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Macro

Peace Headlines Are Here — But Markets Have Already Moved OnA Russia-Ukraine peace deal making headlines right now is historic news — politically and emotionally. But for the forex and commodities markets? The real money already left this story behind months ago. 🧠 Smart Money Knows: Markets Price in the Future, Not the Past Two years ago, the war sent shockwaves through oil, gas, wheat, and risk currencies. By late 2023, price action had already normalized — the "war premium" faded out quietly. Commodities stabilized. Forex volatility shifted. Safe havens lost their edge. Traders adapted, recalibrated, and moved on to new battlegrounds. Bottom Line: The market already priced in a future where this conflict would eventually fade — peace or no peace. 📊 What Actually Drives Forex Now While peace headlines grab attention, the real macro drivers today are: 🔥 Tariff escalation and global trade wars 🔥 Sticky inflation battles (core services inflation still high) 🔥 Central bank pivot games (Fed, ECB, BoJ) 🔥 Global growth fears (China slowdown, EU stagnation) This is where new money is flowing. Not into a two-year-old headline finally catching up. 🛡️ "Buy the Rumor, Sell the Fact" in Action For two years, markets have priced in an eventual end (or fade) to the Ukraine conflict. A peace agreement now? → It confirms expectations, not shocks them. → It may trigger a short-lived risk-on pop (EUR, AUD, NZD up, gold down) — → But unless it unleashes massive new money flows (unlikely), that pop gets sold. 🔥 Final Thought: If you're still trading the last war, you're already late. The next major moves won't come from peace headlines — they'll come from tariff escalations, inflation battles, and central bank pivots. Focus forward. That's where opportunity lives. 💬 Question for Serious Traders: Which macro theme are you really watching into summer 2025? Peace headlines... or the new fires already burning? Drop your insights below. 👇
Education
by natron
1
Behind the Curtain: Bitcoin’s Surprising Macro Triggers1. Introduction Bitcoin Futures (BTC), once viewed as a niche or speculative product, have now entered the macroeconomic spotlight. Traded on the CME and embraced by institutions through ETF exposure, BTC Futures reflect not only digital asset sentiment—but also evolving reactions to traditional economic forces. While many traders still associate Bitcoin with crypto-native catalysts, machine learning reveals a different story. Today, BTC responds dynamically to macro indicators like Treasury yields, labor data, and liquidity trends. In this article, we apply a Random Forest Regressor to historical data to uncover the top economic signals impacting Bitcoin Futures returns across daily, weekly, and monthly timeframes—some of which may surprise even seasoned macro traders. 2. Understanding Bitcoin Futures Contracts Bitcoin Futures provide institutional-grade access to BTC price movements—with efficient clearing and capital flexibility. o Standard BTC Futures (BTC): Tick Size: $5 per tick = $25 per tick per contract Initial Margin: ≈ $102,000 (subject to volatility) o Micro Bitcoin Futures (MBT): Contract Size: 1/50th the BTC size Tick Size: $5 = $0.50 per tick per contract Initial Margin: ≈ $2,000 BTC and MBT trade nearly 24 hours per day, five days a week, offering deep liquidity and expanding participation across hedge funds, asset managers, and active retail traders. 3. Daily Timeframe: Short-Term Macro Sensitivity Bitcoin’s volatility makes it highly reactive to daily data surprises, especially those affecting liquidity and rates. Velocity of Money (M2): This lesser-watched indicator captures how quickly money circulates. Rising velocity can signal renewed risk-taking, often leading to short-term BTC movements. A declining M2 velocity implies tightening conditions, potentially pressuring BTC as risk appetite contracts. 10-Year Treasury Yield: One of the most sensitive intraday indicators for BTC. Yield spikes make holding non-yielding assets like Bitcoin potentially less attractive. Declining yields could signal easing financial conditions, inviting capital back into crypto. Labor Force Participation Rate: While not a headline number, sudden shifts in labor force data can affect consumer confidence and policy tone—especially if they suggest a weakening economy. Bitcoin could react positively when data implies future easing. 4. Weekly Timeframe: Labor-Driven Market Reactions As BTC increasingly correlates with traditional markets, weekly economic data—especially related to labor—has become a mid-term directional driver. Initial Jobless Claims: Spikes in this metric can indicate rising economic stress. BTC could react defensively to rising claims, but may rally on drops, especially when seen as signs of stability returning. ISM Manufacturing Employment: This metric reflects hiring strength in the manufacturing sector. Slowing employment growth here could correlate with broader economic softening—something BTC traders can track as part of their risk sentiment gauge. Continuing Jobless Claims: Tracks the persistence of unemployment. Sustained increases can shake risk markets and pull BTC lower, while ongoing declines suggest an improving outlook, which could help BTC resume upward movement. 5. Monthly Timeframe: Macro Structural Themes Institutional positioning in Bitcoin increasingly aligns with high-impact monthly data. These indicators help shape longer-term views on liquidity, rate policy, and capital allocation: Unemployment Rate: A rising unemployment rate could shift market expectations toward a more accommodative monetary policy. Bitcoin, often viewed as a hedge against fiat debasement and monetary easing, can benefit from this shift. In contrast, a low and steady unemployment rate may pressure BTC as it reinforces the case for higher interest rates. 