Algo Futures Market Insights - Weekly Newsletter - Issue 01 - Saturday, October 5th, 2013

Analysis Prepared By:
www.FollowTheBots.com
Algorithms Powered By:
www.sceeto.com
21ST CENTURY TAPE READING -
LESSON 01 ......................................................1
TO WHAT IS THE HIDDEN FORCE
BEHIND PRICE MOVEMENT?............................1
TRADE OPPORTUNITY OF THE WEEK................1
MARKET STRUCTURE.......................................2
MARKET DEVELOPMENT..................................5
MARKET FUNDAMENTALS...............................7
MONDAY’S TRADING OPPORTUNITIES..............9
DAILY MORNING BRIEFINGS..........................13
DAILY OPENING RANGE MARKET
COMMENTARIES............................................16
DAILY INTRA-DAY MARKET
COMMENTARIES............................................17
EUROPEAN MARKETS....................................18
ASIAN MARKETS............................................20
DAILY MARKET RECAPS.................................23
INSIDE THIS ISSUE
When I speak with active traders about
the effects of High Frequency Trading
Bots in the markets, invariably I see
flashes of recognition in their eyes and
they say, “Of course, I see it happen all
the time!”
Also, invariably, their current software
setup does not possess the functionality
to manage and interpret the type of
market activity that is created by the
presence of High Frequency Trading
Bots.
As noted in Sunday’s Market Structure
commentary, the computational
finance model developed by Follow the
Bots indicates that trade opportunities
are dictated by the market “state” (ie -
Consolidation. Direction).
The price discovery mechanism plays
a major role in all “states” of market
development.
Price discovery is the process by which
financial markets determine the price
Read More
Turn on CNBC and you will find an
inexhaustible supply of Talking Heads
explaining why price did what it did
today and what, they believe, price will
do in the future.
How can these pundits be so sure?
One says price will go up because of
x, y and z, while the other half of the
split-screen says that price will go down
because of a, b and c.
Either or neither analyses may come
true….Price may go up then go down
and then go sideways.
The question then to ask is, “Do you
have the resources to track, back-test
and validate all of this expert advice”?
Transaction Level Analysis, TLA, which
you can think of as “21 Century Tape
Reading”, springs out from the notion
that changes in price, in the short-term,
particularly in the electronic futures
markets, are determined largely by the
supply and demand created by order
flow.
As greater than 50% of all trades are
generated by automated Trading Bots,
Read More
21st Century Tape Reading - Lesson 01
Why Do Prices Go Up & Down?
Trade Opportunity of the Week
To What is the hidden force behind price movement?
SATURDAY, OCTOBER 5th
, 2013
Algo FuturesSTRATEGIES FOR TRADING IN HIGH FREQUENCY MARKETS
STRATEGIES FOR TRADING IN
HIGH FREQUENCY MARKETS
FOR PROFESSIONAL TRADER USE ONLY
WEEKLY NEWSLETTER
Market Insights
.Electronic footprints left from
Smart Money & High Frequency
Trading Bots are readable and are
quantifiable.
Algorithmically generated buying
andsellingwillfrequentlydetermine
the path of least resistance.
This newsletter is focused on continually demonstrating that:

Algo Futures | Market Insights — Weekly Edition
Saturday, October 5th, 20132
Market InsightsMarket Insights
Coming into Monday’s session:
S&P futures traded up to the multiyear high at 1727 on
September 19th.
On Friday, September 20th, the S&P broke down below the
minor support level at 1712 and sold off into the prior FOMC
trading range pulling back to 1701.
During Sunday’s (09-22-13) Globex session, the S&P retraced
up to 1707, before selling down to a new low at 1689.
September 24th, price auctioned up to 1701 before pulling
back to 1687, at or near the September 17 FOMC session low.
The exponential decline caused on Wednesday (09-25-13)
after S&P futures sold down to 1684, the upper edge of the
three day consolidation range that started on September 11th.
During the subsequent minor intraday rallies, buying interest
waned as S&P futures retraced between 1696 and 1698.
On Friday (09-27-13), S&P futures sold off below Thursday’s
overnight Globex high at 1696. By Friday’s open, price
had pulled back to what had been prior support at 1686.
During the week, the “best” long trade location had been
between1688-1484.
At Friday’s open, S&P futures broke down below what had
been minor support and traded down to 1680.
Following the selloff to 1680, S&P futures retraced back to
1686-1687. Late-in-the-day, there was a minor pullback to
1682, but price auctioned back to 1686 into the close.
Follow the bots, employs the principles of computational
finance, a branch of applied computer science that deals with
problems of practical interest in finance, i.e. the market “state”.
In the general, the term market “state” refers to whether or
not a market is moving directionally (vertically higher or lower)
or moving horizontally (consolidating within a given range).
Follow-the bots uses a Gaussian Mixture Model to analyze the
market “state”.
The Gaussian mixture model provides a method of studying
the market data and algorithms currently used in finance and
the mathematics of computerized programs that influence
price direction.
Two major areas of focus are the accurate computation of
“direction” of a financial securities and the modeling of micro
intraday stochastic price series.
The output of the Gaussian mixture model and the micro
intraday price series analysis are described using Bayesian logic.
Bayesian logic is based on probability. Bayesian logic
acknowledges that there exists a degree of uncertainty and
financial data. Thus, a financial forecast can be “best” (most
accurately) using conditional: “IF”, “THAN” statements.
While it has become fashionable in the trading industry to
market courses and trading systems to novice beginners, the
goal of Follow the Bots is to present a detail analysis of the
markets condition (state) to assist Traders in developing a
comprehensive understanding of market development.
Friday’s session, provides an interesting case study.
At the open of Friday session, we commented in our daily
market briefing that S&P futures were likely to break down
below their earlier in the week low (1684).
Indeed, S&P futures traded below the prior support and
sold off into the previous three day trading, which began on
September 11th.
We also noted that, earlier in the week the “best” long trade
has been between 1684- 1688.
Therefore, we expressed the view (Bayesian logic) that the
retracement back at or near the prior low (1686-1688),
provided the opportunity for previous buyers to exit their long
positions.
The rationale behind the market development observed on
Friday was telling, inasmuch as there was no retracement to
the earlier low at 1680.
Indeed, having given the appearance that the low was in, price
traded primarily between 1684 and 1686.
What was the purpose of making a lower low and then not
selling off, but instead spending the entire day trading at what
had been support?
The answer to the question, while it could have only been
inferred at the time, it is apparent at the open of Sunday’s
Globex session, where in S&P futures gapped below Friday’s
close and sold down to 1672.
Therein lies the rub; the conditional uncertainty of the
Bayesian inference. In the event, the government was to agree
by extending the debt ceiling and resolving the US budget
problems, undoubtedly S&P futures would have “gapped”
higher at the open of Sunday’s Globex session.
In light of the failure on the part of the government to resolve
the US budget problems, S&P futures opened Sunday’s Globex
session, the low Friday’s close and traded down to the next
support level at 1671.
It should be noted, that the Gaussian mixture model
consistently indicates that opportunities and financial markets
occur at the edges of the trading ranges.
Lows are deemed opportunities to get long: buy the pullback.
Highs are deemed opportunities to get short: sell the
retracement.
Friday’s Market Structure
Market Structure

Saturday, October 5th, 2013 3
Coming into Tuesday’s session:
S&P futures have auction up 14 points above Monday’s low.
Monday’s high equals low developed during Friday session.
However, very little volume traded at Friday’s low. The bulk of
the trade activity is between 1682 and 1684.
Hence, shorts at Friday’s low have not seen fit to cover their
positions.
Should price auction above 1682, the likelihood is short
will cover. S&P futures will fill the gap at Friday’s close and
potentially auction above Friday’s high.
A rally above 1682 will be accompanied by initiated buying
(HFT buy surge). To the extent a retrace to Monday’s high and
or Friday’s low as accompanied by a buy programs waning,
resistance will continue to hold. While S&P futures found
minor support at Monday’s low, the political events that led
to Sunday’s breakdown yet to be resolved. Therefore, there
is the possibility of a retest of Monday’s low and a lower low.
The next support level is located at the September 10th low
at 1662-1660. A break-down below Monday’s low will be
accompanied by initiated selling (HFT sell surge). To the extent
that during a subsequent pullback to Monday’s lows order
flow events indicate sell programs waning, support is likely to
hold.
In the event S&P futures breached support at Monday’s low
and auctioned down to 1662, if price discovery find support at
the September 10th low (16620-1660), the order flow events
will indicate sell programs waning.
Coming into Wednesday’s session:
The Major Resistance reference points remain at 1705 – 1709.
The up-side maximum likelihood expectation price level is
located at 1713-1715.
Wednesday’s extreme price excursion level is dependent upon
tomorrow’s release by the Federal Reserve’s forward guidance
on monetary policy.
In the event, the Feds extraordinary unconventional
accommodative policy is unchanged, the extreme price
excursion price level is located at 1720-1730.
Minor support is located at Monday’s low 1688
Monday’s Market Structure
Tuesday’s Market Structure
Frequent listeners of our daily market recap, will note that prior
to S&P futures making a new multiyear high, we had noted
that the historic data consistently indicates that the S&P 500 as
well as the DOW30 and the NASDAQ 100 have sold off from
every multiyear high.
Indeed there is no example, where in financial market
development does not result in price selling off from the high.
Corrections in bull markets are common occurrences.
Hence, there is no evidence supporting that one can be
profitable (outperforming the index) by buying the high.
Quoting the research of Richard Schabacker; in his classic book
technical analysis and stock market profits first published in
1930; buying the high is where the uninformed traders (retail)
enter the market. Buying the pull-back is where the informed
traders (wholesale) enter the market.
With regards, the Wall Street analyst hype, the “this time it
will be different”, William Hamilton wrote in his treatise titled
stock market barometer, “trees don’t grow in the sky and
markets don’t go up forever”.
Therefore we are confident, that the principles of computational
finance will prove beneficial to our members.
The Current Reference Points: key support and resistance
levels for the developing trading range; (as of) September 3rd
through September 29th, 2013.
Friday’s close 1681; corresponds with last weeks high 1684. Near term support is located at the September 9th low (1668-
1672); with fractal lows at 1672 (09-11 low) and 1673 (09-13 low).

