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FOMO Potential Could Fuel FX and Equities with Calm Winds

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

FOMO Potential Could Fuel FX and Equities with Calm Winds

Traders should not run towards their trading screens as the week begins, steady attitudes and risk taking tactics will be needed. Yet, there may be reasons to get excited. The return of full market volume as U.S financial institutions open and employees get back in their offices after the long holiday weekend needs to be monitored. The term ‘FOMO’ – fear of missing out – may be heard this week if U.S equity indices continue to shine, Forex demonstrates additional USD weakness and U.S Treasury yields decline further. There will be a whirlwind of economic data and opportunities for ‘official’ rhetoric in the days ahead.

Day traders should ask questions about the results which were seen technically via their charts last week, assets all struggled to find momentum last Thursday and Friday. And earlier in the week many Forex pairs produced choppy results. But here’s the thing, behavioral sentiment was rather muted as large speculators and financial institutions understood that trading volumes would be light – this caused strong bursts and sudden reversals early – but by the end of the week rather calm waters.

Many trading houses could increase their speculative positions this week based on their outlooks. Financial institutions clearly have believed the USD had been overbought and the ability of the GBP, EUR and JPY to gain in the past two weeks are possible signs large ‘players’ remain positioned for further USD weakness.

Equity markets have done well in November, but the major indices including the Dow 30, S&P 500 and the NASDAQ Composite all started to garner strength in the last week of October. Mid-term highs are being achieved in U.S indices. The parade of buyers may not be done quite yet.

Economic data results are vital for day traders to understand because they provide insights into the thinking of financial institutions regarding their outlooks. It is not the trading of small speculators that moves markets, it is the power of large cash positions which drives results. Questions regarding where the cash is going and the allotments financial institutions are pursuing is a key to understanding how the markets are going to react. This information is not readily available for day traders, instead smaller speculators need to try to comprehend outlooks regarding positioning and timeframes of larger players.

Part of the FOMO factor could develop as financial institutions begin to question how much money they will hold in money market accounts for their clients. While the practices of large investors are always comforted by the notion they are making guaranteed returns, the pursuit of better results and the desire for risk appetite does drive behavioral sentiment when bullish markets are being exhibited.

This week will be intriguing as full volumes return to the marketplace today and tomorrow. From today until the 13th of December FOMC Statement from the U.S Federal Reserve, results in the financial markets could be speculative. Financial markets are starting to signal that optimism is creeping back into the mindsets of large investors who may believe mid-term economic scenarios have improved.

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EUR/USD Six Month Chart as of 27th November 2023

Monday, 27th of November, E.U. ECB President Lagarde – the European Central Bank leader will deliver thoughts regarding monetary policy to the European Parliament. While the E.U still is sufferning from recessionary numbers, economic data last week came in slightly better than estimated. However, the EUR/USD remains in a USD centric mode and this will continue this week.

Tuesday, 28th of November, U.S Consumer Confidence via the Conference Board, the numbers are expected to be slightly weaker than last month’s outcome. U.S economic data has been showing signs of being weaker than expected, last week’s Core Durable Goods Orders report followed this trend.

While this may be read as bad news by some people, day traders should note – particularly Forex speculators – that slightly weaker U.S economic data currently is music to the ears of many financial institutions because they believe the Federal Reserve will have to shift their rhetoric from aggressive to neutral.

Tuesday, U.S Federal Reserve Officials – a slew of FOMC members will be speaking at various events during the day. The Fed likes to give clues to the financial markets regarding their outlooks and perceptions regarding interest rates. The Federal Reserve has certainly paused their interest rate hikes.

The question now is if the U.S central bank will start to say while they remain diligent regarding inflation, that they now see signs of a ‘soft landing’ emerging within the U.S economy. If the Fed speakers begin to sound not only neutral, but offer hints of becoming potentially dovish by the spring of 2024 regarding monetary policy, this could spur USD selling.

Wednesday, 29th of November, Germany Preliminary Consumer Price Index – the inflation results are expected to be slightly weaker than last month’s outcome. German economic data has been recessionary, financial institutions know this, what large traders would like to see is stable results that are not wildly surprising.

Wednesday, 29th of November, U.S Preliminary Gross Domestic Product – the growth numbers are expected to show a slight increase. Equity markets, Forex and commodity markets will react to these results. The U.S economy has been surprisingly strong regarding growth. A slight slowdown regarding the GDP numbers would not be the worse thing, if growth numbers did come in below the estimate this could fuel additional USD weakness.