10-Year Treasury Yield (again): On a monthly basis, this repeats and become a cornerstone macro theme. Initial Jobless Claims (again): Rather than individual weekly prints, the broader trend reveals structural shifts in the labor market. 6. Style-Based Strategy Insights Bitcoin traders often span a wide range of styles—from short-term volatility hunters to long-duration macro allocators. Aligning indicator focus by style is essential: o Day Traders Zero in on M2 velocity and 10-Year Yield to time intraday reversals or continuation setups. Quick pivots in bond yields or liquidity metrics could coincide with BTC spikes. o Swing Traders Use Initial Jobless Claims and ISM Employment trends to track momentum for 3–10 day moves. Weekly data may help catch directional shifts before they appear in price charts. o Position Traders Monitor macro structure via Unemployment Rate, 10Y Yield, and Initial Claims. These traders align portfolios based on broader economic trends, often holding exposure through cycles. 7. Risk Management Commentary Bitcoin Futures demand tactical risk management: Use Micro BTC Contracts (MBT) to scale in or out of trades precisely. Expect volatility around macro data releases—set wider stops with volatility-adjusted sizing. Avoid over-positioning near major Fed meetings, CPI prints, or labor reports. Unlike legacy markets, BTC can make multi-percent intraday moves. A robust risk plan isn’t optional—it’s survival. 8. Conclusion Bitcoin has matured into a macro-responsive asset. What once moved on hype now responds to the pulse of the global economy. From M2 liquidity flows and interest rate expectations, to labor market stability, BTC Futures reflect institutional sentiment shaped by data. BTC’s role in the modern portfolio is still evolving. But one thing is clear: macro matters. And those who understand which indicators truly move Bitcoin can trade with more confidence and precision. Stay tuned for the next edition of the "Behind the Curtain" series as we decode the economic machinery behind another CME futures product. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com - This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
CME:BTC1!Education
by traddictiv
Behind the Curtain: Macro Indicators That Move the Yen1. Introduction Japanese Yen Futures (6J), traded on the CME, offer traders a window into one of the world’s most strategically important currencies. The yen is not just Japan’s currency—it’s also a barometer for global risk appetite, a funding vehicle for the carry trade, and a defensive asset when markets turn volatile. But what truly moves Yen Futures? While many traders fixate on central bank statements and geopolitical news, machine learning tells us that economic indicators quietly—but consistently—steer price action. In this article, we apply a Random Forest Regressor to reveal the top macroeconomic indicators driving 6J Futures across daily, weekly, and monthly timeframes, helping traders of all styles align their strategies with the deeper economic current. 2. Understanding Yen Futures Contracts Whether you’re trading institutional size or operating with a retail account, CME Group offers flexible exposure to the Japanese yen through two contracts: o Standard Japanese Yen Futures (6J): Contract Size: ¥12,500,000 Tick Size: 0.0000005 = $6.25 per tick Use Case: Institutional hedging, macro speculation, rate differential trading o Micro JPY/USD Futures (MJY): Contract Size: ¥1,250,000 Tick Size: 0.000001 = $1.25 per tick Use Case: Retail-sized access, position scaling, strategy testing o Margin Requirements: 6J: Approx. $3,300 per contract MJY: Approx. $330 per contract Both products offer deep liquidity and near 24-hour access. Traders use them to express views on interest rate divergence, U.S.-Japan trade dynamics, and global macro shifts—all while adjusting risk through contract size. 3. Daily Timeframe: Top Macro Catalysts Short-term movements in Yen Futures are heavily influenced by U.S. economic data and its impact on yield spreads and capital flow. Machine learning analysis ranks the following three as the most influential for daily returns: 10-Year Treasury Yield: The most sensitive indicator for the yen. Rising U.S. yields widen the U.S.-Japan rate gap, strengthening the dollar and weakening the yen. Drops in yields could create sharp yen rallies. U.S. Trade Balance: A narrowing trade deficit can support the USD via improved capital flow outlook, pressuring the yen. A wider deficit may signal weakening demand for USD, providing potential support for yen futures. Durable Goods Orders: A proxy for economic confidence and future investment. Strong orders suggest economic resilience, which tends to benefit the dollar. Weak numbers may point to a slowdown, prompting defensive yen buying. 4. Weekly Timeframe: Intermediate-Term Indicators Swing traders and macro tacticians often ride trends formed by mid-cycle economic shifts. On a weekly basis, these indicators matter most: Fed Funds Rate: As the foundation of U.S. interest rates, this policy tool steers the entire FX complex. Hawkish surprises can pressure yen futures; dovish turns could strengthen the yen as yield differentials narrow. 