Coming into Friday’s session:
We are now seen the S&P auctioned back down to Monday’s
low (1666) and test support at the September 10 low (1662).
We have also observed that buyers during Tuesday and
Wednesday session (best location) at 1676-1673, had the
opportunity today to liquidate their long positions.
These September 10th low (1662) is now the key support level.
In the event, price pulls back a second time, at or near 1662-
1663 the rationale for buying the pullback remains in place.
The lack of buying interest observed this afternoon, above the
midpoint of the developing trading range (1676) suggests
buying above today’s low at the minor intraday pullback level
(1668) is potentially higher risk.
The conditional factors, order flow events indicating sell
programs waning, should be paid close attention to.
These events were present during the afternoon pullback
resulting in S&P futures retracing back to the midpoint (1676).
However, the weakness observed late in the day is cause for
concern.
Similarly, sellers at the midpoint of the developing trading
range (1676), while currently in profit, should not be overly
committed, as the market is prone to short covering, as
observed during Monday’s session.
Wednesday’s Market Structure
Thursday’s Market Structure
Coming into Thursday’s session:
Coming into Thursday’s session the trade opportunities can be
considered are as follows:
1.) Minor resistance is now located at 1687. This is considered
a weak reference point and resistance could easily be
penetrated as it was yesterday and S&P futures could
potentially auction up to the overnight high at 1692, and
or, the fractal highs which developed last week.
Therefore, sellers at today’s high are advised to be cautious.
2.) Support is located at today’s low. However, should the
S&P pull back and retest Wednesday’s low, the obvious
implication is that price would have sold down from today’s
close (1684).
Therefore, selling pressure would have returned.
While support has held at or near 1675-1673 during the
past two sessions, a third pullback may not result in the S&P
auctioning back to the overnight high.
In the event of a third pullback to 1673 and the potential for
a lower low (1671) and a retest of Monday’s low, increases.
While S&P futures held support Monday at 1666, the known
support level beneath Monday’s low, the lower edge of the
demand cluster at 1662.
Once again, the conditional outcome: i.e. support holding
at 1673 is contingent upon sell programs waning during the
third pullback, and the lack of initiated selling (high frequency
sell surge) during the price discovery phase.
In the event support is breached, the trade consideration is to
sell the break-down. Selling the breakdown is easier said than
done, as break-the down trade requires strong momentum.
An alternative strategy to selling the breakdown is to allow
price to breach support and sell the retracement.
A retest of Monday’s low (1666), and or a sell-off to 1662,
would provide a long opportunity.

Sunday, S&P futures breached support at the weekly low
(1680) and sold-down to 1666 at Monday’s open.
The sell-off triggered a buying opportunity. Informed market
participants took advantage of the decline. S&P futures rallied
into Monday’s close ending the session at 1676.
Overnight, the recovery rally continued. S&P futures traded up
to the lower edge of the minor supply cluster at 1684-1686,
during the overnight session.
At Tuesday’s open, S&P futures pulled back to 1675, the mid-
point of the developing trading range. In light of the overnight
rally up to 1684, the sell-off down to Monday’s close (1676)
was met with a buy response. The order flow events confirmed
the computerized trading program ceased executing to the
sell-side. Responding buying was followed by initiated buying
(HFT Buy Surge). The price path reversed direction and the S&P
futures auctioned up to fill the “gap” at Friday’s close 1686.
The buying interest continued until the European markets
close, with S&P futures trading up to 1690. The rally to 1690
was a long drawn out affair. Trade activity diminished. The
rate of trade decreased, as did the number of trades and the
volume at trade.
The order flow event indicated that the computerized buying
programs decreased (BPW). After 3 hours of no meaningful
participation, S&P futures sold below the high (1690) and
pulled back to 1682. During the pull-back to 1682, the selling
pressure ended. The electronic trading bots ceased executing
on the sell-side, buying interest (demand) held support and
initiated buying auctioned price back to the high (1690) into
Tuesday’s close. The purpose behind describing the intraday
market developments is not to reiterate what occurred during
the session. The purpose is to illustrate how the intraday
market developments fall into the pattern of discernible market
structure.
By the faculty of vision or intellect the astute observer can draw
inferences based upon the reaction of buyers and sellers at key
price levels. Mathematically modeling the market development
is a method used to describe a dynamic system; i.e. price series.
A mathematical model helps to explain a system and to study
the effects of different components, and to make predictions
about behavior.
Mathematical models are proposed of variables. Variables
represent the parameters of the system. Charting applications
provide visual graphics of the data model.
A graphical model is a probabilistic model for which a graph
(chart) denotes the conditional structure between variables.
Graphical models are commonly used in probability theory,
statistics—particularly Bayesian statistics—and machine
learning.
On Friday, the Major U.S. Indexes traded modestly lower. The
Dow fell half a percent, the tech-heavy NASDAQ declined
0.2% and the S&P 500 declined 0.4 percent.
However, at the open of Sunday’s Globex session U.S. futures
“gapped” below Friday’s close. S&P futures breached support
at weekly low (1680) and sold down to the September 11th
low at 1671, before retracing back to 1676.
The selling pressure continued at Monday’s open. S&P futures
re-tested the overnight low (1671) and made a lower low;
trading down 1666: 51 points (3.5%) below it multiyear high
at 1727. Following the break-down below the overnight low
(09-11-13 low) at 1671 and the subsequent sell-off to 1666,
S&P futures auctioned act into the overnight trading range:
auctioning up to 1674.
There was a minor pull-back to 1670, after which the price
direction reversed and S&P futures traded above the overnight
high (1676) and auctioned up to 1681, at or near Friday’s low.
After the close of the European market, S&P futures traded in
a relatively narrow trading range (1679- 1675) until the final
hour of Monday’s trading session.
Price sold below the minor support at 1675 and traded down
to 1671.
Following the pull-back to 1671, initiated buying entered the
order flow and S&P futures auctioned back up through the
trading range, closing Monday’s session at 1678.
Tuesday’s Market Development
Market Development
Monday’s Market Development

In the previous session, S&P futures held support at 1675 and
rallied up to 1690. Overnight, the rally extended - modestly
trading up to 1692.
During the previous week, a series of fractal highs developed
between 1698 and 1696.
S&P futures sold off from the overnight high and initially pulled
back at or near Tuesday’s low, selling down initially to 1676.
In addition to the responsive selling at the overnight high
(1692), during the sell-off, initiated selling was present in the
trading range at 1686 and 1682.
Prior to the open, S&P futures traded up to 1682, encountered
selling pressure and auctioned back to retest Tuesday’s low
(1675 ).
During the price discovery phase, price probed two points
below Tuesday’s low and traded down to 1673 before the
computerized trading programs ceased executing to the sell
side.
After encountering support at 1673, the computerized
programs initiated trade to the buy side. S&P futures auctioned
up to 1682, paused and down ticked to 1680 and then traded
up to 1687.
Following the retracement to 1687, the computerized trading
programs ceased executing to the buy side in the S&P sold
down to 1681.
The pullback to 1681 elicited a buy reaction and S&P futures
auctioned back to the high at 1687, before closing the session
at 1684.
The above description of Wednesday’s session illustrates the
benefits of understanding the market structure.
In Bayesian logic the previous distribution (trading range)
contains the current knowledge of where the market
participants express their willingness to buy and sell. The
acceptance of this plays a key role in understanding the
potential outcome of future developments.
The obvious example in today’s session was the pullback to the
previous day’s low. The sell-off from the overnight high (1692)
was equal to the distance of a daily range.
The potential outcome was as follows:
1.) The market would encounter buying interest as it had
during the previous session and auction back to, at or near,
the previous day’s high.
2.) The market would pause at the low and selling pressure
would increase in price would continue lower and auctioned
down to Monday’s low (1666).
To assist in discerning which outcome would be the most likely,
the micro order flow events provide the required “insight” in
real-time.
IF; S&P futures were going to sell below the prior days low,
initiated selling (high frequency sell surges) would have been
evident during the price discovery phase.
The lack of initiated selling below the price level wherein “stop
loss orders” are typically located (2 points below the previous
low) indicate that probability favors price will auction off the
low and trade back into the prior trading range days range.
This conditional outcome, in the context of the selling pressure
that developed in the overnight session was dependent
upon previous sellers at 1682 and 1686 covering their short
positions.
The second conditional requirement would be that there was
renewed buying interest (high frequency buy surge) during the
retracement.
In the event, the nuances of the above statement are unclear;
we recommend that you replay the market developments that
occurred this morning when S&P futures pulled back to 1673.
After pulling back to retest support at 1675-1673- in the
previous session and subsequently trading up to 1687 into
the close, S&P futures sold down to 1673 overnight.
The astute market observer will note that last week the “best”
long location (support) was between 1684 and 1686.
The sell-off during the overnight session recovered prior to
Thursday’s open. S&P futures retraced to back to 1685.
However, at the open of Thursday session the selling pressure
that had dominated overnight returned. S&P futures traded
back to Wednesday’s low (1673), paused and then continued
to sell lower.
The sell side trade execution continued until S&P futures had
Wednesday’s Market Development
Thursday’s Market Development

