Jump to content
Sign in to follow this  

DX As An Economic Indicator

Recommended Posts

There is an interesting viewpoint I thought it worth sharing with you guys regarding mainstream media (MSM) reporting.  They don't use technical analysis and are trained to come up with a "story" a reason why something is happening in the markets.  Usually they give 1 single overriding reason because the attention span of their readership is such that they need a headline grabber and a simple message or they get tied up in too much detail.  This leads to a phenomenon with a catch Latin phrase "Post hoc ergo propter hoc", which literally means "after, therefore, because".  This mean that people have a tendency to assume something is the cause of another thing because it came before that other thing.  And they are usually wrong.

 

We see this all the time in financial press articles and commentary such as "Oil rallies as Canadian wildfires rage" or some such attention grabber.  When you think about it what possible global impact can this have when the world is awash with oil and Saudi is trying to gobble up market share?  And check out what is happening to oil prices now, has someone put out the fires then..?

 

Another one. "Global stocks mostly higher as oil price rally", so Oil is driving stocks?  Hmm!  More likely the continued concerns over data from China is weighing on broader sentiment that growth just isn't coming despite CB policy. 

 

Also when something correct does hit MSM is is usually a done deal and time to actually think about reversing.  MSM is never at the forefront of market predictions, they report news created by the markets rather than causing market actions (except for the sheep and goats who pile in at the end of a move based on MSM reporting...).

 

Fundamentals are fine for the long term big picture trend, indeed necessary, but they create a background narrative for technical analysis which (using the multi layers approach in the video  posted recently, os some version of that) can help you hone in on low risk high likelihood trades.

 

I guess my message is don't get distracted by MSM headlines, do your own analysis and let the market itself guide your actions.

Share this post


Link to post

You are right that headlines will over simplify or create the impression of causality when none may exist. The real underlying causes are usually many and complex, often unknown and unknowable. But headlines are useful in the broad sense in informing us that something is happening, something has changed, it may be human nature to pretend we always know why. The clever use of 'as' doesn't automatically imply causation but merely two things are happening at the same time.

 

I am reminded of the guest pundits on the financial news feeds, they have to say something, that's why they get paid, and have to stick with it to save face but a punter can quickly change their mind as the information changes, as often as they like. It pays to be flexible as information changes and not try to hang-on to losing positions in hope.

 

It must be useful to be informed of change when it is happening and a more codified data set constantly being updated of a range of markets may be more precise, and without the attempt at interpretation, I do find myself flicking back to my watch list on the IG home page for updated % change info on a broad list of markets, but also useful is a quick news brief that will be more general and inevitably more colourful, we should all know a reporter's explanations may be limited and possibly wrong.

 

Fundamentals (new news) provide the market with impetus (force and direction) technical analysis helps explain how price moves rather than why.  

 

 

 

 

Share this post


Link to post

Agree  but my main point is that all too often retail traders seek out insight in such headlines and many read "as" as meaning causality, which is what the journos are indeed implying without actually stating it because then they could be held to account.  Should we all suddenly go Long Oil because there is a headline about fires in Canada causing a supply problem?  Of course not, it makes no sense.  If, on the other hand, there was a headline announcing full scale war between Saudi and Iran then ok, that would be different.

 

The data release from China is more interesting because it joins the ever building case for non existent global growth leading into recession or even depression.  This is not about one single headline event but a trend in data impacting sentiment and we certainly don't need MSM to tell us this do we?

 

In short my approach is to largely ignore MSM articles and seek only commentary from experienced professionals, such as the Rich Dad piece you posted earlier.  In this way I hope to insulate my human nature response to headlines and focus only on technical analysis backed up by long term fundamentals as applied to sentiment.  As an experience trader once said to me, read and follow as many commentators as you like but in the end do your own analysis and make you own decisions. Interestingly my worst mistakes were when I did not follow this advice and did not follow my own analysis and trading method (or simply misread it).

Share this post


Link to post

It is a sad truth that the inexperienced do listen to the pundits and do rush out to buy or sell on their say so, I don't think these guys ever get to be experienced traders. You must remember how much worse it was before the internet when news from a financial newspaper was probably 24 hrs out of date, how the big players must have laughed. Why do people do it? Probably because it is perceived as a shortcut, avoids work and decision making, but you are right, in the end you must do your own analysis and make your own decisions, work out an edge (trading system) that works for you and the market. There is no panacea in the market or the market would not exist. There are only buyers and sellers trading at agreed fair value, and what is considered fair value can change very quickly.

 

 

Share this post


Link to post

Dollar staged a comeback yesterday evening after falling on more poor US data mid-day. Potential strong dollar day today?

 

EU GDP 10:00 BST

US Retail Sales 13:30 BST

 

 DX 4 hour chart.

 



Share this post


Link to post

Does look like it.  There is a clear break of the Daily chart Triangle resistance plus the resistance zone you highlighted in your 4hr chart .  When taken together with what else is going on, in particular the specific basket crosses and Stocks the odds must be decent for a strong USD rally from here.

 

And it is Friday the 13th!  Maybe it will be unlucky for stock investors but lucky for Short traders, about our turn I'd say...

Share this post


Link to post

Sorry, forgot to attach my chart, also it is worth noting that EURUSD just broke below the recent low on the hourly chart.  GBP yet to do so but that is a bearish sign for the Euro for me.

 



Share this post


Link to post

Friday the 13th, seems you  could be right on, today starting out dollar, yen up, stocks down. Saw this Nasdaq chart flash by yesterday which I thought interesting. That's a chart that looks to be rolling over.