10-Year Treasury Yield (again): While impactful daily, the weekly trend gives traders a clearer view of long-term investor positioning and bond market sentiment. Sustained moves signal deeper macro shifts. ISM Manufacturing Employment: This labor-market-linked metric reflects production demand. A drop often precedes softening economic growth, which may boost the yen as traders reduce exposure to riskier assets. 5. Monthly Timeframe: Structural Macro Forces For position traders and macro investors, longer-term flows into the Japanese yen are shaped by broader inflationary trends, liquidity shifts, and housing demand. Machine learning surfaced the following as top monthly influences on Yen Futures: PPI: Processed Foods and Feeds: A unique upstream inflation gauge. Rising producer prices—especially in essentials like food—can increase expectations for tightening, influencing global yield differentials. For the yen, which thrives when inflation is low, surging PPI may drive USD demand and weaken the yen. M2 Money Supply: Reflects monetary liquidity. A sharp increase in M2 may spark inflation fears, sending interest rates—and the dollar—higher, pressuring the yen. Conversely, slower M2 growth can support the yen as global liquidity tightens. Housing Starts: Serves as a growth thermometer. Robust housing data suggests strong domestic demand in the U.S., favoring the dollar over the yen. Weakness in this sector may support yen strength as traders rotate defensively. 6. Trade Style Alignment with Macro Data Each indicator resonates differently depending on the trading style and timeframe: Day Traders: React to real-time changes in 10-Year Yields, Durable Goods Orders, and Trade Balance. These traders seek to capitalize on intraday volatility around economic releases that impact yield spreads and risk appetite. Swing Traders: Position around Fed Funds Rate changes, weekly shifts in Treasury yields, or deteriorating labor signals such as ISM Employment. Weekly data can establish trends that last multiple sessions, making it ideal for this style. Position Traders: Monitor PPI, M2, and Housing Starts for broader macro shifts. These traders align their exposure with long-term shifts in capital flow and inflation expectations, often holding positions for weeks or more. Whatever the style, syncing your trading plan with the data release calendar and macro backdrop can improve timing and conviction. 7. Risk Management The Japanese yen is a globally respected safe-haven currency, and its volatility often spikes during geopolitical stress or liquidity events. Risk must be managed proactively, especially in leveraged futures products. 8. Conclusion Japanese Yen Futures are a favorite among global macro traders because they reflect interest rate divergence, risk sentiment, and global liquidity flows. While headlines grab attention, data tells the real story. Stay tuned for the next installment of the "Behind the Curtain" series, where we continue uncovering what really moves the futures markets. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com - This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
CME:6J1!Education
by traddictiv
Behind the Curtain The Economic Pulse Behind Euro FX1. Introduction Euro FX Futures (6E), traded on the CME, offer traders exposure to the euro-dollar exchange rate with precision, liquidity, and leverage. Whether hedging European currency risk or speculating on macro shifts, Euro FX contracts remain a vital component of global currency markets. But what truly moves the euro? Beyond central bank meetings and headlines, the euro reacts sharply to macroeconomic data that signals growth, inflation, or risk appetite. Using a Random Forest Regressor, we explored how economic indicators correlate with Euro FX Futures returns across different timeframes. In this article, we uncover which metrics drive the euro daily, weekly, and monthly, offering traders a structured, data-backed approach to navigating the Euro FX landscape. 2. Understanding Euro FX Futures Contracts The CME offers two primary Euro FX Futures products: o Standard Euro FX Futures (6E): Contract Size: 125,000 € Tick Size: 0.000050 per euro = $6.25 per tick per contract Trading Hours: Nearly 24 hours, Sunday to Friday (US) o Micro Euro FX Futures (M6E): Contract Size: 12,500 € (1/10th the size of 6E) Tick Size: 0.0001 per euro = $1.25 per tick per contract Accessible to: Smaller accounts, strategy testers, and traders managing precise exposure o Margins: 6E Initial Margin: ≈ $2,600 per contract (subject to volatility) M6E Initial Margin: ≈ $260 per contract Whether trading full-size or micro contracts, Euro FX Futures offer capital-efficient access to one of the most liquid currency pairs globally. Traders benefit from leverage, scalability, and transparent pricing, with the ability to hedge or speculate on Euro FX trends across timeframes. 3. Daily Timeframe: Key Economic Indicators For day traders, short-term price action in the euro often hinges on rapidly released data that affects market sentiment and intraday flow. According to machine learning results, the top 3 daily drivers are: Housing Starts: Surging housing starts in the U.S. can signal economic strength and pressure the euro via stronger USD flows. Conversely, weaker construction activity may weaken the dollar and support the euro. Consumer Sentiment Index: A sentiment-driven metric that reflects household confidence. Optimistic consumers suggest robust consumption and a firm dollar, while pessimism may favor EUR strength on defensive rotation. Housing Price Index (HPI): Rising home prices can stoke inflation fears and central bank hawkishness, affecting yield differentials between the euro and the dollar. HPI moves often spark short-term FX volatility. 