Editor's Note: Attention 'future' futures traders: Barbara Cohen is hosting a webinar THIS WEEK, exclusively for Tycoon Report readers, to show you how to navigate the futures markets to capture the returns you deserve.

Hundreds of you have been asking for an opportunity to "meet" Barbara so you can "see" the futures market through her eyes. We're pleased that she has agreed to share her strategies for trading the E-Minis, which are futures contracts on a wide range of indices.

Whether you're new to futures or you're finally ready to jump in and trade them right, now's your chance to learn how the institutions make money trading and why it's important to follow their moves.

Mark your calendar for Thursday, Aug. 13 at 4:30 p.m. Eastern for your FREE spot in "An Introduction to Futures Trading: An Insider's Guide to E-Minis."  Spots are limited, so sign up here to reserve your place in Barbara's online seminar TODAY.         

 

Hello Tycoon Readers,
 
For months I have been telling you to trade the E-Mini futures market.  I've told you to take a small amount of money, just $2,500, open an account, and learn to trade E-Mini futures. 

I've received back literally dozens of e-mails asking how to trade, tell us how. 

Today, I am going to give you one of the most-important tools you'll need as you begin to learn to trade E-Minis -- futures pivots.

How did I learn about futures pivots?  It took me years of trading, talking with those who -- let's just say -- would know.  And I lost a lot of money finding out. 

There is an old adage in the trading game ... if you have not lost money, you cannot call yourself a trader.  I can tell you I fully qualify to call myself a "trader."

That also means I've found out the hard way what doesn't work ... and what does. And when I talk about being a "12-minute trader," that refers to the maximum amount of time I spend in the markets each day, as that's all I need to make the returns I want.

Does this type of trading sound like it's for you? Let's take a deeper look into the "futures" ...

What are Futures Pivots, and How Do They Affect Trading?

We'll discuss that momentarily. First, we have to be acutely aware of the environment in which we are using them.

To understand the importance of trading with pivots, you must first understand that the market is very controlled.  I might even venture to say that it is completely controlled.  If it were not a controlled trading environment, millions of shares and contracts could not change hands every day so quickly and efficiently. 

You say you don't buy it that the market is controlled?  Let me show you an example of how it works.

At the end of May 2009, Treasury Secretary Tim Geithner met with Chinese government officials.  In this meeting, the Chinese gave Geithner an ultimatum, with the conversation probably going something like this. 

They told him they have invested heavily in the U.S. stock market and in U.S. Treasury bonds.  They are prepared to walk away, unless the stock market takes off and they can get profits.  No more buying Treasury bonds, no more stock purchases, nothing. 

Geithner knows this would literally crash the U.S. economy, an economy held together with bobby pins and paper clips. 

So, what can Geithner and his friends in the Treasury do?

The Summer That 'Sell in May and Go Away,' Well, Went Away

Go look at the Dow Jones Industrial Average (DJI) for the beginning of June.  Remember, Geithner met with the Chinese at the END of May.  The Dow went from 8,200 to 8,800 in two weeks, a 600-point spike. 

The market had not moved for over two months -- not an inch -- hanging around 8,000.  So, how could a market move 600 points in two weeks when it hadn't moved in 2 1/2 months?   And in July/August, the stock market moved up nearly 1,000 points.

Go back five years in the Dow chart.  You will see that the periods May through August are always considered to be summer doldrums.  How, then, can the market move up 1,300 points in just over one month?

The Most Important 12 Minutes of Your Trading Day

What's the point of the story, and how does it help you become a 12-minute trader?  The point is that the market is controlled. The market "insiders" know where they are taking the market, and just how fast they will move it to get there. 

There are specific trading rules they follow, one of which is pivots.  

Here's the trick to becoming a 12-minute trader: Just learn the rules. 

Trade when they trade ... buy when they buy ... sell when they sell.  Be a shadow in the market.  Follow the markets' rules.

Pivots are support and resistance price levels that market insiders use on a daily basis to control how high or how low the market will go on any given day. 

There are actually 17 pivots -- nine inter-day (occurring over multiple days), and eight intraday (occurring in just one day). 

The futures market insiders use the futures pivots, and the stock market insiders use the stock market pivots.   To be a successful 12-minute trader, you need pivots on your chart to tell you where the market may go and where it might just stop, as if on a dime.

Let's look an example that might just show you how important trading with pivots is.  Check out the market's activity on Friday, Aug. 7, 2009.


                   

At 11 a.m., the market began to move higher off the pivot (the dashed green line).  At 2 p.m., the market hit the high right at the high pivot (the purple dashed line).  At 4 p.m., the market came right back down to the same pivot it started at.  

Is this a coincidence? 

If you believe that this is a coincidence, I have a Golden Gate Bridge in San Francisco to sell you.