The Major US Indexes declined for the week on concern the
U.S. government is headed for a partial shutdown amid a
political stalemate over the budget.
The dollar weakened against the yen while crude oil and
copper futures declined and gold rallied.
According to Moody’s Analytics a failure to approve funding
to keep the government open and to raise the debt ceiling
would have a destabilizing effect on the economy. Closing the
government would cut fourth-quarter economic growth by
as much as 1.4 percentage points depending on its length,
as government workers are furloughed. The possibly that the
federal government could shut down next week barring a
last-minute agreement remains high. Unless Democrats and
Republicans compromise on a bill to raise the legal limit on
how much the government can borrow, the U.S. could default
on part of its debt.
The Treasury could effectively run out of money in late
October. The U.S. Treasury will continue selling debt in the
event of a government shutdown next week, while economic
reports from the Commerce Department will be uspended
and the Bureau of Labor Statistics will stop operations. The
Treasury said yesterday that it would keep paying interest on
the government’s debt and maintain collections and daily
cash management. It would also keep up disbursements of
Social Security and other federal benefits, as well as “critical
government-wide accounting activities.”
U.S. indexes went into “risk off” mode over the weekend,
primarily as a result of stalemate over the federal budget
increased the likelihood of a government shutdown.
The dollar fell against the majority of its most-traded peers.
However, three economic reports showed business activity
expanded more than forecast, reaching a four-month high.
The MNI Chicago Report business barometer rose to 55.7
in September from 53 the prior month. The Dallas Fed’s
manufacturing gauge jumped to 12.8.
The Institute for Supply Management’s Milwaukee index rose
to 55, versus the August 48.2 reading.
The Federal Reserve Bank of New York’s general economic
index showed manufacturing expanded in September, though
the measure eased to 6.3 from 8.2 last month. Factory activity
gauged by the Federal Reserve Bank of Philadelphia’s index
expanded at the fastest pace since March 2011.
Monday’s Market Fundamentals
Tuesday’s Market Fundamentals
Fed Refrains from “tapering” its extraordinary unconventional
accommodative monetary policy: otherwise known as
quantitative easing (QE).
In today’s FOMC announcement, the Federal Reserve, said
it needs to see more signs of lasting improvement in the
economy.
Conditions in the job market today are still far from what all of
us would like to see,” Chairman Ben S. Bernanke said at a press
Wednesday’s Market Fundamentals
Market Fundamentals
of traded down to Monday’s low (1666) and probed for stops
down at 1663. Prior support going back to September 10th was
located at 1662. Following the sell-off, S&P futures recovered
during the mid-day, and retraced its decline auctioning up to
1677. It should be noted that with the exception of Monday’s
low (1666), during Tuesday and Wednesday session S&P
futures had found support at or near 1678-1675. During
the retracement order flow events indicated buying interest
waned. Price made a modest pullback to 1668, before retesting
the high at 1676.
The retracement back to what had been previously support
encountered with a lack of buying interest. However, the price
action stalled at the high. The high frequency market maker
algorithmic pattern dominated the remainder of the session.
The trade execution sequence was limited. Price traded
between 1676 and 1674, until the final 15 minutes when S&P
futures sold off into the close.

U.S. Stocks Fall as Investors Assess Effects of Impasse
U.S. stock indexes decline primarily after price discovery failed
to attract sufficient buying interest to continue the rally above
last week’s resistance levels.
While the financial media attributed the lack of interest to the
impasse over federal spending that shut down the government
a second day.
However, after trading at or near last week’s resistance levels
the astute observer will note there was equally no interest
above those price levels prior to government shutdown.
From a technical buying interest, selling pressure perspective
it can be said that, informed buyer at Monday’s low, sold their
positions to the uninformed trend chaser during yesterday
session.
However, the government shutdown continues to dominant
the NEWS cycle. The White House met with Bank leaders to
discuss the economic effects of the budget impasse. Goldman
Sachs, CEO said lawmakers are risking the recovery if they
don’t raise the federal debt ceiling.
The U.S. dollar index declined for the third weekly against the
yen.
The greenback traded near an eight-month low versus the
euro, on speculation the FED would tend to be more cautious
about reducing the monthly pace of bond purchases.
The government shutdown has delayed three economic data
releases this week. The U.S. Department of Labor won’t issue
the September payrolls report tomorrow as initially scheduled
because of the partial government shutdown now in its third
day. Thus, the Fed “tapering is going to be pushed back further
and that’s bad for the dollar. The Treasury Secretary has said
the U.S. government has begun final extraordinary measures
to avoid breaching its debt limit that will be exhausted no
later than Oct. 17. The more serious concerns are the issue of
the debt ceiling. House Republican leaders plan to bring up a
measure to raise the debt limit as soon as next week as part of
a new attempt to force Obama to negotiate on the affordable
healthcare act.
Trade well my friends
Thursday’s Market Fundamentals
Froday’s Market Fundamentals
conference today in Washington after a two-day meeting of
the Federal Open Market Committee.
The committee has concern that rapid tightening of financial
conditions in recent months would have the effect of slowing
growth. Bernanke and his policy making colleagues held
back from paring record accommodation as rising borrowing
costs show signs of slowing the four-year expansion.
Treasury yields have jumped since May, when Bernanke first
outlined a possible timetable for a reduction in the asset
purchases that have swelled the Fed’s balance sheet to $3.66
trillion. Bernanke said a decision on tapering asset purchases
depends on economic data, and there is no set timetable.
Chairman Bernanke emphasized there is no fixed calendar
schedule. If the economic data confirms our basic “outlook
for growth” and the labor market, “then we could begin later
this year.”
Bernanke added in his press conference that the first interest-
rate increase may not come until the jobless rate is “considerably
below” 6.5 percent. The Fed chairman has orchestrated the
most aggressive easing in the Fed’s 100-year history, pumping
up the balance sheet from $869 billion in August 2007 and
holding the main interest rate close to zero since December
2008.

The Gaussian mixture model indicates that trade opportunities
are dictated by the market “state”.
When the market is trending, i.e. the price series is moving
directionally, the trade opportunities are in the direction of the
trend.
When the market is consolidating: the price series is trading
within a range, the trade opportunities are to sell the high of
the range and buy the low of the range.
When the market breaches support, the trade opportunity is
to sell the break-down and or sell the retracement at what had
been prior support.
When a market penetrates resistance, the trade opportunity is
to buy the break-out and or by the retracement at what had
been prior resistance.
With the exception of when price is auctioning above a prior
multiyear high, a market is auctioning within a continuous
distribution.
Therefore, when a market breaches support it will find a
stopping point at or near the location of the next major
support level.
In those circumstances, when price has breached prior support
and has pullback the distance of an average daily range below
its previous support level, the micro order flow events provide
the astute observer with “insight” into the computerized
trading algorithms that dominate the market.
During pullbacks to previous levels of support, the order flow
events will indicate “when” the computerized sell programs
ceased executing to the sell-side. This is referred to as “sell
programs waning” (SPW).
During a retracement to previous resistance, the order flow
events will indicate “when” the computerized buy programs
ceased executing to the buy-side.
This is referred to as “buy programs waning” (BPW).
The term “waning” refers to gradually decrease in size, intensity
or degree: to decline; and or to the approaching end.
The act or process of gradually declining or diminishing in
the order flow to the buy or sell side; during pullbacks and
retracements has a price series provide the traders with the
decission making information to analyze the potential trade
opportunity. During a time or phase of gradual decrease, the
Gaussian digital filters, which are part of the Follow the Bots
quantitative model, will provide additional information as to
the change in price direction. We encourage our members,
the review the patterns of market structure that are posted
in the chart gallery which a company our daily commentary.
As noted in Sunday’s Market Structure commentary, the
computational finance model (Gaussian mixture) developed by
Follow the Bots model indicates that trade opportunities are
dictated by the market “state”: consolidation, direction. The
price discovery mechanism plays a major role in all “states” of
market development.
Price discovery is the process by which financial markets
determine the price of assets through the interactions of
buyers and sellers.
In dynamic markets, i.e. major indices price discovery takes
place continuously, a price auction through the trading range.
Price will sometimes trade above the daily average and
sometimes below the daily average.
Price will auction within a defended trading range
(consolidation) and or break-down below support or break-
out above resistance.
A market will trend (move directional) “pause” and consolidate
and or reverse direction.
Distance between prior highs and lows, as well as range
extension below support or above resistance provide important
insights as to the “state” the market is in and what is likely to
occur next.
To illustrate the concept of price discovery consider the market
developments coming into Monday’s session.
On Friday, S&P futures extended the trading range modestly
below the prior low at 1684, trading down to 1680.
Price discovery determined that on Friday there was no
“willingness” on the part of market participants to sell below
Monday’s Trading Opportunities
Monday’s Trading Opportunities
Tuesday’s Trading Opportunities

1680. Sell programs diminished and price traded back to what
had been prior support at 1684-1686.
Since the price discovery mechanism is the process by which
the interaction between buyers and sellers determine the price
of an asset, at every price trends action there is a buyer and a
seller.
While there was no willingness to sell below 1680 during
Friday session, there was indeed willingness to trade between
1684 and 1686.
It can be said that half of the market participants were willing
to buy between 1684 and 1686 and half were agreeable to
sell.
At the open of Sunday’s Globex session, “fundamental factors”,
i.e. US budget negotiations influenced market sentiment.
S&P futures sold below Friday’s close, below the weekly low
and traded down to the next support level: i.e. the September
11th low at 1671.
At Monday’s open, S&P futures extended the trading range
below the September 111th low (1671) selling price down to
1667-1666.
However, when price traded back into Sunday’s Globex trading
range on, price discovery took on a new form. S&P futures
traded back at or near Friday’s low (1681).
Once again, it can be said half of the market participants were
willing to buy between 1680 and 1677, while the other half
was willing to sell.
The end result was, when price discovery determined there
were no more willing buyers above 1680-1681, S&P futures
sold back through the trading range and retested Monday’s
low.
This is the perpetual nature of the price discovery mechanism.
The question arises, how then can a trader determine where
to be a buyer or seller?
In regards to the above question, the Gaussian mixture model
indicates the trade opportunity is always to be the buyer at the
support (low) and the seller at the resistance (high).
In the case of a directional market (price series)
1.) To be a buyer on a break-out above previous resistance and
or a buyer on the initial pullback following a break-out.
2.) To be a seller on a break-down below previous support or a
seller on the initial retracement following a break-down.
Analysis of the historical market development in the S&P
500, the DOW30 and the NASDAQ 100 going back to 1995
indicates the above stated trading strategy outperforms the
buy and hold or the modern portfolio method.
In the context of Monday’s session, the Bayesian logic
explanation is as follows;
1.) Price breached support at Friday’s low; therefore expect
resistance following the initial retracement.
2.) Price auctioned down to the next support level (1671) and
extended the range modestly lower (1667). Following the
range extension, price auctioned back to the prior support:
therefore expect support during the initial pullback.
In an effort to enhance the macro directional model (Gaussian
mixture), the order flow events provide the micro insights,
i.e. buy programs waning (diminishing) at the high, sell
programs waning (diminishing) at the low.
The combination of the macro and micro algorithms developed
by follow the bots are intended to model the near term
“direction” of a financial securities and to accurately compute
the micro order flow event of intraday stochastic price series.
We are confident, that the principles of computational finance,
described above, will prove beneficial to our members.
The goal of Follow the Bots is to present a detail analysis of
the markets condition (state) to assist Traders in developing a
comprehensive understanding of market development.
Wednesday’s Trading Opportunities
In today’s chart gallery I have included three charts which
illustrate Tuesday’s intraday market development.
The charts include the numbered references to the key variables
that developed during Tuesday’s session.
#1.) The pullback to Monday’s close (1676).
In the context of the overnight rally to 1684,
The conditional outcome to the pullback to Monday’s close is
as follows:
A.) Price discovery will find support and the S&P will auction
back to retest the overnight high (1684) and fill the gap at
Friday’s close.
B.) Price discovery will fail to find support and the S&P will
auction back into Monday’s trading range and retest support
at Monday’s low.
The conditional variable (unknown) is the reaction on the part
of the market participants during the price discovery phase.
“IF”, selling pressure diminishes (SPW) and buyers initiate
trade (HFT-BS) the likelihood is price will auction back and fill
the gap at Friday’s close.
“IF”, selling pressure increases (HFT-SS), the order flow
sequence indicated by the slope of the Gaussian digital filters,

