-down when price has traded at or below 1754. In that context, S&P futures breaching support (1775) and selling down to 1754 or lower, what had been support 17671765 (1772 in the Cash) become resistance on the initial retracement.
#2 Bayesian Reference (12-12-13) | Sell the retracement at or near 1782-1784.

As a result of Wednesdays sell-off the following levels: 1784, 1794, 1800 and 1812 are all possible candidates for possible Selling the Retracements. Traders must be aware of the situation we observed last week: i.e. the possibility of a short covering rally.
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S&P futures traded higher in the overnight session, auction up to 1777 (1782 in the December). Overnight, bargain hunters emerged after recent selloff, capping the downside to a large extent. In the previous session, stocks fell for a third consecutive day, as investors digested mixed economic data on retail sales and jobless claims and looked ahead to next week's FOMC meeting. Coming into Fridays session we noted #1 Bayesian Reference (12-12-13) Buy the pull-back at 1767-1765: todays low (March contract) The expectation is that S&P futures will consolidate at the low. The likelihood is that price will auction back to the high (1778) and make a higher high (1782). The risk is that the sell-off will continue to auction the S&P lower. The next support level is down at 1754; the November 13th low. In the context of the current decline (down - 47 points) from Mondays retracement back to the multiyear high (1812), a sell-off to 1754 would be less likely, then a retracement back to Thursdays high (1778). However, if S&P futures auction back to Thursdays high 1777 and fail to make a higher high (1782), the likelihood of a lower low increases. #2 Bayesian Reference (12-12-13) Sell the retracement at or near 1782-1784. As a result of Wednesdays sell-off the following levels: 1784, 1794, 1800 and 1812 are all possible candidates for possible selling the retracements. Traders must be aware of the situation we observed last week: i.e. the possibility of a short covering rally. Fund Manager comment Investment manager Veronika Pechlaner at Ashburton Jersey, $2.3 billion under management, said, we might see a bit of stabilization in markets after a couple of days of weakness.
The budget deal is good news in the long term for U.S. stocks. It removes the risk of another Trending Now | Algo Futures
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government shutdown. Markets have shown some weakness on Fed concern. IFM there is no "tapering" announced at the December FOMC, we are likely to see a rebound into the end of the year.
Asian Market Recaps

Mondays Asian Market
Asian stocks ended mostly higher on Monday.

Signs of a fairly robust U.S. recovery and optimism that China's economy is stabilizing helped investors to shrug off worries over Fed tapering, at least for now. China's Shanghai Composite edged up marginally to 2,238 as investors digested trade and inflation data. Hong Kong's Hang Seng rose 0.3%, to trade at 23,811, with a broad decline in property stocks capping gains. Data released over the weekend showed that China's trade surplus increased to $33.80 billion in November from $31.1 billion in the previous month. Exports jumped 12.7 percent, up from 5.6 percent in the previous month and beating forecasts for a 7 percent rise, while the import growth slowed down to 5.3 percent. Another government report showed that consumer prices in China rose 3.0 percent year-overyear in November, falling below expectations for an increase of 3.2 percent amid a slowdown in food price inflation. Japan's Nikkei average climbed 2.3%, to trade at 15,650, extending gains for a second day, with a weaker yen and firm cues from Wall Street boosting sentiment. The broader Topix index gained 1.6%, to trade at 1,255, its biggest advance in three weeks. According the Cabinet Offices revised estimate Japan's gross domestic product expanded 0.3 percent in the third quarter of 2013 compared to the previous three months. That missed forecasts for 0.4 percent expansion and was down from October's preliminary reading for 0.5 percent growth. The Ministry of Finance reported that Japan posted a current account deficit of 127.9 Trending Now | Algo Futures
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billion yen in October - missing forecasts for a surplus of 148.9 billion yen. Exports jumped 17.9 percent year-over-year to 5.833 trillion yen, while imports surged an annual 28.2 percent to 6.925 trillion yen. Australian shares fell to eight-week low. The benchmark S&P/ASX 200 closed 0.8% lower, to trade at 5,144, erasing early gains. The financial sector was the big decliner, after QBE Insurance warned it will likely report a net loss for the 2013 fiscal year due to write-downs at its U.S. operations. QBE shares plunged over 22%. According to a survey by Australia and New Zealand Banking Group, Australian job advertisements in newspapers and on the internet declined in November. Job ads fell a seasonally adjusted 0.8 percent in November from the previous month following the 0.1 percent drop in October. Seoul shares rose sharply, snapping a six-day losing streak, helped by foreign fund buying. The benchmark KOSPI average surged 20 points or a percent to 2,000, led by tech stocks. Fletcher Building, the nation's largest construction company, dropped 1.3% after data from property value Quotable Value revealed that New Zealand house prices increased notably in November reflecting a fundamental imbalance between supply and demand. Another report from Statistics New Zealand showed that the total volume of manufacturing activity in New Zealand climbed a seasonally adjusted 0.5 percent in the third quarter of 2013 compared to the previous three months. India's Sensex is climbing 1.6% as investors cheered encouraging state election results that came in line with the exit poll results. Indonesia's Jakarta Composite index was adding a percent, the Taiwan Weighted average advanced 0.9% and Malaysia's KLSE Composite was gaining 0.8%. Singapore's Straits Times index was down 0.1%. U.S. stocks rallied on Friday, with the Dow and the S&P 500 ending a five-day losing streak, as a stronger-than-expected jobs report and upbeat consumer sentiment data fueled hopes that the U.S. economy can withstand the winding back of Federal Reserve stimulus. The Dow rose 1.3%, the tech-heavy NASDAQ advanced 0.7% and the S&P 500 added 1.1%.
Tuesdays Asian Market
Asian stocks fell broadly on Tuesday.