How often does the market hit pivots like this?  Let's just say, this is the norm, not the exception.  Is that often enough for you? It might be if you know how to identify them and, better yet, what to do when they occur.

Want to learn more about trading tricks and what you need for software to be a 12-minute trader?  Because of the number of e-mails I have received, The Tycoon Report and I are sponsoring a free live webinar this Thursday, Aug. 13, 2009, at 4:30 p.m. Eastern.  I will be there to answer your questions and show you what it takes for you to become a 12-minute trader.

Accept my invitation to you to join us live. 






Barbara Cohen
Chief Investment Officer
<>






THURSDAY, AUG. 13

8:30 a.m. Retail Sales

    * Importance (A-F): This release merits an A-.
    * Source: The Census Bureau of the Department of Commerce.
    * Release Time: 8:30 ET around the 13th of the month (data for one month prior).
    * Raw Data Available At: http://www.census.gov/svsd/www/advtable.html

The retail sales report is a measure of the total receipts of retail stores. The changes in retail sales are widely followed as the most timely indicator of broader consumer spending patterns. Retail sales are often viewed ex-autos, as auto sales can move sharply from month-to-month. It is also important to keep an eye on the gas and food components, where changes in sales are often a result of price changes rather than shifting consumer demand.

Retail sales can be quite volatile and the advance reports are subject to rather large revisions. Retail sales do not include spending on services, which makes up over half of total consumption. Total personal consumption is not available until the personal income and consumption reports are released, typically two weeks after retail sales.

Highlights

    * The Retail Sales report for June was mixed relative to expectations with total sales up 0.6% (consensus 0.4%) and sales, excluding autos, up 0.3% (consensus 0.4%).

    * As expected, gasoline station sales played a leading role in the positive surprise for overall sales.  When they are removed the equation, retail sales were up only 0.3%.

    * Declines were registered in furniture and home furnishings stores (-0.2%), building materials (-0.9%), health and personal care stores (-0.3%), general merchandise stores (-0.4%), miscellaneous store retailers (-0.8%), and food services and drinking places (-0.9%).

    * Outside of gas station sales, motor vehicle and parts dealers ( 2.3%), electronics and appliance stores ( 0.9%), sporting goods ( 0.9%), and food and beverage stores ( 0.2%) were the other areas that saw increases in spending versus May.

Key Factors

    * The report reflects the uneven, and uncertain, nature of the recovery process given that there were a few pockets of strength in both discretionary categories and non-discretionary categories, as well as a few pockets of weakness.  In this sense, then, the report can be described as being mixed despite the plus signs ahead of the headline numbers.

    * In the broader picture, sales remain generally weak as they were down -9.0% from a year ago (-7.9%, ex-auto) and down -0.4% from the January to March period despite some early benefit from lower tax rates.

Big Picture

    * Retail sales fell off dramatically starting in September.  That was when the financial markets fell apart and the news became apocalyptic.  Auto sales also collapsed as the news of potential auto company bankruptcies dominated headlines.  Retail sales are likely to remain weak for quite a while given the current trends in employment, and the negative wealth impact for depressed prices for homes and stocks.


FRIDAY, AUG. 14

8:30 a.m. Consumer Price Index

    * Importance (A-F): This release merits a B .
    * Source: Bureau of Labor statistics, U.S. Department of Labor.
    * Release Time: 8:30 ET, about the 13th of each month for the prior month.
    * Raw Data Available At: http://stats.bls.gov/news.release/cpi.toc.htm

The Consumer Price Index is a measure of the price level of a fixed market basket of goods and services purchased by consumers. CPI is the most widely cited inflation indicator, and it is used to calculate cost-of-living adjustments for government programs and it is the basis of COLAs for many private labor agreements as well.

It has been criticized for overstating inflation, because it does not adjust for substitution effects and because the fixed basket does not reflect price changes in new technology goods which are often declining in price. Despite these criticisms, it remains the benchmark inflation index.

CPI can be greatly influenced in any given month by a movement in volatile food and energy prices. Therefore, it is important to look at CPI excluding food and energy, commonly called the "core rate" of inflation. Within the core rate, some of the more volatile and closely watched components are apparel, tobacco, airfares, and new cars. In addition to tracking the month/month changes in core CPI, the year/year change in core CPI is seen by most economists as the best measure of the underlying inflation rate.

Highlights

    * Like the Producer Price Index, the Consumer Price Index came in hotter than expected for both total CPI and core CPI.   Specifically, CPI was up 0.7% (consensus 0.6%) while core CPI, which excludes food and energy, was up 0.2% (consensus 0.1%).

    * There was no surprise that higher gas prices were the primary reason for the uptick in CPI.  The gasoline index rose 17.3% in June and drove a 4.2% increase in the transportation index, which contributed 0.64% to the change in CPI.