4. Weekly Timeframe: Key Economic Indicators Swing traders looking for trends spanning several sessions often lean on energy prices and labor data. Weekly insights from our Random Forest model show these three indicators as top drivers: WTI Crude Oil Prices: Oil prices affect global inflation and trade dynamics. Rising WTI can fuel EUR strength if it leads to USD weakness via inflation concerns or reduced real yields. Continuing Jobless Claims: An uptick in claims may suggest softening labor conditions in the U.S., potentially bullish for EUR as it implies slower Fed tightening or economic strain. Brent Crude Oil Prices: As the global benchmark, Brent’s influence on inflation and trade flows is significant. Sustained Brent rallies could create euro tailwinds through weakening dollar momentum. 5. Monthly Timeframe: Key Economic Indicators Position traders and institutional participants often focus on macroeconomic indicators with structural weight—those that influence monetary policy direction, capital flow, and long-term sentiment. The following three monthly indicators emerged as dominant forces shaping Euro FX Futures: Industrial Production: A cornerstone of economic output, rising industrial production reflects strong manufacturing activity. Strong U.S. numbers can support the dollar, while a slowdown may benefit the euro. Likewise, weaker European output could undermine EUR demand. Velocity of Money (M2): This metric reveals how quickly money is circulating in the economy. A rising M2 velocity suggests increased spending and inflationary pressures—potentially positive for the dollar and negative for the euro. Falling velocity signals stagnation and may shift flows into the euro as a lower-yield alternative. Initial Jobless Claims: While often viewed weekly, the monthly average could reveal structural labor market resilience. A rising trend may weaken the dollar, reinforcing EUR gains as expectations for interest rate cuts grow. 6. Strategy Alignment by Trading Style Each indicator offers unique insights depending on your approach to market participation: Day Traders: Focus on the immediacy of daily indicators like Housing Starts, Consumer Sentiment, and Housing Price Index. Swing Traders: Leverage weekly indicators like Crude Oil Prices and Continuing Claims to ride mid-term moves. Position Traders: Watch longer-term data such as Industrial Production and M2 Velocity. 7. Risk Management Currency futures provide access to high leverage and broad macro exposure. With that comes responsibility. Traders must actively manage position sizing, volatility exposure, and stop placement. Economic indicators inform price movement probabilities—not certainties—making risk protocols just as essential as trade entries. 8. Conclusion Euro FX Futures are shaped by a deep web of macroeconomic forces. From Consumer Sentiment and Oil Prices to Industrial Production and Money Velocity, each indicator tells part of the story behind Euro FX movement. Thanks to machine learning, we’ve spotlighted the most impactful data across timeframes, offering traders a framework to align their approach with the heartbeat of the market. As we continue the "Behind the Curtain" series, stay tuned for future editions uncovering the hidden economic forces behind other major futures markets. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com - This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
CME:6E1!Education
by traddictiv
Business CycleAll the credits to Ostium labs insights. Found here Intuition behind different indicators NFCI - NATIONAL FINANCIAL CONDITIONS INDEX Note y axis is inverted. Rising NFCI here suggests loosening of financial conditions. Btc outperform in loose conditions. DRTSCILM - NET % OF BANKS TIGHTENING LENDING STANDARDS Note y axis is inverted. This tracks changes in the willingness of banks to lend, where tightening lending standards is indicative of caution, whereas looser lending standards suggest economic confidence. Here the graph is inverted - a rise shows improving willingness to lend and a fall shows tighter lending standards. HYG Real time proxy for demand of junk bonds which is a good proxy for risk appetite in the market. Demand for junk bonds is correlated with the rest of the risk curve, with Bitcoin tending to outperform during periods of strength for HYG, and vice-versa. BAMLH0A0HYM2 - HY ICE CREDIT SPREADS Note y axis is inverted. This measures the premium demanded by investors over government bonds. As one would imagine, wider credit spreads mean that more yield is being demanded to invest in junk bonds vs safe bonds, which itself is suggestive of risk in the economy. Narrow spreads, meanwhile, are indicative of confidence. The graph is inverted such that the peaks are the tightest spread. If credit spreads are narrow, risk appetite is high, which means assets further out the risk curve benefit. This is also suggestive of expansion vs contraction in the business cycle, where widening spreads would be suggestive of downturn and narrowing spreads of continued growth. USMNO/USNMNO - US MANUFACTURING ORDERS / NON-MANUFACTURING ORDERS Manufacturing New Orders growing faster than Non-Manufacturing New Orders is generally indicative of early recovery in a business cycle, whereas late cycle dynamics are more heavily weighted towards services, largely driven by consumer spending and therefore this ratio would begin to contract, as Non-Manufacturing New Orders dominate. USBC0I - US PMI A composite of the Manufacturing and Services sectors in the