China's Shanghai Composite index ended little changed with a negative bias after a slew of economic reports came largely in line with expectations. Hong Kongs Hang Seng fell 0.3% to 23,744. Trending Now | Algo Futures
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Chinese retail sales grew 13.7 percent year-over-year in November, its strongest pace of growth so far this year, the latest figures from the National Bureau of Statistics revealed. Economists had forecast a marginal slowdown to 13.2 percent. Industrial production grew 10 percent annually in November, decelerating from 10.3 percent growth recorded in October, while urban fixed asset investment increased 19.9 percent in the year through November compared with the same period last year. Japan's Nikkei index dropped 0.3% to 15,611 on profit taking after rallying 2.3 percent on Monday, spurred by renewed weakness in the yen. The yen fell against major rivals after Japanese Prime Minister Shinzo Abe signaled more economic reforms under his government. Abe pledged Monday to adopt a growth strategy action plan early next month, which includes offering tax breaks on capital spending. In economic releases, an index measuring tertiary industry activity in Japan fell a seasonally adjusted 0.7 percent in October compared to the previous month, while Japan's M2 money stock grew 4.3 percent year-over-year in November, separate reports showed. According to a report from the Cabinet Office showed that Japan's consumer confidence improved in November, but to a lesser extent than economists had forecast. Australian shares erased early gains to end on a flat note. The benchmark S&P/ASX 200 closed flat at 5,144 after falling 0.8% the previous day. QBE shares tumbled nearly 10 percent, extending the previous session's plunge, after the nation's largest insurer warned it would likely report a net loss for the 2013 fiscal year due to write downs at its U.S. operations. According to the latest survey from National Australia Bank an index measuring business confidence in Australia saw a score of +5 in November, down from the upwardly revised +6 in October, Another report from the Australian Bureau of Statistics revealed that the total number of owner-occupied home loans in Australia rose a seasonally adjusted 1.0 percent in October compared to the previous month, standing at 52,305. South Korea's Kospi average closed 0.4 percent lower at 1,993 amid concerns the Fed may trim its stimulus program as early as next week. New Zealand's benchmark NZX-50 dropped 0.3% to 4,706, with 25 of its components retreating. Air New Zealand dropped 0.6 percent despite the company forecasting a 20 percent rise in pre-tax earnings for the first half. Retailers fell across the board after Statistics New Zealand showed the total value of credit card spending in New Trending Now | Algo Futures
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Zealand rose a seasonally adjusted 0.2 percent in November compared to the previous month following the 1.1 percent increase in October. India's Sensex was down 0.4% on profit taking after rallying sharply to a record closing high the day before. Singapore's Straits Times was down 0.9% and the Taiwan Weighted edged down marginally, while Indonesias Jakarta Composite was rising 1.3% and Malaysia's KLSE Composite was up 0.1%. U.S. stock indexes were relatively flat overnight. Comments from St. Louis Fed President James Bullard voicing support for a small tapering beginning next week appears to have dampened investor sentiment. Next week's Federal Reserve policy meeting will provide market participants with fresh clues about the stimulus outlook. Based on labor market data alone, the probability of a reduction in the pace of asset purchases has increased according to Bullard. The risks associated with the Federal Reserve's unprecedented support measures are beginning to outweigh further benefits, Richmond Fed President Jeffrey Lacker said. The Dow inched up marginally, the S&P 500 rose 0.2% to reach a fresh record closing high and the tech-heavy NASDAQ added 0.2%.
Wednesdays Asian Market
Asian stocks fell across the board on Wednesday.