Thursday’s Trade Opportunities
Trading strategies are dictated by the market “state”.
The Gaussian mixture is based on a two “state” model of market
development. The two states are: direction and consolidation.
These states occur in multiple time frames and or within a
Gaussian mixture distribution.
The term distribution is synonymous with the trading range.
The trading range is a continuous distribution from the
inception of the data set (IPO of the Index) up until the present.
Price is the variable. By definition price is always located within
the trading range (probability distribution).
The location of price indicates the bias with in the distribution.
If price is located at the midpoint (median) of the trading range
(probability distribution) the market is neutral.
If price is above the median and within the upper quarter of
the trading range the bias is positive
If price is above the upper quarter in the 90 percentile and or
at the maximum value the bias is extremely positive.
The bias is the measurement of price change with in the trading
range (probability distribution).
The price change is a result of trade activity. More trades on
the uptick, higher ratio between upticks & downticks results in
price auctioning higher.
More trades on the up-tick (at the ask) is accepted as being
representative of buying interest More trades on the downtick
higher ratio between downticks & upticks results in price
auctioning lower. More trades on the downtick (at the bid) are
accepted as being representative of selling pressure
Thus, buying interest equals demand and selling pressure
equals supply.
The strength or bias within the supply demand curve is
point lower the likelihood is price will auction back to retest
support at Monday’s low.
Additional observation: the slope of the polynomial regression
channel is ascending.
#2.) The conditional outcome to “gap” fill at Friday’s close
A.) “IF”, the price is going to sell back into the trading range,
buying interest must diminish (buy programs waning), the
price series must reverse, and initiated selling (high frequency
sell surge) must be detected in the order flow.
B.) “IF”: price is going to continue higher, initiated buying
must be present in the execution sequence (high frequency
buy surge), and the slope of the digital filters which accurately
computes the execution sequence (up-tick/down-tick count)
will continue ascending.
In this manner the market structure, the order flow events and
key reference points combine to make discernible the most
likely, least likely outcome of the auction process.
It is the knowledge that price series data contains a degree
of uncertainty. The uncertainty cannot be removed, as it
reflects the irrational (fears and greed) behavior of the market
participants.
Acknowledging the uncertainty cannot be removed; the astute
trader accepts the “risk” and manages the position.
#4.) During the rally (up move) to fill the gap at Friday’s close,
which resulted in the minor range extension up to 1690, as
price auctioned above the opening range low (1675), a minor
reference point developed.
As the price series traded up to the high and exponential
function was present in the price series.
In mathematics, the exponential function is used to describe
a relationship in which a constant change in the independent
variable gives the same proportional change (i.e. percentage
increase or decrease) in the dependent variable.
I first read about exponential function of the price series in the
research of Welles Wilder.
When a directional “turning point” develops the price level
associated with the change in direction is referred to as the
inflection point.
Depending upon the extent of the exponential function, i.e.
the distance price moves above or below the inflection point
(turning point), pullbacks and retracements to these price
levels are worthy of consideration.
In the case, where the exponential rally exceeds a prior high,
there is the potential for the market to encounter support on
the pullback.
In the case of #4, during the pullback, the inflection point
(1682) was also aligned with the lower band of the ascending
polynomial regression channel.
The conditional outcome to the pullback
A.) “IF”, during the pullback to 1682 the order flow events
indicate the computerized trading programs ceased executing
to the sell side (SPW), the slope of the digital filters will turn up
and initiated buying will enter the order flow (high frequency
buy surge): likelihood is price will auction back and retest the
high at the upper edge of the polynomial regression channel.
We encourage our members to review the charts posted in
today’s gallery.

measured by the location of price within a probability
distribution (trading range).
Currently, S&P futures have broken out above their prior
multiyear high (1705) and have extended the trading range up
to a new multiyear high at 1727: 22 points (1.29%).
Based upon the above stated criteria the bias is extremely
positive. The extension of the trading range above the prior
multiyear high is estimated with the Markov chain sequence in
relation to the close. Whereas techniques like Fibonacci range
extension is the mathematics of the Golden mean, the hidden
Markov algorithm uses statistical measurements based on
cluster analysis.
Previous examples, as in the case of a breakout above a prior
multiyear high are statistically analyzed to determine distances
referred to as the maximum likelihood expectation price level
and the extreme price excursion level. The current distance
above the previous high equals a hidden Markov chain
sequence: (17 to 23 points).
Price has pulled back 14 points, to 1713; modestly below the
midpoint of the developing trading range.
This represents an “initial pull-back”.
The previous market structure (prior distribution) provides
the information as to where in buying interest (demand) and
selling pressure (supply) is located in relationship to the current
location of price within the trading range.
In the context of Wednesday’s break out above the prior
multiyear high, the low the current location of price at 1717;
buying interest was present at 1713-1711 during the previous
rally up to a new multiyear high at 1723.
Below 1713-1711, market structure indicates buying interest
was present when the S&P traded above the prior multiyear
high at 1705. The significance of the 1705 price level is that
it was the prior multiyear high and therefore the breakout
point. The breakout point refers to that price above which a
transition in the market state occurs.
Price located at the previous high (maximum value of the
previous distribution) a strong positive bias and the breakout
represents an extreme positive bias. Therefore, trading strategy
of buying the pullback at or near the price levels that exhibited
demand: buying interest sufficient in quantity to halt the
downward movement in price and result in a reversal of the
price path back in the direction that came.
When price auctions back to retest the new multiyear high,
during the initial retest probability favors the price direction
will continue higher.
During today’s session, as price gradually sold down to 1713,
the market structure currently indicates a lack of buying
interest at the high (1727). During today’s open there was no
buying interest above 1723, Wednesday’s high.
The selling pressure (more down-ticks then up-ticks, war
volume on the down-ticks) occurred between 1719 and 1716;
at or near Wednesday’s close.
Therefore, the minor supply cluster is the immediate obstacle
to price auctioning back to retest the multiyear high 1727.
At the close of today’s session, S&P futures auctioned back
to 1618. Within the context of Thursday’s trading range
(distribution): maximum value 1727, minimum value 1713:
the midpoint is 1720. Interpreting the outcome of the
retracement back to Wednesday’s close (1717) the positive
and negative outcomes are described as follows:
Price auctions up to 1717, there is insufficient buying interest
(high frequency buy surge). Buyers (buy side computer
program trades) are unwilling to absorb the supply above and
selling pressure auctions price back to the low.
The down tick sequence would represent the second pull-back
to 1713-1711. Probability favors a lower low, continuation of
the directional lower.
The expected outcome of the second pullback would be an
increased likelihood that support (1713 – 1711) would be
breached. The outcome would precipitate the initial pull-back
the breakout point at or near 1705, the prior multiyear high.
The expectation of a pullback to 1705 would be that price will
auctionbacktothemidpointofthecurrenttradingrange(1715-
1717). In above manner each of the component indicators in
the market structure is categorized by their significance with in
the supply demand curve (in flexion points).
Inferences are then drawn using Bayesian logic. The micro
developments during pullbacks and retracements are indicated
by the order flow sequences of micro price structure.
The order flow algorithm events that surface during the price
discovery (pullback phase) along with the digital filters will
aid in interpreting the rotational shift in the high frequency
computerized trading programs. Therefore, the immediate
information regarding how price arrived at its current location
in which “state” is likely to trade (auction) is found in the
market structure.
On the sell side, micro resistance on the retracement to 1718
– 1720 is expected.
A positive outcome would be the price sequence “pauses”.
The “pause” is followed by buying in the direction of the
current high (1727). The negative outcome would be the price
sequence pauses, buying interest waned and high frequency
computerized sell programs (HFT sell surge) auctioned price
back to today’s low 1713. The current market development
calls for buying the pullback at 1713-1711. The risk potential
breakdown below 1713- 1711 and pullback to at or near
1705, followed by a retracement back to 1713-1711.
The positive outcome would be following the retracement
to 1713-1711, price “pauses” and trades back up into the
midpoint of the trading range and retraces up to 1718-1720.