US economy. Above 50 = expansion and below 50 = contraction. T10YIE - 10-YEAR INFLATION BREAKEVENS A market-based measure of average expected inflation over the next 10 years. Bitcoin likes it very much when the average expected inflation rate has bottomed and is trending higher and it generally underperforms when 10-year inflation breakevens are declining. Bitcoin also tends to front-run peaks in 10-year inflation breakevens by about 6-9 months, which in turn tend to peak after Global M2 YoY growth has peaked and is turning lower. This measure also is useful for understanding what is likely to happen to financial conditions - tighter after peaks and looser after bottoms. The clearest correlation here is not to the downside but the upside: when breakevens have bottomed out and cycle higher, Bitcoin tends to do very well indeed. DFII10 - 10-YEAR REAL YIELD Note y axis is inverted What is interesting here is that whilst there is not a strong correlation as real yields rise, there is a clearer correlation as real yields fall. Falling real yields tend to be supportive of Bitcoin, whilst rising real yields have occurred whilst BTC has outperformed and underperformed historically. This one is not as key for mapping out the market cycle, but still worth keeping an eye on.
BITSTAMP:BTCUSDEducation
by Oxfirefist
1
Stock feedback loopStock market is a adaptive system or a stock, with feedback loops (for inflow, outflow function). Where nobody knows the outcome or future, but feedbacks (corrections or resistance) gives tells (makes inflows or outflows). Without a common leader. Economists think in models (price is the result of supply-demand, or inflow-outflow) that helps to explain system behavior (short term moves), but models are just ideas to explain complex world (models work until they dont). System thinkers study the stock not aggregate behavior . Looking at markets trough perspective of "eco system" helps better understand the drivers or moving forces?
FOREXCOM:SPX500Education
by citsvar
FOMC Meeting Next Week: Bank of America Expects 50bp Rate Hike The Federal Open Market Committee (FOMC) is set to meet next week, and investors are eagerly anticipating the outcome of the meeting. Bank of America Global Research has discussed its expectations for the meeting, saying that it expects the Fed to raise its target range for the federal funds rate by 50bp in December to 4.25-4.5%. According to Bank of America, the Fed has telegraphed this move over the last few weeks through its communications. However, the more important question is where the Fed will go next. Bank of America expects the median forecast for 2023 to move up by 50bp to 5.125%, which is consistent with its terminal rate. The bank also expects the dot plot to show 100bp of cuts each in 2024 and 2025. In addition, Bank of America expects the macro projections in the Statement of Economic Projections (SEP) to be revised to show lower GDP growth and inflation than in September, and higher unemployment. At the press conference following the FOMC meeting, Bank of America expects Chair Powell to push back against easing in financial conditions and remind investors that a slower pace of hikes does not mean a lower terminal rate. The bank believes that Powell will stress that the Fed's job is far from done. Overall, Bank of America expects the FOMC meeting next week to be consistent with the Fed's previous communications and for there to be no major surprises or shifts in policy. Some Jargon Explained The Dot Plot The dot plot, also known as the Summary of Economic Projections (SEP), is a visual representation of Federal Reserve policymakers' individual forecasts for where they think key interest rates will be in the coming years. The dot plot shows the central tendency, or the middle of the range, of the individual forecasts for the federal funds rate. Each participant in the FOMC meeting provides their own individual forecast for the federal funds rate at the end of each calendar year, as well as over the longer run. These forecasts are then plotted on a chart, with the dots representing the individual forecasts and the lines connecting the dots indicating the median of the group's forecasts. The dot plot is released four times per year, along with the FOMC's policy statement, and provides insight into the collective thinking of FOMC members about the future path of interest rates. It is an important tool for investors to gauge the future direction of monetary policy. The Terminal Rate The terminal rate, also known as the long-run federal funds rate or the equilibrium real interest rate, is the interest rate that the Federal Reserve believes is consistent with the long-run health of the economy. It represents the level of the federal funds rate that is neither expansionary nor contractionary and is expected to prevail in the long run, once the economy has reached its full employment and price stability goals. The terminal rate is not a fixed number, and can change over time depending on a variety of factors such as changes in the underlying productivity and demographic trends of the economy. The Federal Reserve uses the terminal rate as a reference point when setting its short-term interest rate targets. In general, the terminal rate is expected to be lower than the current federal funds rate, as the Fed typically raises interest rates in the short run to prevent the economy from overheating and then lowers them in the long run to support economic growth. This means that the terminal rate can provide important information about the future direction of monetary policy.