Japan's Nikkei index fell 0.6%, to trade at 15,515, as the yen rallied. The broader Topix index shed half a percent to 1,250. According to a survey by the Cabinet Office, core machine orders in Japan added a seasonally adjusted 0.6 percent in October from the previous month, - coming in at 807.2 billion yen. The headline figure missed forecasts for a gain of 0.7 percent following the 2.1 percent contraction in September. Separately, an index tracking the prices of domestic corporate goods rose 0.1 percent in November compared to the previous month, the Bank of Japan said, matching forecasts. Utilities Kyushu Electric Power and Kansai Electric Power lost 2-3 percent on a Nikkei report that safely checks for nuclear restarts will see further delay. China's Shanghai Composite fell 1.5%, to trade at 2,204, dragged down by financials amid concerns that interest-rate liberalization may increase competition and put short-term pressure on banks' profits. Hong Kong's Hang Seng index dropped 1.7%, to trade at 23,338. Australian shares fell to a 3-1/2-month low, dragged down by banks and miners, after the latest Trending Now | Algo Futures
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results of a survey by Westpac Bank showed consumer confidence in Australia fell sharply in December. The headline index fell to 105.0 from 110.3 in November. The "Current Conditions" index fell to 115.5 from 121.1, while the "expectations" index fell to 98.0 from 103.2 in the previous month. The benchmark S&P/ASX 200 dropped 0.8%, to trade at 5,104, extending losses for the fifth straight day. Gold miner Newcrest Mining soared 8% after gold prices hit a three-week high on Tuesday. OZ Minerals plunged 14 percent on concerns over its growth prospects after the company gave a downbeat production forecast. South Korea's Kospi closed 0.8% lower at 1,978, a four-week closing low, as investors adopted a cautious stance ahead of the U.S. monetary policy meeting scheduled for next week. Overseas investors remained net sellers and offloaded shares worth a net 214.9 billion won, data showed. According to data released by Statistics Korea, South Korea's seasonally adjusted jobless rate dropped to 2.9 percent in November from 3 percent in October. A year earlier, the unemployment rate was 3 percent. New Zealand shares lost ground after dairy giant Fonterra Shareholders Fund halved its earnings forecast and unexpectedly slashed its full-year dividend forecast by twothirds. Fonterra units plunged 5.7 percent, while the benchmark NZX-50 index declined 0.05%, to trade at 4,704. Key benchmark indexes in India, Indonesia, Malaysia, Singapore and Taiwan were down between 0.1% and 0.6%. Malaysia's industrial production growth accelerated in October, driven by increases in manufacturing and electricity, the Department of Statistics said. Industrial output advanced 1.7 percent year-over-year versus forecasts for a 0.8 percent rise. U.S. stocks saw modest weakness overnight, offsetting the strength seen in the two previous sessions. Investors awaited Thursday's data on monthly retail sales and the Federal Reserve's decision on interest rates and stimulus next week for further direction. Market participants appear cautious ahead of next week's Federal Reserve meeting. Investors showed little reaction to news of a U.S. budget accord amid concerns the two-year deal to prevent another government shutdown may prompt the Fed to come up with a definitive path for scaling back large scale asset purchases at its policy meeting next week. The bipartisan deal, coming after intensive negotiations and concessions from both sides, will now go before the Senate and the House of Trending Now | Algo Futures
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Representatives The Dow and the S&P 500 declined about 0.3% each, while the tech-heavy NASDAQ edged down 0.2%.
Thursdays Asian Market
Asian stocks fell to a 2-1/2 month low on Thursday.