But traders should not get overly ambitious and bet against the GDP numbers. If the expected outcome of 5.0% is delivered, equity markets could use this as additional fuel. The number is sure to be a talking point, but unless their is a massive divergence it may simply be a way to create noise for ‘talking heads’, when in fact behavioral sentiment regarding risk appetite remains optimistic.

Thursday, 30th of November, China Manufacturing PMI – the result is forecast to show a slight improvement. China economic numbers remain a concern, particularly from the real estate sector which is suffering and is causing cascading troubles on other sectors within the nation. Global demand for products, as an example from European countries, that are suffering recessionay pressures also is slowing China’s manufacturing. A slight improvement would be welcomed by global investors participating in China financial assets.

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WTI Crude Oil Six Month Chart as of 27th November 2023

Thursday, 30th of November, OPEC and JMMC Conference – the oil producers will certainly make their policies known and energy markets will react to the news and rumors. Commodity traders should note that WTI Crude Oil, Brent, Natural Gas and Unleaded Gasoline markets have been under price pressure and important mid-term cash support levels are in sight.

Thursday, 30th of November, U.S Core Personal Consumption Expenditures Index – this inflation reading is important and should be watched. The result is expected to be weaker than the previous month. If the outcome matches the anticipated reading of 0.2% or less, this could spur additional USD weakness. The Core PCE Index is an important reading for the U.S Federal Reserve regarding its inflation insights.

Friday, 1st of December, U.S Fed Chairman Jerome Powell – the Fed leader will be speaking at a college event in Atlanta. Traders should remember that about ten days before the Fed’s pause in November regarding its FOMC Statement, Powell delivered a large hint regarding monetary policy. The Fed Chairman’s comments will come late on Friday and could cause a reaction early next week if Powell’s remarks fuel more Forex speculation.

Additional note – the U.S jobs numbers will not be released this Friday, the Non-Farm Employment Change and Average Hourly Earnings results will be published on the 8th of December.

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Optimism in Challenging Conditions and Time Considerations

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Optimism in Challenging Conditions and Time Considerations

Traders by nature are optimists, after all they are wagering on outcomes they believe are valid with targets regarding future results. Global market conditions for the moment have created expensive price action unfortunately, this as plenty of day traders wagering on their perceptions have found out while whipsaw movements and fast velocity have taken place and caused losses.

The USD continues to create turbulent higher values among many major currencies it is teamed against as financial institutions exhibit risk adverse tendencies. U.S Treasury yields may be going up because the U.S Federal Reserve continues to sound alarms regarding inflation, but the last two weeks of trading globally have seen an influx into U.S Treasuries as a safe haven move. Another signal that risk appetite is poor among global investors is because while the USD has gotten stronger, gold has also risen in value.

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Gold Five Year Chart as of 26th Oct. 2023

And importantly, global markets are trading in conditions which are not considered normal. Many inexperienced people within financial institutions have not dealt with markets like the ones being battled now. High interest rates combined with risk adverse conditions because of concerns regarding an escalation of war conditions in the Middle-East are causing a storm of volatility. U.S stock indices are trading at mid-term lows, and this may continue to be a theme over the next few weeks and beyond, but certainly there are those among us who look towards sunnier days.

So what does an optimist do if they are a day-trader? Perspective needs to be questioned at all times by speculators, and bias regarding all insights by individuals need to be given consideration. A trader must make sure they are not trading based on noise which is coming from the media and tainted with hyperbole. A trader must also question their personal instincts making sure they are free of preconceived notions. Behavioral sentiment gets affected from many angles when market noise becomes loud. Looking for a quiet place to think about market direction is vital for everyone.

Speculators need to remain calm and stick to risk management tactics that prove effective even during chaotic trading conditions. A variety of ways to be involved with the markets directly exists for all, Forex, equities and indices, commodities, bonds are only some of the avenues. Traders can go long or short on their chosen positions, they can participate in the ‘cash’ markets, but can also participate in futures and options trading via time related duration.

Famous investors are known for taking advantage of lower values when fear is high. They look for value via fundamentals within assets with long-term track records. It is not an accident the USD is strong, U.S Treasuries are being sought, gold is being bought currently.

Trends are there to be found and can be taken advantage of by day traders who are looking for quick hitting outcomes, but they must proceed carefully. Because it is also important to acknowledge that no matter how bad circumstances sometimes look in the short-term, that a positive quality among we as humans is to seek optimism. There are reasons to participate in trades with a perspective knowing more tranquil days will come and the markets will grow calm again, markets can reverse and suddenly display risk appetite.