Good Morning Traders,
Global markets are trading lower on Monday, as investor
sentiment reflects a “risk off” attitude, as the U.S. Government
faces a historic shutdown.
On Sunday, the U.S. House of Representatives voted 231-
192 to delay many provisions of President Barack Obama’s
healthcare law for a year and added it to the funding bill.
If the Democrat-controlled Senate, which will convene this
afternoon, rejects the bill, the government may have to stop
some functions from October 1.
The Euro Stoxx 50 index of Eurozone bluechip stocks is
down1.15%.
The Stoxx Europe 50 index, which includes some major U.K.
companies, is down 0.57 percent.
The German DAX has declined 1% and the French CAC 40 is
down 1.2%.
The UK’s FTSE 100 is declining 0.8% while Switzerland’s SMI
is dropping 0.6%. Asian stocks also closed lower on Monday
Japan’s Nikkei index declined 2%to end at its lowest level in
about two weeks
The broader Topix index fell 1.9%.
China’s Shanghai Composite held on to its recent gains, to
close 0.7% higher, to close at 2,175.
Hong Kong’s Hang Seng dropped 1.5%.
The benchmark S&P/ASX 200 fell 88 points or 1.7%, to trade at
5,218, with resource and financial stocks leading the decliners.
U.S. Markets
On Friday, the Major U.S. Indexes traded modestly lower. The
Dow fell half a percent, the tech-heavy NASDAQ declined
0.2% and the S&P 500 declined 0.4 percent. However, at the
open of Sunday’s Globex session U.S. futures “gapped” below
their prior week’s close.
S&P futures breached support at Friday’s low (1680) and sold
down to the September 11th low at 1671, before retracing
back to 1676. The selling pressure is continued, with the S&P
trading down to 1669: 58 points (3.3%) below the multiyear
high at 1727.
The September 10th low at 1662 is the next support level.
The 1662 low equals a Hidden Markov chain sequence level
relative to Friday’s low at 1680. The extent of the economic
damage to the US, if the government defaults on its debt and
the impact it would have on the US dollars position as the
world’s reserve currency is difficult to estimate.
The current political impasse regarding increasing the US debt
ceiling is of major concern. While previous debates have proven
to be nothing more than political theater, the reoccurrence of
the debt ceiling argument is indicative of the US government
living beyond its means.
The reality is the US can no longer afford to play the role of
the world’s policeman, without increasing the burden of debt
upon future generations.
Trade Consideration
In the context of the current breach of support and the
subsequent sell-off, the ideal trading strategy is to sell the
retracement. In light of the break-down occurring when the
US markets were closed, there is the potential for S&P futures
to find a temporary stopping point at/or near the 1671-1670
price level. However, Monday’s Markov chain sequence level at
1662 (09-10-13) would provide a stronger support.
Coming into Monday’s session, attention should be focused
on the micro order flow events associated with the previous
known support levels mentioned above, to determine potential
long opportunities. More importantly, attention should be
focused on selling the retracement.
Friday’s retracement to what had been prior support at 1686-
1684 is the location, where the “Informed Traders” liquidated
their long positions.
Minor resistance at the overnight Globex high (1676) is also a
candidate for a short location. However, there is potential for
S&P futures to attempt to fill the “gap” and possibly auction
up to Friday’s low at 1680-1682.
S&P futures traded higher in the overnight session, auctioning
up to 1684, the lower edge of Friday’s micro price cluster.
The possibility of a government shutdown has become
reality, it would appear market participants have concluded
the materialization of the risk is unlikely to cause immediate
negative impact to the global economy and corporate profits.
However, a broader reality is that informed traders that
accumulated positions at yesterday’s low (1667-1671) are
likely to be willing to sell there acquired positions to the
uninformed participants at 1684-1686.
S&P futures has not as yet traded above Friday’s close (1686),
the best possible long location during the prior week’s session.
As we observed during the previous week’s auction, S&P
futures consistently sold-off from the 1698-1696 price level.
On a positive note, data released yesterday indicated
that manufacturing around the country showed notable
improvement.
October will also begin third-quarter earnings season.
US futures are also trading higher due to positive manufacturing
activity data for several countries and a strong improvement in
Japanese business sentiment. The domestic markets may also
Monday Morning Briefing
Tuesday Morning Briefing
Daily Morning Briefings

24 Hour Recap
U.S. futures traded lower in the overnight session.
In the previous session, the major averages moved to the
upside going into the close, ending the day above their
previous settlement.
The Dow rose 0.4%, the NASDAQ rallied 1.2% percent and
the S&P 500 advanced 0.8%. S&P futures continued moving
higher in the overnight session and traded up to 1692. S&P
futures had previously encountered resistance at 1695 (09-27-
13) and 1698 (09-26-13).
Relative to Tuesday’s low (1675), the overnight high equals 17
points.
The overnight sell-off was exponential in character. Price
“paused” briefly at 1682 before continuing its dissent down
to Monday’s low (1675).
Initiated selling occurred at 1682 and 1686. Trading Analysis
For Today’s Session. A retracement above the overnight low is
likely to encounter minor resistance (buy programs waning)
at/or near the initiated selling points (1682 & 1686). However,
the significant resistance levels are located at the September
26th & 27th highs. Support below Tuesday’s low (1675) is
located at 1671 and 1666. We would expect to see S&P futures
retrace up off of Tuesday’s low (1675) and depending upon
the (conditional) response at the initiated selling price levels,
an attempt to continue to move higher: retest the overnight
high. Global Markets
The European markets are trading lower on Wednesday.
The European Central Bank is slated to announce its interest
rate today.
The Euro Stoxx 50 index of Eurozone bluechip stocks is losing
0.46%. The Stoxx Europe 50 index, which includes some major
U.K. companies, is down 0.67%. Asian stock markets traded
mostly higher.
In commodities
November Crude is trading at $101.79 per barrel: ( ) down
-$0.25.
December gold is trading at $1293.7 a troy ounce: ( ) up +
$7.60.
Wednesday Morning Briefing
stay tuned to the results of separate manufacturing surveys
due to be released by Markit and the Institute for Supply
Management.
The Institute for Supply Management is due to release the
results of its national manufacturing survey for September.
The consensus estimates call for a reading of 55 compared to
55.7 in August.
The Commerce Department will release its construction
spending report for August. Construction spending is expected
to have risen by 0.4 percent month-over-month in August
compared to a 0.6 percent increase in July.
The major Asian markets closed on a mixed note.
The Chinese and the Hong Kong markets were closed, with
the Chinese market due to remain closed until October 7th for
Golden Week holidays.
Japan’s Nikkei 225 ended up 28.92 points or 0.20% at 14,485.
Australia’s All Ordinaries ended 11.40 points or 0.22% lower
at 5,206.
The results of the official survey by the China Federation of
Logistics and Purchasing and the National Bureau of Statistics
showed that Chinese manufacturing activity saw a slight
acceleration in expansion in September.
The results of the Bank of Japan’s quarterly Tankan survey
showed that sentiment among large manufacturers in Japan
improved in the third quarter.
European stocks opened mixed and continue to see mixed
sentiment. On the economic front, the results of a survey by
the German Federal Statistical Office showed that the number
of unemployed people in Germany fell 4.8 percent year-over-
year to 108,000 in August.
On a monthly basis, the number of unemployed individuals
was down 3.6 percent. The unemployment rate remained at
5.2 percent.
Overnight Globex Price Levels
Resistance is still located at Friday’s close (1686-1684. Minor
support is located at Monday’s 1676. Monday’s intraday low
at 1671 (September 11 low)
Monday’s opening range low at 1666 (Support)
The 1676- 1575 price level is the approximate midpoint of the
developing trading range.
To the extent that buying interest wanes on a retracement to
Friday’s close, resistance is likely to hold between 1684 and
1686. Should initiated buying (HFT buy surge) develop during
a retracement to Friday’s close, traders should be alerted to
the potential for a breakout and a retracement to last week’s
highs 1696-1698.
In the context of yesterday’s breakdown the possibility of a
retracement to the 1696 1698 price level would be a “least
likely outcome”.
A pullback to 1676 and a potential breakdown below the mid-
point, resulting in a sell-off to 1671 and the possible retest of
Monday’s low, is the main concern for buyers at the midpoint
of the developing trading range.
Initiated selling (HFT sell surge) accompanying a pullback to
1675-1676, would indicate long positions at the midpoint of
the trading range should not be defended.
To the extent that the order flow events continue to indicate
sell programs waning, 1675-1676 are likely to be the opening
range low during Tuesday’s session.

S&P futures sold below Wednesday’s close in the overnight
session, pulling back to re-test support at or near Wednesday’s
low at 1674.
Support at 1674 held and price traded to 1682, before pulling
back to 1677.
Thus far, S&P futures have consolidated gains since selling
off below last week’s low and traded down to 1666 during
Monday’s session.
Last week S&P futures failed to attract buying interest above
the fractal highs at 1696-1700.
The best long (buy) location during last week’s session was
at1682.
The overnight retracement has stalled at what last week had
been support 1682.
Thus, the market structure indicates the trade disbursement
is lower.
Coming into Thursday session: yesterday’s low 1675-1673 is
the key over under price level in other words Wednesday’s low
is the transition point, below which S&P futures break-down
into the lower quartile of the developing trading range.
To the extent that a pullback at Thursday’s open continues to
hold support at 1673-1675: i.e. sell programs waning during
the next pullback, S&P futures may still auction above 1682 an
attempt to retest the current high at 1690-1692.
In the event that during the next pullback initiated selling (high
frequency sell surge) accompanies a retest of the overnight
low, probability favors S&P futures will sell-off and retest
support at Modnay’s low (1666).
Minor resistance is located at the overnight retracement high
at (1682).
Wednesday’s high at 1687 is equal to the short covering
high which developed on Monday, prior to the minor range
extension up to 1692 in the overnight session.
Sellers at the overnight retracement high (1682) are advised to
be cautious as S&P futures are prone to short covering above
the 1682 price level (HFT buy surge).
U.S. stock-index futures traded modestly higher in the
overnight session.
In the previous session, US stocks sold off following
disappointing service sector data and growing concerns that
the budget impasse will hurt the economy weighing on the
markets.
S&P futures sold down to 1663, pulling back to support at or
near the September 10th low.
While S&P futures rallied back to 1676, buying interest faded
and price sold off into the close. Overnight, S&P futures traded
down to 1667, at or near Monday’s low (1666) and the minor
intraday pullback level that developed on Thursday.
S&P futures held support at 1667-1666 and have retraced
back to the price level from which they sold off late in the day
(1674).
However, order flow events indicate there is still no buying
interest above what had been support earlier in the week
(1675).
The dollar traded at almost a month low against the yen.
The U.S. government shutdown has delayed a key jobs report,
clouding the outlook for when the Federal Reserve will reduce
stimulus.
U.S. lawmakers have still not agreed on raising the debt limit.
House Speaker John Boehner has been telling fellow
Republicans that he won’t allow the U.S. to default on its
debt, even if that requires Democratic votes, according to two
Republican congressional aides.
Atlanta Fed President Dennis Lockhart said the shortage of
data “would tend to make me somewhat more cautious”
about reducing the pace of bond purchases.
Trade Opportunities
Sellers at the overnight high (1674 - 1675 ) are advised to
be cautious, in as much as S&P futures are currently prone to
short covering. Ideally, at Friday’s open we would like to see
S&P futures retest yesterday’s low (September 10 low) and or
the minor pull-back level at 1667-1666 (Monday’s low) before
attempting to move higher.
A move above yesterday’s late in the day high (1666-1677)
would be nothing more than a short covering rally. Thus, the
short opportunity would be the retest of Thursday’s opening
range high (1684) and or Wednesday’s overnight high (1692).
In the event S&P futures trade above the 1666- 1667 price level,
without first retesting support, it would indicate a reversal in
sentiment (short covering) and not new capital entering the
market.
Whereas, a retest of yesterday’s low (1663) and or the intraday
pullback level, would create an opportunity for the S&P to
establish a new base of support.
The overnight events suggest the selling pressure has backed
off and therefore we would expect a retest of Thursday’s lows
to continue providing a buy opportunity.
This would make it easier to consider buying off the low, as
opposed to selling the short covering rally.
The indication that the short covering rally is underway will
be evident in the order flow events; i.e. initiated buying above
1676 (high frequency buy surge).
Trade well, my friends
Thursday Morning Briefing
Friday Morning Briefing