Japanese shares extended declines for a third day as the yen held in a narrow range against the dollar ahead of the Federal Reserve's policy meeting due next week. The Nikkei average hit an intraday low of 15,255 early in the session before finishing down 1.1%, to trade at 15,342. Chinese shares ended largely unchanged with a negative bias, with a report showing increasing M2 money supply and forecast-beating bank loan data underpinning sentiment. Hong Hong's Hang Seng fell half a percent to 23,218, tracking losses elsewhere across the Asia-Pacific region. Australian shares fell for the sixth day on concerns about the potential market impact of a reduction in the Fed's stimulus program. The benchmark S&P/ASX 200 hit an intraday low of 5,028 before closing down 0.8%, to trade at 5,062, its lowest level since August 22. In economic news, Australia's seasonally adjusted unemployment rate rose to 5.8 percent in November from 5.7 percent last month, the Australian Bureau of Statistics reported. The Australian economy added 21,000 jobs in November - blowing past expectations for an increase of 10,000 following the addition of 1,100 jobs in the previous month. Separately, inflation expectations among Australian consumers increased slightly in December, a monthly survey by the Melbourne Institute revealed. Seoul shares hit a fresh four-week low on foreign fund selling. The benchmark Kospi average fell half a percent to 1,968, its lowest level since November 14, dragged down by tech shares. The Bank of Korea kept its benchmark interest rate unchanged at 2.50 percent today following a surprise 25 basis points rate cut in May. The trend of economic recovery in the U.S. has been sustained and that the sluggishness of economic activities in the euro area appears to have continued to ease, while economic growth trends in emerging market countries, above all China, have been maintained," the bank said in a statement accompanying the decision. New Zealand's benchmark NZX-50 index edged up 0.1%, to trade at 4,708. On the economic front, the Reserve Bank of New Zealand held its official cash rate unchanged at a record low 2.5 percent as expected, but warned that interest rates will rise more over the next two years than previously expected. Separately, house prices in New Zealand reached a fresh record high in November, while sales numbers weakened, a report from the Real Estate Institute of New Zealand showed. Singapore's Straits Times was marginally higher, while the key benchmark indexes in India, Indonesia, Malaysia
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and Taiwan were down between 0.5% and 0.9%. The major US averages fell between 0.8% and 1.4% overnight on concerns about the eventual tapering of the central banks bond-buying program.
Fridays Asian Market
Asian stocks turned in a mixed performance on Friday.