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Risk Events and Questioning the Hyperbole of ‘Bad Actors’

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Risk Events and Questioning the Hyperbole of 'Bad Actors'

The week in a way has already started for financial institutions and traders because of the developing news from Russia. Due to yesterday’s events surrounding the ‘noise’ caused by the Wagner Group’s leader Yevgeny Prigozhin, let there be no doubt that energy sector traders became nervous and fragile behavioral sentiment was being anticipated for Monday’s openings. However, like a well staged drama (perhaps this is giving too much credit to the actors) the Russian saga seems to have come to an odd conclusion. Leaving the possibility for a Part Two to develop. Stay tuned ladies and gentlemen.

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EUR/USD One Month Chart as of 25th June 2023

Monday, the 26th of June, Germany ifo Business Climate – the reading is forecast to come in worse than the previous month. Germany has turned in rather troubling economic data and the E.U as a whole is struggling under the weight of inflation and lackluster growth. The EUR/USD could be affected from the business climate survey.

Monday, the 26th of June, E.U ECB Forum on Central Banking – the annual event which is a bit like the Fed’s Jackson Hole Symposium will be attended by the leading central bank officials from around the globe. This year’s event in Sintra, Portugal will focus on inflation. ECB President Christine Legarde will kick off the event, which will end on Wednesday the 28th of June with speeches from Fed Chairman Jerome Powell, BoE Governor Andrew Bailey and others.

Tuesday, the 27th of June, Canada Consumer Price Index – a slew of inflation reports will be delivered. The forecast anticipates a slight drop in price pressure, but will that actually be the result? The USD/CAD could move based on the outcomes.

Tuesday, the 27th of June, U.S Consumer Confidence via the Conference Board – this survey is expected to show a slight improvement in the outlook of American consumers.

Wednesday, the 28th of June, E.U ECB Forum on Central Banking – the event will conclude with speeches from the heads of the ECB, Bank of Japan, Bank of England and Federal Reserve. The event is not supposed to stir up the dust, but Forex traders should monitor the rhetoric generated.

Thursday, the 28th of June, Germany Preliminary Consumer Price Index – the data is expected to show an increase in prices and underscore the ECB’s aggressive rhetoric regarding inflation.

Thursday, the 28th of June, U.S Final Gross Domestic Product – the growth numbers are projected to show a gain of 1.4% compared to last month’s 1.3%. The results will move the financial markets if they are surprising. Traders should be on the lookout for revisions to the previous month’s numbers.

Friday, the 29th of June, U.K Final Gross Domestic Product – an expected ‘growth’ number of 0.1% is anticipated, which would match last month’s lackluster outcome. The U.K is hovering under recessionary pressures and this GDP result will be watched by GBP/USD day traders.

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Nervous Contradictory Trading Winds for Behavioral Sentiment

by with No Comment AMT MarketsAssetsFeatured Highlights

Nervous Contradictory Trading Winds for Behavioral Sentiment

Behavioral sentiment in the broad financial markets is nervous, and mixed results in the major asset classes are likely causing retail traders to feel uneasy. Most day traders try to perceive which direction they should lean based on price momentum while looking for fast profits. The current state of the broad markets are making decisions difficult for retail traders.

A healthy dose of nervousness at this moment might be a good thing for speculators and keep them conservative. Swirling results in Forex and commodities are causing plenty of problems for traders who instinctively like to pursue buying positions because of the human tendency to be optimistic.

Federal Reserve Causing Headaches for Smaller Banks and Forex

Forex markets have been choppy since the beginning of February 2023, when the U.S Federal Reserve surprised many people with continued aggressive rhetoric. The U.S central bank has backed up its ‘tough’ talk as it ‘fights’ inflation with more interest rate hikes. Clarity regarding a potential June hike from the Fed remains problematic with no certain answer yet. For the moment there seems to be a belief there will be a genuine pause, which may be fueling better returns for U.S equity indices, but there are no guarantees. Behavioral sentiment remains fragile.

The detrimental effect from higher interest rates on mid and small size banks in the U.S remains harmful. Mid and smaller corporate banks continue to struggle with the increased Federal Funds Rate. Bad business decisions within these banks have made it difficult to make profits in an environment when money is no longer ‘free’, this as many of their depositors look for better returns.

A six month chart of the EUR/USD below shows how the EUR started to climb in the fall of 2022, but then began to run into headwinds when financial institutions started to reconsider the seriousness of U.S Federal Reserve policy earlier this year. Analysis regarding the timing of the Federal Funds Rate forecast to actually start becoming dovish has proven problematic.