TVC:US10YEducation
by JoelWarby
Pine Editor Shortcuts Hotkeys (All Hidden Included)For Those who have not explored, Here is the list of All the shortcut keys available. Very useful for Macros 'show settings menu' - "CONTROL - ," "command - , 'go to next error' - "ALT - e" "F4" 'go to previous error' - "ALT - SHIFT - e" "SHIFT - F4" 'select all' - "CONTROL - a" "command - a" 'center selection' - "CONTROL - l" 'go to line' - "CONTROL - l" "command - l" 'fold' - "ALT - l |or| CONTROL - F1" 'unfold' - "ALT - SHIFT - l |or| CONTROL - SHIFT - F1" 'toggle fold widget' - "F2" "F2" 'toggle parent fold widget' - "ALT - F2" "ALT - F2" 'fold all' - "CONTROL - command - option-0" 'fold other' - "ALT - 0" "command - option-0" 'unfold all' - "ALT - SHIFT - 0" "command-option-SHIFT - 0" 'find next' - "CONTROL - k" "command - g" 'find previous' - "CONTROL - SHIFT - k" "command-SHIFT - g" 'selector find next' - "ALT - k" "CONTROL - g" 'selector find previous' - "ALT - SHIFT - k" "CONTROL - SHIFT - g" 'find' - "CONTROL - F" "command - f" 'overwrite' - "insert" 'select to start' - "CONTROL - SHIFT - home" 'go to start' - "CONTROL - home" "command - home |or| command-UP" 'select UP' - "SHIFT - UP" "SHIFT - UP |or| CONTROL - SHIFT - p" 'go lineup' - "UP" "UP |or| CONTROL - p" 'select to end' - "CONTROL - SHIFT - end" 'go to end' - "CONTROL - end" "command - end |or| command-DOWN" 'select DOWN' - "SHIFT - DOWN" "SHIFT - DOWN |or| CONTROL - SHIFT - n" 'go line DOWN' - "DOWN" "DOWN |or| CONTROL - n" 'select word LEFT' - "CONTROL - SHIFT - LEFT" "option-SHIFT - LEFT" 'go to word LEFT' - "CONTROL - LEFT" "option - LEFT" 'select to line start' - "ALT - SHIFT - LEFT" 'go to line start' - "ALT - LEFT |or| home" 'select LEFT' - "SHIFT - LEFT" "SHIFT - LEFT |or| CONTROL - SHIFT - b" 'go to LEFT' - "LEFT" "LEFT |or| CONTROL - b" 'select word RIGHT' - "CONTROL - SHIFT - RIGHT" "option-SHIFT - RIGHT" 'go to word RIGHT' - "CONTROL - RIGHT" "option - RIGHT" 'select to line end' - "ALT - SHIFT - RIGHT" 'go to line end' - "ALT - RIGHT |or| end" 'select RIGHT' - "SHIFT - RIGHT" "SHIFT - RIGHT" 'go to RIGHT' - "RIGHT" "RIGHT |or| CONTROL - F" 'select page DOWN' - "SHIFT - pagedown" 'page DOWN' - "option - pagedown" 'go to page DOWN' - "pagedown" "pagedown |or| CONTROL - v" 'select page UP' - "SHIFT - pageup" 'page UP' - "option - pageup" 'go to page UP' - "pageup" 'scroll UP' - "CONTROL - UP" 'scroll DOWN' - "CONTROL - DOWN" 'select line start' - "SHIFT - home" 'select line end' - "SHIFT - end" 'toggle recording' - "CONTROL - ALT - e" "command-option-e" 'replay macro' - "CONTROL - SHIFT - e" "command-SHIFT - e" 'jump to matching' - "CONTROL - p" "CONTROL - p" 'select to matching' - "CONTROL - SHIFT - p" "CONTROL - SHIFT - p" 'expand to matching' - "CONTROL - SHIFT - m" "CONTROL - SHIFT - m" 'remove line' - "CONTROL - d" "command-d" 'duplicate selection' - "CONTROL - SHIFT - d" "command-SHIFT - d" 'sort lines' - "CONTROL - ALT - s" "command-ALT - s" 'toggle comment' - "CONTROL - /" "command-/" 'toggle block comment' - "CONTROL - SHIFT - /" "command-SHIFT - /" 'modify number UP' - "CONTROL - SHIFT - UP" "ALT - SHIFT - UP" 'modify number DOWN' - "CONTROL - SHIFT - DOWN" "ALT - SHIFT - DOWN" 'replace' - "CONTROL - h" "command-option-f" 'undo' - "CONTROL - z" "command-z" 'redo' - "CONTROL - SHIFT - z |or| CONTROL - y" 'copy lines UP' - "ALT - SHIFT - UP" "command-option-UP" 'move lines UP' - "ALT - UP" "option - UP" 'copy lines DOWN' - "ALT - SHIFT - DOWN" "command-option-DOWN" 'move lines DOWN' - "ALT - DOWN" "option-DOWN" 'del' - "delete" "delete |or| CONTROL - d |or| SHIFT - delete" 'backspace' - "SHIFT - backspace |or| backspace" 'cut or delete' - "SHIFT - delete" 'remove to line start' - "ALT - backspace" "command-backspace" 'remove to line end' - "ALT - delete" "CONTROL - k |or| command-delete" 'remove to line start hard' - "CONTROL - SHIFT - backspace" 'remove to line end hard' - "CONTROL - SHIFT - delete" 'remove word LEFT' - "CONTROL - backspace" 'remove word RIGHT' - "CONTROL - delete" "ALT - delete" 'outdent' - "SHIFT - tab" "SHIFT - tab" 'indent' - "tab" "tab" 'block outdent' - "CONTROL - [" "CONTROL - [" 'block indent' - "CONTROL - ]" "CONTROL - ]" 'split line' - "CONTROL - o" 'transpose letters' - "ALT - SHIFT - x" "CONTROL - t" 'to uppercase' - "CONTROL - u" "CONTROL - u" 'to lowercase' - "CONTROL - SHIFT - u" "CONTROL - SHIFT - u" 'expand to line' - "CONTROL - SHIFT - l" "command-SHIFT - l"