    * As it so happens, most components, excluding the special indexes of food (0.0%) and energy ( 7.4%), were up versus May.  Food and beverages increased 0.1%; housing was flat; apparel jumped 0.7%; medical care rose 0.2%, recreation was up 0.5%; education and communication increased 0.2%; and other goods and services rose 0.3%.

Key Factors

    * Despite the broader-based increases in prices, the flat reading for a housing was a big swing factor that kept headline inflation from being higher than it was since housing has a 43.4% weight in the CPI report.

    * Overall, core inflation still remains in the Fed's comfort zone as it is up 1.7% year-over-year versus the 1.5% year-over-year decline in total CPI, which reflects the collapse in oil prices.  This report shouldn't stir inflation concerns, but it should certainly quiet deflation fears.

Big Picture

    * Inflation trends have weakened.  The decline in energy prices after the summer spike has taken CPI down to -1.4% on a year-over-year basis as of June 2009 data.  Energy prices have again increased, yet the core rate should ease from due to weak demand.  Low inflation rates are likely to continue through 2009 although deflation is not likely.


9:15 a.m. Industrial Production

    * Importance (A-F): This release merits a B-.
    * Source: Federal Reserve.
    * Release Time: 9:15 ET around the 15th of the month (data for month prior).
    * Raw Data Available At: http://www.federalreserve.gov/releases/G17/Current/g17.txt

The index of Industrial Production is a fixed-weight measure of the physical output of the nation's factories, mines, and utilities. Manufacturing production, the largest component of the total, can be accurately predicted using total manufacturing hours worked from the employment report. One of the bigger wildcards in this report is utility production, which can be quite volatile due to swings in the weather. Severe hot or cold spells can boost production as increased heating/cooling needs drive utility production up.

In addition to production, this monthly report also provides a measure of capacity utilization. Though the rate of capacity utilization is seen as a critical gauge of the slack available in the economy, the market does not completely trust this measure. Capacity is very difficult to measure, and the Fed essentially assumes that growth in capacity in any given year follows a straight line. One can therefore predict the capacity utilization rate quite accurately based on the assumption for production growth.

The 85% mark is seen as a key barrier over which inflationary pressures are generated, but given revisions to these data and the difficulties with capacity measurement, the 85% mark should be viewed cautiously. It would be appropriate to look for corroborating inflation indications from commodity prices and vendor deliveries.

Highlights

    * Industrial production declined -0.4% in June following a downwardly revised -1.2% decline (from -1.1%) in May.  The headline print was better than the consensus estimate among economists, which called for a -0.6% decline, yet it still marked the 17th decline in output over the last 18 months.

    *  Looking at the major industry groups, manufacturing output dropped -0.6% (vs. -1.1% in May), the output of mines fell -0.5% (vs. -1.9%), and the output of utilities rose 0.8% (vs. -1.3%).

    * Total capacity utilization dropped to 68.0% from 68.3% in May and marks a new record low dating back to 1967.  Similarly, manufacturing capacity utilization dipped to 64.6% from 64.9% in May and is at its lowest level since records began in 1948.

Key Factors

    * The prevailing message in this report is that production levels aren't good, yet they are clearly less bad than before.  In its release, the Federal Reserve highlighted the point a number of times how the rate of contraction in the second quarter improved versus the first quarter.  To that end, output fell at an annual rate of -11.6% for the second quarter as a whole versus a -19.1% decline for the first quarter.

    * The depressed utilization rates should temper inflation concerns.  At the same time, the slowing rate of deceleration in industrial production should contribute to the hope that better numbers lie ahead as inventories get replenished.

    * The June decline was the "best" number since a -0.1% decline in July 2008.

Big Picture

    * Production held up surprisingly well through most of 2008 due in part to strong exports.  Exports grew at a 7.0% annual rate in 2005, 9.1% in 2006, 8.4% in 2007, and at an annual average rate of 7.8% through the first three quarters of 2008.  A major factor in this boom was a continually weakening dollar.  Now, the dollar has strengthened and global economies are in recession.  This will undermine export growth and take away a major support for U.S. industrial production.  U.S. companies will also be impacted by the weak economic outlook.  Production is therefore likely to remain depressed.


9:55 a.m. University of Michigan Consumer Sentiment Index

    * Importance (A-F): This release merits a B-.
    * Source: The University of Michigan.
    * Release Time: Preliminary: 10:00 ET on the second Friday of the month (data for current month); Final: 10:00 ET on the fourth Friday of the month (data for current month).

The Michigan index is almost identical to the Conference Board Consumer Confidence index, though there are two monthly releases, a preliminary and final reading. Like the Conference Board index, it has two subindexes -- expectations and current conditions. The expectations index is a component of the Conference Board's Leading Indicators index.

Big Picture

    * Sentiment readings are a reflection of a variety of events rather than an accurate tool for forecasting consumer spending.  Gas prices and political events can have an outsized impact on sentiment.  In general, these data are of very little economic value.

Source: Briefing.com