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Monday, May 2, 2016 - Weekly e-Newsletter - Issue No. 703

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Economic Calendar
Date
ET
Release
For
Consensus
Prior
May 2
10:00 AM
ISM Index
Apr
NA
51.8
May 2
10:00 AM
Construction Spending
Mar
NA
-0.5%
May 3
2:00 PM
Auto Sales
Apr
NA
5.12M
May 3
2:00 PM
Truck Sales
Apr
NA
8.21M
May 4
7:00 AM
MBA Mortgage Index
04/30
NA
NA
May 4
8:15 AM
ADP Employment Change
Apr
NA
200K
May 4
8:30 AM
Productivity-Prel
Q1
NA
-2.2%
May 4
8:30 AM
Unit Labor Costs - Prel
Q1
NA
3.3%
May 4
8:30 AM
Trade Balance
Mar
NA
-$47.10B
May 4
10:00 AM
Factory Orders
Mar
NA
-1.7%
May 4
10:00 AM
ISM Services
Apr
NA
54.5
May 4
10:30 AM
Crude Inventories
04/30
NA
1.99M
May 5
7:30 AM
Challenger Job Cuts
Apr
NA
31.7%
May 5
8:30 AM
Initial Claims
04/30
NA
NA
May 5
8:30 AM
Continuing Claims
04/23
NA
NA
May 5
10:30 AM
Natural Gas Inventories
04/30
NA
73 bcf
May 6
8:30 AM
Nonfarm Payrolls
Apr
NA
215K
May 6
8:30 AM
Nonfarm Private Payrolls
Apr
NA
195K
May 6
8:30 AM
Unemployment Rate
Apr
NA
5.0%
May 6
8:30 AM
Hourly Earnings
Apr
NA
0.3%
May 6
8:30 AM
Average Workweek
Apr
NA
34.4
May 6
3:00 PM
Consumer Credit
Mar
NA
$17.3B
 
This Week's Featured Trading Indicator:
CAMARILLA PIVOT POINTS

Camarilla pivot points are leading indicators that map out potential lines of support and resistance based on the high (H), low (L), and close (C) of the previous day. They differ from standard pivot points on two accounts: their calculations will produce different pivot, support, and resistance levels which are typically closer in range than standard pivots; and Camarillas have additional support and resistance levels (S4 and R4).

The 3rd and 4th levels play a key signaling role in Camarilla pivots. Generally, when price hits the 3rd level, price is expected to revert to the mean (the pivot). If price exceeds the 4th level, it generally indicates that the price move has strong underlying momentum and may continue moving beyond that price level.

PROS:

  • As leading indicators, they provide traders with mechanical (i.e. “calculated”) means to “anticipate” potential support/resistance and breakouts from “important” price levels.

CONS:

  • There are other means of gauging support and resistance, such as real historical levels, that may conflict with Pivot Point levels.
This Week in History

5/3/1933 - Nellie Taylor Ross was named head of U.S. Mint; she was first woman to hold this position

5/4/1932 - Al Capone was sentenced to 11 years and made to pay $80,000 for tax evasion

5/5/1933 - William Woodin was named 51st Secretary of Treasury; credited for helping Roosevelt during famoun Banking Holiday

5/6/1935 - Works program Administration started work this day creating 8.5 mill jobs for ailing US economy

5/7/1998 - Chrysler signed $38 billion deal with German Daimler-Benz AG

Lessons from Jesse Livermore – One of the Most Spectacular and Tragic Traders of All Time
Part 8

“It cost me millions to learn that another dangerous enemy to a trader is his susceptibility to the urging of a magnetic personality when plausibly expressed by a brilliant mind.”

In 1908, the 31 year old Livermore had already made millions in trading. Considering that he succeeded in building a fortune based on his own trading approach, what’s surprising is not that he heeded trading advice from another successful trader (Teddy Price, a well-known cotton trader), but that he put so much capital at stake trusting someone else’s opinion. Price told Livermore to continue buying cotton even as the cotton market was drastically falling. In the end, Livermore lost 90% of his remaining $5 million due to following bad advice. He went bankrupt later that year.

What caused Livermore to go against the manner of thinking which initially made him a multi-millionaire? It’s hard to say. But let’s take his words at face value: a “magnetic personality” and a “brilliant mind.” Because Teddy Price was a successful speculator by his own right, it was plausible that perhaps Livermore would learn something from him. Setting aside the possibility that Price might have been trading against Livermore, what remains is that Price’s approach, as it was presented to Livermore, differed greatly. Because Livermore didn’t take the time to fully study this approach, he still could have tested it with minimal capital. Instead he ended up “plunging” a market that eventually went against him.

Do you follow any “successful” trading gurus with magnetic personalities and seemingly brilliant minds? Do you simply accept their opinions or do you retain some healthy degree of skepticism? When you follow their approach, do you risk a large majority of your capital? If you do, are you sure that such actions are wise?

 

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