U.S. stocks sell-off during Sunday’s globex session, erasing
quarterly gain for the Standard & Poor’s 500 Index, as a
stalemate over the federal budget increased the likelihood of a
government shutdown.
All 10 main industries in the S&P 500 dropped, with technology
and energy shares declining the most.
At the open of Sunday’s globex session, S&P futures sold-off,
breaking down below Friday’s low (1680).
At Monday’s open, S&P futures extended the trading range
down to 1666, 20 points (1.18%) below Friday’s settlement
(1686). The price direction reversed off the low (1666) and
auctioned back to the overnight high at 1676, the mid-point
of the current decline.
Price extended the range up to 1678, before pulling back to
1674, prior to the close of the European session.
Minor resistance is likely to be encountered, if S&P futures
attempts to fill the “gap” at Friday’s close, prior to re-testing
Monday’s low. However, should the S&P re-test Monday’s low
(1666) before attempting to fill the “gap” at 1686, market
participants will have had the opportunity to acquire new
positions at a relative discount (1.18%).
In the event S&P futures re-test the low before trading above
the current intraday high (1678) and/or Friday’s low at 1680,
the sell response may be minor, as informed traders, long at
the low, will take their time selling to the uninformed trend
followers at 1686.
During Monday’s opening range price discover was down to
1666, S&P futures spent little time at the low, before auctioning
back into the overnight trading range.
There was a second (minor) pull-back to 1670, prior to the
retracement up to the overnight high 1676.
The price discovery to Monday’s opening range low resulted in
a 12 point retracment.
Thus, a re-test of Monday’s low would offer a potential long
opportunity (buy the pull-back).
The next support level below 1666 is the September 10th low
at 1662.
Attenion should be focused on the order flow event should
S&P futures re-test the 1666 price level during today’s session.
In the event, S&P futures continue higher, minor resistacne is
likley to be encountered at Friday’s low 1680-1682.
The order flow events are likley to indicate buy programs
waning.
Market Fundamentals
The negative market reaction to political events which
developed over the weekend was certainly to be expected.
Market participants have been down this road before. The
politician dharma will last until there’s some economic
disruption that will cause public outrage and the politicians
feel some negative repercussion.
U.S. lawmakers have to approve emergency legislation by
midnight to keep the federal government operating from
tomorrow, the beginning of the 2014 fiscal year. Failure to do
so may result in as many as 800,000 federal employees being
placed on temporary unpaid leave.
U.S. lawmakers face their next fiscal dispute over raising the
$16.7 trillion debt ceiling. The Treasury has said measures to
avoid exceeding the limit will be exhausted on Oct. 17.
The debt limit debate is a bigger problem than a federal
shutdown. There will certainly be a negative impact if the U.S.
shuts down, but the real concern is with the debt ceiling.
If the debt ceiling is not raised, then the U.S. government
won’t be able to pay its bills and that would be much more
damaging to the economy.
European Market Closed lower on Monday
Europe’s economic recovery has yet to make any impact on
the region’s jobs market. Unemployment in the 17-nation euro
area remained at a record high of 12.1 percent in August.
The European Union’s statistics office is due to publish the
jobless numbers at 11 a.m. tomorrow in Luxembourg.
Europe’s Record Jobless Rate
Europe is faced with a high level of structural unemployment
and this is not likely to change any time soon.
The recovery is happening painfully slow and that’s another
reason why we’ll see jobless rates far above 11 percent well
into 2015.
Even after the currency bloc emerged from it’s longest-ever
recession, unemployment has continued to raise and peak at
12.3 percent in the final quarter of this year.
The job market’s resistance to an improving economy has been
the subject of political debate across the region.
European Central Bank President Mario Draghi has urged
governments to implement “decisive structural reforms” to
fight unemployment.
Structural unemployment is much the same in the U.S. as
manufacturing has moved to emerging markets, where labor
cost are cheaper.
Daily Opening Range Market Commentaries:
Monday Opening Range Market Commentaries:

Hello Traders,
The dollar fell against the majority of its most-traded peers
as U.S. budget threatened a partial government shutdown
tomorrow.
The yen erased its rally versus the dollar even with Congress
deadlocked and a decision on raising the debt ceiling needed
within three weeks. The dollar remains in defensive mode.
Intraday Developments
U.S. indexes went into “risk off” mode over the weekend.
Selling below Friday’s close at 1686 and trading down to 1666
at Monday’s open. The U.S. markets pared declines as three
economic reports showed business activity expanded more
than forecast, reaching a four-month high and adding to signs
of a rebound in manufacturing that will help underpin the
world’s biggest economy.
Positive economic data released on Monday includes the MNI
Chicago Report business barometer, which rose to 55.7 in
September from 53 the prior month.
The Dallas Fed’s manufacturing gauge jumped to 12.8. The
Institute for Supply Management’s Milwaukee index rose to
55, versus the August 48.2 reading. The Federal Reserve Bank
of New York’s general economic index showed manufacturing
expanded in September, though the measure eased to 6.3
from 8.2 last month.
Factory activity gauged by the Federal Reserve Bank of
Philadelphia’s index expanded at the fastest pace since March
2011. Today’s indication of economic improvement is likely to
support the Fed’s ‘tapering” its quantitative easing monetary
policy at its upcoming October meeting.
Trade Consideration
S&P futures recovered from its overnight decline, after trading
down to 1666 at Monday’s open. There was no pull-back to
the opening range low during the development that followed
Monday’s open. Price auctioned back to Friday’s low at 1680,
after a 2.5 hour period of HFT market marker algo grind
between 1678 and 1676.
There was a minor down tick to 1675, at/or near the mid-point
of the developing trading range, prior to price trading back to
up to the 1678 and extending the range to 1681.
During the retracement to Friday’s low, the order flow events
indicated the computerized buy programs diminished and
the Market Maker algorithm kicked in. There would appear to
be little rationale for buying the high as there was no buying
interest above 1686 on Friday. And the recent events, leading
to the “risk off” trade have not changed.
Support is located at Monday’s low 1666: secondary (intraday)
support is located at 1670.
The mid-point of the range is at 1674. As the market comes
into Monday’s close, minor resistacne is at Friday’s low 1680-
1682. Near term resistance is a Friday’s close 1686. The pattern
of Monday’s price structure suggest there is the potential: i.e.
no-pull-back to re-test the low, for price to auction above the
current high (1681) and possibly fill the “gap” at 1686.
Hello Traders,
Following Tuesday’s overnight development, wherein the S&P
futures traded above Monday’s high 1676 and auctioned up
to 1684 the lower edge of Friday’s micro price cluster, S&P
futures pulled to the mid-point of the developing trading
range (1675) at Tuesdays’ open.
As inferred in the Morning Briefing, the likelihood that
price would encounter a buy response on the pull-back was
confirmed in the order flow events.
The computerized trading program “waned” as price traded
down to 1675-1676. Initiated buying (HFT buy surge) was
followed on the up-tick and S&P futures traded up to re-test
the overnight high (1684) and fill the “gap” at Friday’s close
1686.
The price action stalled following the retracement to 1686.
S&P “paused” and eventually made a higher high, trading up
to 1690.
However, the rally to 1690 was a long drawn out affair. Trade
activity diminished. The rate of trade decreased, as did the
number of trades and the volume at trade.
After 3 hours “flat” with no meaningful participation, S&P
futures sold below the high (1690) and pulled back to 1682.
Market Fundamentals
Data today from the Institute for Supply Management showed
U.S. manufacturing expanded in September at a faster pace
than forecasted, indicating U.S. factories will provide a bigger
boost to the economic expansion.
Earnings at S&P 500 companies are projected to have grown
1.8 percent last quarter.
Alco and Safeway are among the 316 companies in the gauge
scheduled to report in October. Analysts’ forecasts show
earnings will increase at the fastest pace in two years during
the fourth quarter.
In light of the partial shutdown of the U.S. government, the
dollar traded at almost the lowest since February.
There is growing speculation that the Federal Reserve will
persevere with asset purchases that tend to weaken the
currency.
European Central Bank President Mario Draghi said Sept. 23
he’s ready to deploy another long-term refinancing operation
to fund banks. The central bank is scheduled to announce its
next policy decision tomorrow.
Daily Intra-Day Market Commentaries:
Monday Intra-Day Market Commentaries:
Tuesday Intra-Day Market Commentaries:

The European markets are trading lower on Monday. Investor sentiment has turned to
“risk off”, as U.S. Government faces a historic shutdown.On Sunday, the U.S. House of
Representatives voted 231-192 to delay many provisions of President Barack Obama’s
healthcare law for a year and added it to the funding bill. If the Democrat-controlled Senate,
which will convene this afternoon, rejects the bill, the government may have to stop some
functions from October 1. Sentiment was also impacted by disappointing data out of China,
as well as political turmoil in Italy where Prime Minister Enrico Letta is expected to bring
confidence vote later this week. According to the data released by the Federal Statistical
Office, Germany’s retail sales increased less than forecast by economists in August. Retail
sales grew 0.5 percent month-on-month on a seasonally and working day adjusted basis,
weaker than the 0.7 percent growth expected. Eurozone inflation slowed more than
expected to 1.1 percent in September, the lowest since February 2010, from 1.3 percent
in August, preliminary data from Eurostat showed. It was forecast to slow to 1.2 percent.
Meanwhile, according to Markit Economics, an indicator of manufacturing activity in China
increased less than previously estimated in September. The latest result signaled only a
modest improvement in operating conditions from August. The Euro Stoxx 50 index of
Eurozone bluechip stocks is down1.15%. The Stoxx Europe 50 index, which includes some
major U.K. companies, is down 0.57 percent. The German DAX has declined 1% and the
French CAC 40 is down 1.2%. The UK’s FTSE 100 is declining 0.8% while Switzerland’s SMI
is dropping 0.6%. In London, Albemarle & Bond is plunging more than 46%. The holding
company for pawn-broking and retail jewelry sales said the ongoing weakness in gold price
creates significant uncertainty over its prospects as well as profitability for the current fiscal
year. Asian stocks fell sharply on concerns that a prolonged U.S. budget impasse would
hurt economic growth in the world’s largest economy.U.S. futures point to a lower open
on Wall Street. In the previous session, the Dow fell half a percent, the tech-heavy NASDAQ
declined 0.2% and the S&P 500 declined 0.4 percent.
In commodities
November Crude is trading at $101.46 per barrel: ( ) down - $1.41.
December gold is trading at $1336.1 a troy ounce: ( ) down - $3.10.
The European markets are mostly higher on Tuesday. As market participants ignore the
partial shutdown of the U.S. Government.
Sentiment was influenced by firm cues from Asia where most markets advanced. According
to the Federal Labor Agency, Germany’s unemployment rate increased to seasonally adjusted
6.9 percent in September from 6.8 percent in August. A survey by Markit Economics
confirmed that Eurozone’s manufacturing sector expanded at a slower pace in September.
The headline purchasing managers’ index edged down to 51.1 in September from August’s
26-month high of 51.4, matching the flash estimate released last month. Meanwhile,
according to a survey by the China Federation of Logistics and Purchasing and the National
Bureau of Statistics, manufacturing activity in China expanded at a slightly faster rate in
September, with business activity across the sector seeing a modest pickup. The Euro Stoxx
50 index of Eurozone bluechip stocks is gaining 0.58%. The Stoxx Europe 50 index, which
includes some major U.K. companies, is rising 0.21%. The German DAX is gaining 0.6%, the
French CAC 40 is adding 0.7%.Switzerland’s SMI is up 0.1%, while the UK’s FTSE 100 is falling
0.2%. In London, consumer goods giant Unilever forecast slower underlying sales growth
of 3 percent to 3.5 percent in the third quarter, citing a slowdown that has accelerated in
emerging markets. The stock is declining 3.7%. Asian stocks ended mostly higher, after the
Bank of Japan’s closely-watched Tankan survey showed business sentiment in Japan hit its
highest level in almost six years in the three months to September. U.S. futures traded higher
in the overnight session. In the previous session, stocks closed lower as concerns about a
government shutdown weight on investor’s sentiment. However, according to data released
on Monday manufacturing activity in many area of the U.S. improved.
In commodities
November Crude is trading at $102.14 per barrel: ( ) down - $0.19.
December gold is trading at $1331.3 a troy ounce: ( ) up +$4.30.
The European markets are trading
lower on Wednesday.
The European Central Bank is
slated to announce its interest
rate today. The bank is expected to
retain its refi rate at a record low
0.50 percent. The announcement
will be followed by the customary
post-decision press conference
by ECB President Mario Draghi at
8.30 am ET. According to Markit
Economics, British construction
sector growth eased unexpectedly
in September. The headline
Markit/CIPS purchasing managers’
index fell to 58.9 in September
from a near six-year high of
59.1 in August. Economists
had forecast the index to rise
to 59.5. Former Italian Prime
Minister Silvio Berlusconi’s party
announced over the weekend
that its ministers would resign
from the Cabinet. Prime Minister
Enrico Letta is expected to hold a
confidence vote today to save the
government. The Euro Stoxx 50
index of Eurozone bluechip stocks
is losing 0.46%. The Stoxx Europe
50 index, which includes some
major U.K. companies, is down
0.67%. The German DAX is losing
0.6% and Switzerland’s SMI is
falling just over 1%. he French
CAC 40 and Switzerland’s SMI are
declining 0.8% each. In London,
Tesco is losing 3.5%, after the
supermarket chain reported lower
profit for the first half of the
year, amid challenging economic
conditions overseas, particularly
in Europe. U.S. futures traded
lower in the overnight session.
In the previous session, the major
averages moved to the upside
going into the close, ending the
day higher.
The Dow rose 0.4%, the NASDAQ
rallied 1.2% percent and the S&P
500 advanced 0.8%. Asian stock
markets traded mostly higher.
In commodities
November Crude is trading at
$101.79 per barrel: ( ) down
-$0.25.
December gold is trading at
$1293.7 a troy ounce: ( ) up +
$7.60.
European Markets
Monday European Markets
Tuesday European Markets
Wednesday European
Markets

The European markets are trading mixed on Thursday.
Volume was thin in Germany owing to the German Unity Day
public holiday.
According to the latest figures from Eurostat, retail sales in
the Eurozone increased more than expected by economists in
August. Retail sales increased 0.7 percent month-on-month in
August compared with forecast for a 0.2 percent growth.
A survey by Markit Economics revealed that private sector
business activity across the Eurozone improved slightly more
than previously estimated in September.
The composite output index, which measures performance of
manufacturing and service sectors, rose to a 27-month high
of 52.2 in September from 51.5 in August. The flash estimate
was 52.1. The Euro Stoxx 50 index of Eurozone bluechip
stocks is losing 0.24%.
companies, is gaining 0.02%.
The German DAX is losing 0.1% and the French CAC 40 is
falling 0.4%.
The FTSE 100 index of the U.K. and Switzerland’s SMI are up
0.2% each.
Investors also cheered a major political victory for Italian Prime
Minister Enrico Letta’s government in a no confidence vote
and positive economic data out of China.
U.S. futures have traded modestly lower in the overnight
session.
In the previous session, stocks modestly lower as a report from
payroll process ADP showed weaker than expected private
sector growth in September.
Concerns about the economic impact of a prolonged
government shutdown and the looming debt ceiling is said to
have attributed to a lack of interest in the market at this time.
However, last week there was also no interest in the S&P 500
at the current price levels.
The Dow slipped 0.4%, while the tech-heavy NASDAQ and the
S&P 500 dropped about 0.1% each.
In commodities
November Crude is trading at $103.87 per barrel: ( ) down
-$0.23.
December gold is trading at $1305.5 a troy ounce: ( ) – down
$15.20.
The European markets are trading mostly higher on Friday.
According to a survey by Markit Economics, Germany
construction sector expanded for the fifth straight month in
September, but at a notably slower pace than in the previous
month.
Eurozone industrial producer prices dropped 0.8 percent in
August from a year ago, largely due to a sharp fall in energy
prices.
The Euro Stoxx 50 index of Eurozone bluechip stocks is gaining
0.56%.
companies, is down 0.09%.
The DAX index is marginally higher while the FTSE 100 index
is up 0.2%.
The UK’s FTSE 100 is climbing 0.6%.
Switzerland’s SMI is, however, losing 0.4 percent.
In London, Tate & Lyle is rising 1.7 percent. The maker of
sweeteners and starches expects adjusted operating profit for
the first half of the year to fall slightly from the prior year,
amid softness in the US beverage sector. Overall, the company
expects to deliver another year of profitable growth.
Premier Gold is plunging 24 percent after announcing a safety
issue at Cholokkaindy in the Kyrgyz Republic.
U.S. futures traded modestly higher overnight.
In the previous session, U.S. stocks sold off, as disappointing
service sector data and growing concerns that the budget
impasse would hurt the economy.
The monthly U.S. jobs data will not be released today due to
the U.S. government shutdown.
The Dow and the S&P 500 declined 0.9% percent each, while
the tech-heavy NASDAQ declined 1.1%.
In commodities
November crude is trading $103.58 per barrel: ( ) up + $0.27.
December gold is trading $1316.5 a troy ounce: ( ) down -
$1.10.
Thursday European Markets
Friday European Markets