Bargain hunters emerged after recent selloff, capping the downside to a large extent. Japan's Nikkei index snapped a three-day losing streak to end 0.4% higher, to trade at 15,403, with sentiment underpinned by a weaker yen. The Japanese currency hit its lowest level against the greenback in over five years amid Fed tapering speculation and after Japan's cabinet approved a $53 billion stimulus package for the current fiscal year to help support growth and cushion the impact of a planned sales tax hike in April. According to the final data from the Ministry of Economy, Trade and Industry, Japan's industrial production grew 1 percent in October from the prior month, faster than the 0.5 percent rise initially estimated, China's Shanghai Composite index eased 0.3%, to trade at 2,196, falling for a fourth consecutive session, as investors awaited news from an economic planning conference aimed at setting an economic growth target for next year. Hong Kongs Hang Seng edged up 0.1%, to trade at 23,246. Australian shares broke six days of losses amid bargain hunting. The benchmark S&P/ASX 200 finished up 0.7%, to trade at 5,098, rebounding from a four-month low hit the day before. The Australian dollar slumped below 90 U.S. cents after Reserve Bank of Australia Governor Glenn Stevens said the Australian economy would perform better if the exchange rate of the local currency traded near the 0.85 level against the greenback. Prime Minister Tony Abbott also backed Stevenss dovish rhetoric, undermining the exchange rate. Banks ended mixed. Seoul shares fell for the fourth day as better-than-expected U.S. retail sales figures fueled speculation the Fed could begin tapering its stimulus program as early as next week. The benchmark Kospi average fell 0.3%, to trade at 1,963, its lowest level since September 6. Overseas investors remained net sellers, offloading shares worth a net 269.4 billion won, data showed. New Zealand's benchmark NZX-50 rose 0.2 percent to 4,717. According to the latest survey by Bank of New Zealand and Business, New Zealand's manufacturing activity expanded for the 14th consecutive month in November, led by new orders, NZ showed. The seasonally adjusted performance of manufacturing index rose to 56.7 from 55.9 in October. Another survey by ANZ Bank revealed that its index of consumer confidence in New Zealand hit a near four-year high in December. India's Sensex was down 0.8% and Indonesia's Jakarta Composite index was losing a percent.
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Singapore's Straits Times was up 0.3%, Malaysia's KLSE Composite was gaining 0.4% and the Taiwan Weighted average added 0.2%. Singapore's jobless rate fell to 1.8 percent in the September quarter from 2.1 percent recorded during the quarter ended June, while retail sales decreased unexpectedly in October, separate reports showed. U.S. indexes traded higher overnight. Investors digested mixed economic data on retail sales and jobless claims and looked ahead to next week's FOMC meeting. The Dow dropped 0.7% and the S&P 500 slid 0.4% to end at their worst closing levels in a month, while the techheavy NASDAQ slipped 0.1%.
European Market Recaps

Mondays European Market
The European markets are mostly lower on Monday. A monthly survey by the think tank Sentix showed that the confidence index came in at 8 points in December, down from 9.3 in November. The reading was forecast to rise to 10.3. The assessment of current situation declined sharply to -6.3 from -3.3 in November. According to data from the Federal Statistical Office, Germany's trade surplus declined more than expected in October. The trade surplus fell to 17.9 billion euros in October from 20.3 billion euros in September. Economists expected a decline to 18.3 billion euros. The Euro Stoxx 50 index of Eurozone blue chip stocks is falling 0.13%. The Stoxx Europe 50 index, which includes some major U.K. companies, is losing 0.25%. The German DAX is gaining 0.3%. The French CAC 40 and Switzerland's SMI are dropping around 0.2%. The UK's FTSE 100 is losing 0.1%. Tullow Oil is losing 2.8%. The energy firm, which issued an update on its East Africa Exploration, said a well in the South Omo block onshore Ethiopia would be plugged and abandoned as a dry hole. Kentz said it has entered into an agreement to acquire the USbased Valeros field solutions business for $435 million in cash. The stock is surging by over 10 percent. Lloyds Banking Group said it has agreed to sell a portfolio of UK corporate real estate loans to Promontoria Holding 87 B.V., for 90 million pounds in cash, as part of the group's continued non-core asset reduction program. The stock is little changed. The Asian stocks ended mostly higher, with upbeat data out of the U.S. and China, and a weaker yen underpinning sentiment. U.S. futures traded modestly higher overnight.
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In the previous session, stocks rose sharply as a stronger-than-expected jobs report and upbeat consumer sentiment data fueled hopes that the U.S. economy can withstand the winding back of Federal Reserve stimulus. The Dow rose 1.3 percent, the tech-heavy NASDAQ advanced 0.7 percent and the S&P 500 added 1.1 percent. In Commodities January Crude is trading at $0.22 to $97.87 per barrel: () up + $0.22. February gold is trading at $1227.8 a troy ounce: () down - $1.20.
Tuesdays European Market