 



Share this post


Link to post

Could be a fly in the ointment for Euro down, Germany posted good GDP figures today at 7am, Euro GDP at 10:00, can Germany keep the whole thing propped up?

Share this post


Link to post

GDP was 1.3% but consensus was 1.4% so that is a miss and the previous reading was 2.1%!  I guess it's all in how you read into these things, which is one reason I don't much worry about the snapshot reading but where the whole thing is trending big picture and it is not looking good big picture, anywhere...

Share this post


Link to post

Nasdaq yeah, we have been discussing that on my Tech sector thread.  There was a double top with strong Neg Mom Div in December 2015 in what I think is a Wave C end (i.e. a direction change retrace) and now a classic EW1-2 move heading into Wave 3.  As I mentioned before if this is a wave 3 on Tech it will run down hard and fast once it gets going.  Another bubble about to pop?  Financial markets are all connected I think and once one of significance goes the whole house of cards comes tumbling down.

Share this post


Link to post

Agreed, paradoxically the figures can affect the day trader more than the longer term trader because they often just form a blip then price continues where it was heading anyway. Another problem with figures is the expected quote varies depending on source, I should start using the IG to save myself embarrassment when when they quote different. Another problem with figures on twitter is that typos are quite common in the rush to be first to tweet LOL.

 

I did look into the negative German CPI but that was mainly down to oil derivatives and was expected. Did you note Carney yesterday kind of imply he publishes a CPI forecast because politicians make him, as in, take with a pinch of salt. Much like his Brexit forecasts really.

Share this post


Link to post

Re USD, as always there is an alternative view.  It is quite possible that the USD has not yet reached EW1 end and when it does a retrace can be expected.  The chart below shows a possibility if we are currently at wave 1 end but of course it could go up a little further still.  I'd expect any retrace to not be too deep, so currently showing the 38% Fib as a guide.  I can make cases for this on EUR and GBP and JPY is already in retrace

 



Share this post


Link to post

I can totally see why the day trader waits with baited breath for data releases  , one of the many reasons I don't trade that way... (also I am no good at it!).  Clearly data has a short term impact, though often reversed.  I noted the volatility in stocks yesterday and wonder how a day trader can pick out that move for the swing, I guess that is where  and his 150 indicated (or whatever the number was) comes in.

 

I too saw the CPI data and the thing that struck me, and continues to strike me about this stuff is that despite the unprecedented (and some, myself included, would say Don Quixote tilting at windmills crazy) stimulus in an attempt to push inflation and get themselves out from under the debt mountain the CPI remains resolutely poor.  Now you can talk about commodities as a special case and so on but they never do when commodities are pushing inflation figures through the roof right!  And in reality commodities are down, and will continue to be down, because demand is simple no longer there as it has been over the past 10 or so years.  Oil is more of a supply issue I guess but still demand has backed off here too.

 

In other areas it seems clear to me that consumers have had enough and are cutting up the plastic, I noted before that there are way more special offers in stores that normal these days and it looks like sales have started early - never a good sign in my view.  What if house prices do start to tumble?  What if stocks start to roll back and small investors (otherwise known as consumers) panic sell or simply see their wealth dwindle?  Lower value stock portfolio and pensions pots, higher taxes as governments try to balance the books on their ill conceived vote grabbing policies, lower property equity what does it all amount to?  Feeling poorer and feeling more insecure and consumers like that do not spend!  Cue recessions or worse and Central Bankers think they can control and influence this?  Haven't they ever heard of King Canute?

 

Share this post


Link to post

Re; USD alternative view, that's a very important point. Good advice for everyone. There always MUST be an alternative view or there is no one to exchange contracts with, meaning there is no market. So the other side are not your enemy but your facilitator. You only have one enemy in the market and guess who it is. Try hard to view evidence without bias, don't just tick the positive and ignore the negative. Put your stops and targets at reasonable levels and respect them.

 

I nicked this quote from the tradeciety blog this morning, it seemed fitting for MY rant this morning.



Share this post


Link to post

Too right  we should all ask for and welcome opinions contrary to our own and criticism (constructive) of our analysis or assessments.  Would like to see much more of that on the forum as it would get more debate going which is a very good thing.

Share this post


Link to post

Many Euro markets closed today (except France) may see the Euro drift this morning, possibly higher as the DX pulls back after a strong week.

 



 

 

Share this post


Link to post

Dollar Index within striking distance of major resistance and FOMC minutes released today. Eurodollar heading down from major resistance at 11600 and Cable failing at minor resistance level just above 14500. All adds up to the possibility of some big moves today.

 



 

 

 

 

 

 

Share this post


Link to post

Dollar may consolidate here before a concerted push higher or lower.

 



Share this post


Link to post

Some retrace might happen but I think the main trend is now up and any retrace will be relatively shallow.  I'm expecting EUR to remain weak and GBP rally to reverse.  USD looks strong against CAD and JPY.  AUD could rally v USD but that is not part of this basket anyway.

Share this post


Link to post

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Member Statistics

    • Total Topics
      8,083
    • Total Posts
      44,663
    • Total Members
      55,695
    Newest Member
    Suchada
    Joined 23/02/20 23:48
  • Posts

    • The zombie apocalypse is spreading, the indices are falling https://uk.reuters.com/article/uk-china-health/concern-over-coronavirus-spread-as-cases-jump-in-south-korea-italy-and-iran-idUKKCN20H03O
    • Hammer time!
    • Hi  u can try looking at videos on You tube regarding Options. there are quite  few there, but don't pay any money to these institiutions. I am sure I have seen in past few Free videos . good luck in your trading . 
×
×