Asian stocks fell sharply on Monday.
The U.S. budget impasse, the stalemate over the U.S. debt
ceiling, rising political tensions in Italy and disappointing
economic reports out of China and Japan are all contributing
to the negative investor sentiment: “”risk off”.
Japan’s Nikkei index declined 2% to end at its lowest level in
about two weeks, weighed down by the yen’s appreciation
on concerns over the U.S. budget crisis and weak industrial
production data domestically.
The broader Topix index fell 1.9%.
Exporters and technology firms bore the brunt of the selling as
the dollar traded below 98 yen for the first time since the end
of August. Toyota Motor lost 2.6% and Nintendo declined
2.5%. Toshiba dropped 1.1% after announcing job cuts at
its loss-making TV unit. According to official data, Japan’s
industrial output contracted a seasonally adjusted 0.7 percent
in August compared to the previous month. Production eased
0.2 percent on an annual basis, below expectations for a 0.4
percent gain. The total value of retail sales climbed 1.1 percent
year-over-year in August, beating forecasts, and construction
orders received by big 50 contractors increased 21.4 percent
annually. Housing starts growth slowed unexpectedly to 8.8
percent from 12.4 percent in July.
China’s Shanghai Composite held on to its recent gains, to
close 0.7% higher, to close at 2,175. China’s manufacturing
activity edged up at a pace slower than expected in September.
The HSBC China manufacturing purchasing managers’ index
rose to 50.2 from 50.1 in the previous month.
Hong Kong’s Hang Seng dropped 1.5%.
Australian shares lost ground as investors braced for a partial
government shutdown in the U.S. The benchmark S&P/ASX
200 fell 88 points or 1.7%, to trade at 5,218, with resource
and financial stocks leading the decliners. Global miner BHP
Billiton lost 1.7%, Rio Tinto declined 2.5% and Fortescue
Metals Group tumbled 3.9%. Gold miner Newcrest rose 2%
as gold prices advanced on uncertainty over the U.S. budget
impasse. Oil & gas producer Woodside Petroleum shed 1.3%
percent and Santos declined 3.7%. According to data from
the Melbourne Institute, Australian consumer inflation rose
2.1 percent in September from a year earlier. On a monthly
basis, inflation rose 0.2 percent, accelerating slightly from
0.1 percent in the previous month. Reserve Bank of Australia
reported that total private sector credit in Australia rose 0.3
percent in August compared to the previous month, missing
forecasts for an increase of 0.4 percent.
South Korea’s Kospi average closed 0.7% lower at a two-week
low after three affiliates of embattled Tong Yang Group filed
for court receivership to avoid a default. Overseas investors,
however, extended their buying streak for a 24th streak,
purchasing shares worth a net 115 billion won, official
data showed. Industrial production in South Korea climbed
a seasonally adjusted 1.8 percent in August compared to
the previous three months, Statistics Korea said. Industrial
production spiked 3.3 percent on an annual basis, also
topping forecasts. New Zealand shares lost ground in line
weak regional cues. The benchmark NZX-50 declined 1.0%, to
trade at 4,736, with 37 of its components retreating.
According to a report released by Statistics New Zealand,
business confidence came in with a score of 54.1 for
September, with the construction, services and building sectors
seeing significant gains. The total number of building permits
issued in New Zealand rose a seasonally adjusted 0.8 percent
in August from the previous month.
Malaysia’s KLSE Composite was down 0.4% and the Taiwan
Weighted average dropped 0.7%. The key benchmark indexes
in India, Indonesia and Singapore were down 1-2%.
U.S. stocks traded modestly on Friday, as continued concerns
about the U.S. budget talks and the debt ceiling. On the
economic front, U.S. personal income and spending both
rose in line with estimates in August, while confidence among
consumers declined to a five-month low in September, separate
reports showed. Besides the budget stalemate, investors are
more worried about debt default as the government won’t be
able to pay some of its bills on October 17 if Congress doesn’t
raise the debt ceiling. A failure to raise the federal debt limit
would have huge ramifications for the global economy.
U.S. futures are trading lower in the overnight session.
Asian stocks ended mostly higher on Tuesday.
Monday’s midnight deadline to approve the U.S. federal budget
passed with no sign of a deal, forcing a partial shutdown of
the government for the first time in 17 years.
Standard & Poor’s Ratings Services said that the current
impasse over the debt ceiling debate is unlikely to change the
firm’s double-A-plus rating on U.S. sovereign debt. The ratings
agency said its base-case assumption doesn’t include a failure
by lawmakers to raise the debt ceiling by October 17 when the
U.S. government will run out of money.
Japan’s Nikkei index advanced modestly (0.2%), after Prime
Minister Shinzo Abe said that he would hike the sales tax as
planned from April next year to reduce the country’s huge
debt load.
The government is also set to announce a stimulus package to
cushion the potential negative impact that the tax hike could
have on the nascent recovery of the economy.
The Nikkei index advanced was capped by the yen’s rise against
the dollar ahead of Abe’s press conference in the evening.
The Bank of Japan’s closely-watched Tankan survey showed
business sentiment in Japan hit its highest level in almost six
years in the three months to September.
The government move to proceed with the sales tax hike
Asian Markets
Monday Asian Market
Tuesday Asian Market

Asian stock markets are mostly trading higher on Wednesday.
In the Australian market, financial, healthcare, property trusts,
consumer discretionary and information technology stocks are
trading higher, while energy and mining stocks are mixed. The
benchmark S&P/ASX 200 index, which advanced to around
5,231 in early trades, is currently up 12.7 points or 0.2%, to
trade at 5,219.
The broader All Ordinaries index is up 12.9 points or 0.2%,
to trade at 5,219.2, off the day’s high of 5,229. In economic
news, Australia saw a seasonally adjusted merchandise trade
deficit of $815 million in August, the Australian Bureau of
Statistics said on Wednesday. Exports added 3.0 percent on
month to $27.116 billion, while imports gained 1.0 percent
to $27.931 billion. According to another report from the
bureau, the total number of building approvals issued in
Australia was down a seasonally adjusted 4.7 percent on the
month in August at 13,687.
On a yearly basis, approvals gained 7.7 percent - also missing
forecasts for an increase of 12.8 percent following the
28.3 percent spike in the previous month. In the currency
market, the Australian dollar opened lower against the U.S.
dollar. After a flat start and a subsequent smart up move, the
Japanese stock market faltered, with the yen’s rise against the
U.S. dollar triggering some selling.
The benchmark Nikkei 225 index, which rose to 14,569.2 after
opening at 14,492.5, was down 102.6 points or 0.7%, to trade
at 14,382. According to the Bank of Japan, the monetary base
in Japan surged 46.1 percent on year in September to 181.701
trillion yen.
Banknotes in circulation were up 3.4 percent, while coins
in circulation added 1.0 percent. Current account balances
surged 139.2 percent, including a 137 percent spike in reserve
balances. The adjusted monetary base climbed 69.4 percent
on year to 181.533 trillion yen. For the third quarter of 2013,
the monetary base jumped 42.0 percent on year. In the
currency market, the U.S. dollar traded in the upper 97 yen
range in early deals in Tokyo. The yen is currently trading at
97.79 to the U.S. dollar.
Hong Kong, South Korea, Taiwan, Indonesia, New Zealand and
Malaysia are trading firm, while Singapore is down marginally.
On Wall Street, stocks moved mostly higher on Tuesday, while
traders ignored concerns about the economic impact of the
government shutdown and focused instead on an unexpected
increase in U.S. manufacturing activity aided sentiment.
The Dow rose 62 points (0.4%), to trade at 15,191, the Nasdaq
rallied 46.5 points (1.2%) to 3,818 and the S&P 500 advanced
13.5 points (0.8%), to end the session at 1,695.
Major European markets ended higher on Tuesday. The U.K.’s
FTSE 100 index ended roughly flat, while French CAC 40
index and the German DAX index moved up 1.3% and 1.1%,
respectively.
U.S. crude oil pared much of the losses but ended lower for
a third straight session on Tuesday, as investors continued
to mull over the impact of the partial shutdown of the U.S.
Government on oil demand.
November Crude delivery dropped $0.29 (0.3%) to close at
$102.04 per barrel.
Wednesday Asian Market
next year comes as that Japan’s average monthly household
spending dropped a worse-than-expected 1.6 percent in
August from a year ago.
The financial markets in China and Hong Kong were closed
for public holidays. Chinese manufacturing activity expanded
at a slightly faster rate in September, with business activity
across the sector seeing a modest pick-up, an official survey
showed. China’s purchasing managers’ index rose to 51.1
from 51 in August. Australian shares erased early gains to end
modestly lower after the Reserve Bank of Australia retained its
benchmark cash rate at a record-low of 2.5 percent, matching
expectations.
The benchmark S&P/ASX 200 declined 0.2%. The current
setting of the monetary policy remains “appropriate” and the
board will “continue to assess the outlook and adjust policy as
needed to foster sustainable growth in demand and inflation
outcomes consistent with the target” the central bank said in
a statement accompanying its rate decision.
Leighton Holdings advanced 1.1%, after winning a contract
worth $370 million to build a new terminal and car park
at Melbourne Airport. According to Australian Bureau of
Statistics, retail sales added a seasonally adjusted 0.4 percent
in August compared to the previous month, the said, standing
at $21.923 billion.
A survey results released by the Australian Industry Group
showed that its manufacturing PMI index moved into positive
territory for the first time in more than two years. The headline
index rose 5.3 points to 51.7 in September from the previous
month. South Korea’s Kospi average closed 0.1% higher, to
trade at 1,999.
Overseas investors bought shares worth a net 149.7 billion
won, extending their buying streak for the 25th straight
session, data showed. Korean government data showed
consumer prices in South Korea eased to a 14-year low of 0.8
percent in September, down sharply from 1.3 percent in the
previous month, while the nation’s exports fell slightly last
from a year earlier.
New Zealand shares posted modest gains, tracking gains
elsewhere across the Asia-Pacific region.
The benchmark NZX-50 closed 0.2% higher, to trade at 4,744,
with 19 of its components advancing.
Among the prominent gainers, Auckland International Airport
climbed 3.4% India’s Sensex was moving up 0.7 percent
following Monday’s selloff.
According to Markit Economics, Indian’s manufacturing sector
contracted for the second successive month in September,
but at a slower rate than in the previous month. Indonesia’s
Jakarta Composite index was gaining a percent, Malaysia’s
KLSE was little changed.
Singapore’s Straits Times was up 0.4% and the Taiwan
Weighted average closed up 0.2%.
U.S. Indexes traded higher overnight, as concerns about a
looming government shutdown overshadowed data showing
improved manufacturing activity in the Chicago area.

Algo Futures Market Insights - Weekly Newsletter - Issue 01 - Saturday, October 5th, 2013

Algo Futures Market Insights - Weekly Newsletter - Issue 01 - Saturday, October 5th, 2013

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Algo Futures Market Insights - Weekly Newsletter - Issue 01 - Saturday, October 5th, 2013