August 31st, 2011 - Issue #599

In This Issue

1. Labor Day Holiday Hours
2. JS Canadian Dollar Report
3. Common Potential Meanings from Volume and Open Interest Changes
4. Economic Calendar

1. Labor Day Holiday Hours

2. JS Canadian Dollar Report

SEP '11 CANADIAN DOLLAR ** BEAR TREND DIGESTION **

The MKT is in a difficult sideways trade with an underlying negative tone. On the SELL side BREAKOUT, FADE and REVERSAL strategies are valid with the expectation that the underlying negative momentum is going to reassert itself. Work any UP FADE or REVERSAL strategies within the digestive range, covering any position near the DP.

On the BUY side avoid UP BREAKOUT strategies but rather FADE a negative reaction after a positive breakout signal against the DIR. DP REVERSAL strategies are recommended over FADE strategies as "sloppy" trading conditions are expected. Any FADE trades should get confirmation or a negative exhaustion or turning point signal before executing.

3. Common Potential Meanings from Volume and Open Interest Changes

Price Rising, VOLUME dropping and OPEN INTEREST dropping:

Market is running out of traders willing to open or hold an OPEN LONG. Traders are liquidating both loosing short positions and closing winning long positions. A higher probability the market is set to retrace in price lower at some point forward.

Should prices be falling when this scenario develops, the market has a higher probability of a price rise at some point forward.

Price Rising, VOLUME rising and OPEN INTEREST rising:

Market is attracting larger numbers of traders willing to open positions from the long side and hold them. Traders are more confident that prices will continue to climb in favor of a working long. This scenario is a good clue that UPTREND is secure and that the trend may continue further for a period of time.

Should this scenario develop while prices are falling, it is a good indication that DOWNTREND is secure and that the trend may continue for a period of time.

Price Rising, VOLUME dropping and OPEN INTEREST rising:

Market is attracting LATE buyers and EARLY shorts; market is vulnerable to a sharp correction but likely that that correction will be bought creating a buy point for UPTREND.

If this scenario should develop while prices are dropping, it is a good indication that a sharp rally against DOWNTREND will develop creating a sell point for DOWNTREND.

Price Rising, VOLUME rising and OPEN INTEREST falling:

Market has a lot of traders initiating from both sides but larger traders may be liquidating into the higher prices. The market may be vulnerable to large price swings as shorter-timeframe traders attempt to trade from both sides of the market but liquidating before end-of-day. Often a signal of a market turn near-term or continued volatility. More common at significant tops (or bottoms).

Should this scenario develop as prices are dropping, it is still the same quality of market action. Often this is a sign of a significant bottom.

It should be noted that a brief discussion of the basics of VOLUME and OPEN INTEREST cannot take the place of deeper study into market structure. V/OI is only one clue to potential market price action and no market condition is 100% definable from simply a brief understanding of the V/OI picture at any one point in time. V/OI is best used as confirmation tool when selecting price points that you personally expect the market to move away from creating a potential opportunity.

Wishing all of you good trading!

Disclaimer:

Trading commodity futures and options involves substantial risk of loss. The recommendations contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results. This is not a solicitation of any order to buy or sell, but a current futures market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!

4. Economic Calendar

Source: Moore Research Center, Inc.

* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!