BEducation
by kaigouthro
JPY/USD Breaking Down the Macro Range: ObservationsJPY/USD: It’s not often that a macro breakdown of this magnitude presents itself, but Dollar/Yen is providing the opportunity to monitor and learn from just such a breakdown in real time. One of the more interesting mysteries of the last two decades has been the durability of the JPY. · Years of extremely accommodative monetary policy, Negative Interest Rate Policy (NIRP), Yield Curve Control (YCC) and Quantitative Easing (QE) have thoroughly disrupted fair value across JPY asset classes. · Government Debt at 266% of GDP is more than double the threshold above which countries are vulnerable to sovereign default. For more on sovereign debt levels see Reinhart and Rogoff “This Time is Different, Eight Centuries of Financial Folly.” A must read in my opinion. · They are an island nation devoid of energy assets. Higher energy prices increase the need for to swap Yen for Dollars in order to transact. While monetary policy has created the greatest macro danger, growing yield differentials and rising oil prices represent more immediate concerns. In particular, the YCC policy that pins Japanese 10 year rates at 25 bps even as rates are rising sharply across the rest of the developed markets is creating massive capital outflows. The YCC policy creates an arbitrage between Japanese and other DM rates. · A Japanese citizen can swap JPY for DX and buy a 10 year US Treasury at +300 bps carry advantage. · While collecting 300 bps in positive carry they own a currency (DX) far less likely to depreciate. Particularly as the Fed is tightening policy relative to the BOJ. · If DX appreciates, they can add the appreciation to the carry. This same dynamic can also be seen in institutional flows. With the yield differential so wide, the Yen Carry trade popular prior to the financial crisis is being implemented again. Investors can borrow Yen at very low rates, swap for higher yielding currencies and earn the carry. Many of us old guys remember the extreme pain generated by the unwind of this trade. This arbitrage results in significant outward bound capital flows but in spite of the Yen weakness the BOJ continues to reiterate its support of the YCC program. It should also be remembered that the BOJ and other official Japanese institutions have acquired so much of Japan’s sovereign float, that even if they lose their resolve and end YCC, rates probably won't rise enough to totally offset the rate differential. I suspect that a rally with this as a fundamental catalyst, while violent, would likely fail long before reversing the recent damage. Importantly the fundamental pressures add weight to the technical breakdown occurring on longer time frame charts. · JPY/USD is breaking out of a wide, upwardly slanting channel that has acted as support for over 30 years. · After testing the bottom of the channel, the market was unable to attract buyers and moved mostly laterally along the channel bottom. This lethargic behavior suggested a near complete lack of buying pressure/interest. · The six years spent moving laterally stored tremendous energy. Remember that the more time spent in a range, the more potential for movement exists. In essence, six years of buyers are now trapped. I would expect that these trapped buyers will now be sellers into strength and drive declines. · Wyckoff called this stored energy “cause” or count. The size of the count directly relates to the size of subsequent move as it reflects years of positioning, much of which must be adjusted for a new price regime. · While I haven’t done so for this piece, Point and Figure counts can be used to derive targets based on the width of the count. You can see an example of how this is done on the IWM post linked below. · The width of the channel (MM1 - MM2) can be projected lower (MM3) to arrive at an initial estimate of the potential move. This could create a measured move target as low as .003. · There