While the EUR/USD still maintains plenty of its gains, the current price of the the currency pair is below early February highs. The EUR/USD was trading near 0.95700 in late September of 2022, and the price as of today near 1.07800 is a vast improvement for the EUR. However, the choppiness of the Forex market the past few months has not been easy for day traders who have suffered from sudden reversals frequently in many of the major currency pairs.

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EUR/USD Six Month Chart as of 19th May 2023

The KRE regional bank index below shows the dramatic drop in value of the mid and small size banks in the U.S the past year, and the sector certainly still has financial concerns and shadows which are causing pressure on their corporate share values. Stubborn inflation remains and the desire of the U.S Federal Reserve to attack rising costs with higher interest rates remains a serious concern.

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KRE Regional Banking Index One Year Chart as of 19th May 2023

Stock Markets Suddenly at One Year Highs as Investors Seem to Return

Is the S&P 500 a harbinger of things to come or are investors in the index being too optimistic? Day traders likely stay away from the S&P 500 many times because they are mostly trading the index via CFD’s and this can prove expensive regarding transactions, they are not long-term investors – meaning they do not like to make bets that take awhile to materialize. The results from the past year and a half in the stock markets have made speculators nervous regarding bets on equities.

However, institutions and long-term investors buy and hold the S&P with a vision towards the future; they also reap the rewards of its dividends. The ability of the S&P to be trading at nearly one year highs is curious. The improvement in equity values in the indices may be a sign that ‘smart money’ continues to invest in the stock market for the long-term, even during what is perceived as a fragile period of behavioral sentiment. Financial institutions may also be betting on the U.S Federal Reserve having to become more dovish regarding interest rate policy in June and looking forward.

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S&P 500 Index One Year Chart as of 19th May 2023

Results on the NASDAQ 100 may be surprising to many and the index is trading at one year highs, and though like the S&P it is still under all-time highs from late 2021 and early 2022, investors have shown a taste for investing in the ‘hi-tech’ index again. While this may contradict the behavioral sentiment of Forex and the results in the mid and small size banking sector, the NASDAQ 100 does point out money is still being invested and might be an indication that day traders need to be more patient, more optimistic about the coming months and year.

While a recession might be looming, large companies have started to lay off workers and scale back on bonuses in an effort to fight against reduced profits. The narrative from the media may be negative in many cases, but many long-term investors tend to look at more conservative fiscal policy in companies as a good practice and a sign they should invest.

Perhaps the market is going through a needed case of the jitters and the U.S indices are showing that brighter days are ahead, even if there are storm clouds that still must be dealt with regarding inflation and possible recession.The long-term horizon tends to always be more optimistic. Day traders may not be able to take advantage of quick hitting trades, but what about changing perspective and looking for more patient results by being more conservative as a speculator? Or maybe investors in the stock market are wrong and another violent selling surge will return into equities, but what if it doesn’t.

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NASDAQ 100 Index Five Year Chart as of 19th May 2023

There is a fear among mid-size brokers that trading volumes in many sectors are dropping. Showing cautious investor sentiment on the retail front – which may be a healthy reaction in many respects because it is hard to read momentum right now. Day traders tend to get killed by the daily gyrations of Forex and equities in choppy markets because they are using too much leverage. However, historically when retail traders have turned cautious, this is when institutional trading houses have tended to do remarkably well. Investment houses can take on more risks in markets that are perceived as nervous and fragile, because they have a longer time horizon and more cash to absorb momentary losses.

Commodity prices are also intriguing because after hitting highs nearly one year ago in May and June of 2022, the ratios of many broad commodity indices have come down and values are traversing near late 2021 levels. Which brings us to the consideration that global demand for physical resources are limited because corporations are not making large purchases of commodities, this as they wait on better manufacturing demand for their products. This may appear contradictory and create nervous behavioral sentiment for traders, but cautious business practices are a way to make sure there is enough money for the future when conditions turn optimistic again.

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We Have Seen This Show Before Friends

by with No Comment Federal Reserve, Interest RatesMajor Global Equity IndicesWorld

We Have Seen This Show Before Friends

Another day, week, month and year – another financial crisis causing havoc. We have seen this show before, and experienced traders should make sure friends who are ‘newbies’ are prepared for what is going to happen next. And what is next is: unknown.

People who believe they can profit from the current mess in the markets need to have deep pockets to sustain choppy conditions and a time parameter that allows for volatile prices until the results targeted are achieved. Day traders need to have very narrow goals, because if they do not cash out of the market quickly, then they should expect to get burned by the price velocity which will ensue.