The European markets are mostly trading higher on Tuesday. According to the statistics office Insee French industrial production decreased at a steady pace in October, contrary to economists' forecast for a modest increase, latest data revealed. Industrial production dropped 0.3 percent month-on-month, as it did in September. Economists had forecast a 0.1 percent increase for October. The Office for National Statistics said. U.K.'s industrial as well as manufacturing output growth slowed in October as expected by economists. Both industrial and manufacturing output grew 0.4 percent each. Meanwhile, the U.K. visible trade gap narrowed to 9.7 billion pounds in October from 10.1 billion pounds in September. The visible trade deficit with EU countries widened to 6.5 billion pounds from 6.2 billion pounds in September. The Euro STOXX 50 index of Eurozone blue chip stocks is adding 0.24%. The STOXX Europe 50 index, which includes some major U.K. companies, is up 0.06%. The German DAX and the French CAC 40 are up around 0.2% each. The UKs FTSE 100 is gaining about 0.1% while Switzerland's SMI is falling 0.16%. The Asian stocks fell broadly as investors digested a raft of Chinese data. Chinese retail sales growth accelerated in November to the strongest pace so far this year, while industrial production and fixed asset investments trailed forecasts, the latest figures from the National Bureau of Statistics revealed, giving mixed signals on the prospects of the economy. U.S. futures were relatively unchanged in the overnight session. In the previous session, stocks rallied despite comments from St. Louis Fed President James Bullard voicing support for a small tapering beginning next week capping gains. . Federal Reserve Bank of Dallas President Richard Fisher said in a speech in Chicago on Trending Now | Algo Futures
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Monday that the Fed needs to begin tapering at the earliest opportunity and cease from interfering with the normal price-setting functioning of financial markets. The Dow inched up marginally, the S&P 500 rose 0.2% to reach a fresh record closing high and the tech-heavy NASDAQ added 0.2%. In commodities January Crude delivery is trading at $98.59 per barrel: () up + $1.25. February gold is trading at $1244.8 a troy ounce: () up + $10.60.
Wednesdays European Market

The European markets are trading modestly higher on Wednesday.
According to the Federal Statistical Office Germanys EU harmonized inflatio n increased in November as estimated earlier. Employment in France's non-agricultural sector decreased further in the September quarter, but at a weaker pace than in the preceding quarter, data released by statistical office Insee revealed. The Euro STOXX 50 index of Eurozone blue chip stocks is adding 0.2%. The STOXX Europe 50 index, which includes some major U.K. companies, is gaining 0.11%. The German DAX and the UK's FTSE 100 are trading higher by around 0.1% each. The French CAC 40 is gaining 0.6% while Switzerland's SMI is up 0.2%. In London, the Royal Bank of Scotland is down1.9 % after its Group Finance Director Nathan Bostock announced his intention to resign from the company. Santander said it would appoint Nathan Bostock as its Chief Risk Officer and Deputy Chief Executive Officer. The Asian stocks fell across the board, as investors expressed some caution ahead of next week's Federal Reserve meeting. In the U.S., futures point to a lower open on Wall Street. In the previous session, the Dow and the S&P 500 shed about 0.3% each, while the techheavy NASDAQ edged down 0.2%. The U.S. lawmakers announced the details of a bipartisan budget agreement that would fund the government for the next two fiscal years. The deal places spending levels above the $967 billion cap established by the sequester and aims to reduce the deficit by $23 billion without raising taxes. The bill will now go before the Senate and the House of Representatives. In Commodities
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January Crude is trading at $98.55 per barrel :() up +$0.04. February Gold is trading at $1254.5 a troy ounce: () down - $6.60.
Thursdays European Market

The European markets are in negative territory on Thursday. Industrial production in the euro area decreased at a notably faster pace in October, defying expectations for a modest increase, with all the major industrial sectors recording decline in activity. Industrial production fell a seasonally adjusted 1.1 percent month-on-month in October, after dropping an upwardly revised 0.2 percent in the previous month, statistical office Eurostat said. Economists had forecast production to grow 0.3 percent, following September's originally reported 0.5 percent contraction. The Swiss National Bank decided to maintain the franc ceiling with the exchange staying high and the "vulnerable" external economic situation posing downside risks to Switzerland. In a statement, the SNB said it would maintain the minimum exchange rate of 1.2 Swiss francs per euro. The Euro STOXX 50 index of Eurozone blue chip stocks is losing 0.4%. The STOXX Europe 50 index, which includes some major U.K. companies, is falling 0.55%. The German DAX is falling 0.48% and the UK's FTSE 100 is losing 0.64%. Switzerland's SMI is sliding 0.57%, while the French CAC 40 is marginally lower. The Asian stocks fell to a two and a half month low, mirroring losses on Wall Street overnight, as investors grew more apprehensive about Fed tapering following a bipartisan budget deal reached in Washington on Tuesday. U.S. futures traded lower in the overnight session. In the previous session, stocks fell sharply on worries that a bipartisan budget deal reached in Washington could strengthen the case for the Federal Reserve to taper its bond-buying program in January. The Dow slid 0.8%, the tech-heavy NASDAQ fell 1.4% and the S&P 500 declined 1.1%. In Commodities January Crude is trading at $97.50 per barrel :() up + $0.09. February gold is trading at $1242.4 a troy ounce: () down - $14.80.
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Fridays European Market

The European markets are trading above the flat line on Friday. On a day of little economic news from the region, U.K. construction output recovered in October, boosting hopes of strong recovery in the fourth quarter, the Office for National Statistics said. Construction output gained 2.2 percent month-on-month, after declining 0.5 percent in September. The growth was driven by the strength in new work, and repair and maintenance. Dutch trade surplus increased in October from a year earlier, data released by Statistics Netherlands revealed. The trade surplus rose by 0.4 billion euros year-on-year to 4.2 billion euros. However, the value of exports of goods fell 2.1 percent annually to 37.9 billion euros. The Euro STOXX 50 index of Eurozone blue chip stocks is adding 0.23%. The STOXX Europe 50 index, which includes some major U.K. companies, is gaining 0.11 percent. The German DAX and the French CAC 40 are rising about 0.2 percent each. The UK's FTSE 100 and Switzerland's SMI are fractionally higher. The Asian stocks turned in a mixed performance, as investors remained apprehensive of Fed action at its policy meeting next week. Bargain hunters emerged after recent selloff, capping the downside to a large extent. U.S. futures traded higher overnight. In the previous session, stocks fell for a third consecutive day, as investors digested mixed economic data on retail sales and jobless claims and looked ahead to next week's FOMC meeting. The Dow dropped 0.7% and the S&P 500 slid 0.4%, while the NASDAQ declined 0.1%. In commodities January Crude is trading at $97.17 per barrel: () down - $0.33. February gold is trading at $1222.5 a troy ounce: () down - $2.40.
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Algo Futures - Trending Now - Strategies For Trading in High Frequency Markets - Issue 11 - 15-DeC-2013

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STRATEGIES FOR TRADING IN HIGH FREQUENCY MARKETS

FOR PROFESSIONAL TRADER USE ONLY

FOLLOW THE BOTS NEWS CHANNEL

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Daily Market Recap Videos

Mondays Market Recap

Tuesdays Market Recap

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Wednesdays Market Recap

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Weekly Recap (Cont. from page 1)

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Monday's Reference Points

Coming Into this week

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1 # Bayesian Inference (12-08-13)

2 # Bayesian Inference (12-08-13)

Daily Morning Briefing

Good Morning Traders,

Coming into Mondays session

1 # Bayesian Inference (12-08-13) calls for:

2 # Bayesian Inference (12-08-13)

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Monday's Market Development | Tuesday's Reference Points

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Daily Morning Briefing

Good morning Traders,

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Tuesdays Market Development

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pull-back and retracements.

Coming into Wednesdays session

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Daily Morning Briefing

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Daily Morning Briefing

Good Morning Traders,

Thursday Market Development | Friday's Reference Points

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Thursday Market Development

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Coming into Fridays session

#2 Bayesian Reference (12-12-13) | Sell the retracement at or near 1782-1784.

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Daily Morning Briefing

Good Morning Traders,

Asian Market Recaps

Asian stocks ended mostly higher on Monday.

Tuesdays Asian Market

Asian stocks fell broadly on Tuesday.

Wednesdays Asian Market

Asian stocks fell across the board on Wednesday.

Thursdays Asian Market

Asian stocks fell to a 2-1/2 month low on Thursday.

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Fridays Asian Market

Asian stocks turned in a mixed performance on Friday.

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