Sharks Eating the Minnows as Crony Capitalism Flourishes

The demise of Silicon Valley Bank and Signature Bank are unpleasant surprises, but not shocking, and not to sound too matter of fact or contradictory, but the handwriting has been on the wall. The aggressive stance by the Federal Reserve finally caused enough nervousness in the stock markets to make certain equities shake and the banking sector has proven vulnerable. It is easy for many corporations to make money when it is cheap, but when ‘and not so suddenly’ borrowing costs, inflation and bonds chaos combine and deliver mayhem then profitable outcomes become more difficult, and for some – impossible. Corporate investors do not look kindly on mid-term and long-term projections which hint of negative growth implications. Investors tend to punish these equities.

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Gold One Month Chart

What comes over the next week and month will likely anger many people. Capitalism is good, it is even great. However, a dark and evil shadow lurks when crony capitalism starts to have an upper hand. The insolvency of Silicon Valley Bank raises the prospect for crony capitalism to be witnessed by all. Suddenly the U.S Treasury, Federal Reserve and government have emerged to save the skin of depositors within a bank which up until last week was heralding its ability to be a ‘lone wolf’; merrily disregarding sound investment principles and saying they knew better. It is only my opinion, but it stinks of contradiction that both the U.S Federal Reserve and Silicon Valley Bank have made vast mistakes and now are being allowed to cover their tracks and protect members of their ‘club’. Both Fed and Silicon Valley Bank officers need to be held accountable, but do not count on this result producing more than scapegoats.

Rising interest rates which are causing ‘import inflation’ has been a worry expressed by some economists and they can still be heard, but obviously not given enough attention. The Fed has marched to its own drummer and disregarded ‘the street’ for its own ideals and statistics viewed from its ‘ivory tower’ where it could not be held accountable.

Inflation is stubborn, yes, but it is a result of chaos via global commerce from the effects of difficult supply and logistics problems caused by coronavirus. Inflation became problematic two years ago and it was essentially disregarded for about nine months, until the Fed and others admitted rising prices was a concern. Hopes of transitory inflation have faded into oblivion. But I digress…..

Nervous Financial Institutions Battling as Federal Reserve Wavers

A sin bin of mistakes has collected and is now being exposed. Many financial houses were surprised when the Fed came out on the 1st of February and sounded so aggressive talking about inflation while increasing the Federal Funds rate again. Then jobs numbers came out on the 3rd of February, along with Average Hourly Earnings and showed the U.S economy was stronger than expected. The USD began to find strength again, and inflation data then added an extra punch by coming in strong again in February via the CPI results.

Btw, Consumer Price Index will be published today too from the U.S, and this will cause a reverberation for those attempting to day trade among waters filled with nervous financial houses who have their programmed algos ready to take advantage of hectic markets. Volatility the next handful of trading days is set to be wild. The Fed is not likely to raise interest rates by half a basis point on the 22nd of March, but if CPI numbers are stronger than anticipated today, this could cause a tremor and fear. Even if the Fed pauses for the moment, the prospects of raising interest rates again in the near future unless the banking sector shows it cannot sustain another round of Federal Fund increases is troublesome. Nothing like a complete lack of clarity for short-term traders to cause bedlam and a complex gauntlet of inflation statistics to make the Federal Reserve squirm.

Traders have to understand that if they are going to attempt to wager on the markets in the near-term that they are taking a huge risk. The use of leverage could provide solid profits on a winning bets via Forex, commodities or CFD wagers, but it could also wipe a trader completely out if they are caught by a violent wave. And the U.S Federal Reserve is not here to protect small traders, they frankly do not consider your results very much and likely believe you should not be wagering.

What the U.S government and its institutions like the Fed, Treasury and FDIC want to do is guard against systemic risks for the larger speculators – corporate traders, banks, hedge funds, V.C’s, etc. to make sure they do not go belly up and cause a global financial sink hole and long-term ruptures. The financial crisis of 2007 and 2008, the coronavirus pandemic starting in 2020 and the ongoing Ukrainian war have tested the markets and were likely enough for most of us to voice troubles. Now the prospects of a far-reaching banking crisis and illiquidity adding fuel to the fire are quite a combination of risk events usable as costly teaching moments. Do we seriously need another teaching moment however?

We are the little people and nobody sees us. We may yell, we may bellow our angst towards the system, but the system treats us as an afterthought. Day traders should keep this in mind as they bet in the coming days, because more gyrations are likely as a metaphoric ‘country club for institutional risk takers’ is given sanctuary. This as we minnows look up, shaking our heads in disbelief while our trading accounts flounder.