is a monthly perspective MACD sell signal. The solid sell signal comes after multiple years of what I think of as flutter (I think George Lane first used the term to describe the behavior in his stochastic oscillator). · Following periods of oscillator flutter, a clear oscillator buy/sell signal coupled with a clear violation of price support/resistance can be extremely reliable. In shorter term perspectives the market would normally be considered oversold (both price and momentum). But breakouts from large macro ranges attract strong handed sellers and often oscillators and price both behave differently than they do in normal markets. This is particularly true in the early in the move. Specifically, oscillator readings become meaningless and short term price targets are regularly exceeded. This makes them extremely difficult and risky to trade in. At this point, to turn bullish on JYPD will require the development of overtly bullish price and volume behaviors or clear bottoming behaviors. Until then I will treat this as a bear market and use strategies and tactics appropriate for that environment. Good Trading: Stewart Taylor, CMT Chartered Market Technician Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
Education
by CMT_Association
30
Bond - Equity Correlation: The Most Important Question?TVC:US10Y TVC:NYA A reminder that falling bond yields are synonymous with higher bond prices. In other words, a downtrend in yield equates to a bull market in bonds. In January, bonds were still in a technical bull market as defined by the broad declining channel that had contained the 40 year bull market. In March the break of that downtrend turned the macro trend from bullish to neutral. Now, all that is left to define a bearish trend is a substantive violation of the 3.25% pivot zone. More recently, after testing the major macro pivot in the 3.25% zone, ten year Treasury yields have fallen sharply. The decline begs the question: Is the decline the result of the decades long negative correlation between equity and fixed income reasserting itself on the back of equity weakness or is it simply the beginning of a relief rally created by the combination of major support and a deeply oversold condition? While it is too soon to answer the question with any degree of certainty, it is clear that the outcome will have vitally important macro/portfolio implications. My guess is that if equities continue to weaken, that the bonds will continue to do better, but that without the bid provided by flight-to-quality that the outlook for bonds will quickly deteriorate as the oversold condition is alleviated. In future posts I will provide a deeper dive into the shorter term technical and fundamental outlook for bonds, but the posts from January 2, 11, and February 9 should provide adequate background for now. Early in the year I published a five part market overview detailing my macro technical and fundamental views of the "Big 4" asset classes: Equities, Rates, Commodities and the Dollar. As part of that series I discussed the importance of the correlation between equities and bonds and the central role falling inflation played in creating the relationship. This inverse correlation is a historical anomaly, yet it drives much modern portfolio construction. The idea is that when equities decline sharply, flight to quality in bonds pushes rates lower (bond prices higher). In other words, gains in the bond portion of the portfolio partially hedge losses in the equity portfolio. Variations of the 60/40 portfolio construction (60% equities and 40% bonds) and risk parity strategies are intended to shield investors from the worst of equity declines and indeed have had an admirable track record of reducing return volatility. After decades of success, the amount of assets devoted to this strategy, both overt and passive, is staggeringly huge. If the historic positive correlation is reasserting itself due to a change in the trend of inflation (stocks down and bonds down), the subsequent unwind has the potential to create massive dislocation. In my view, the combination of extremely negative real rates (nominal rates less inflation), an inflation cycle that has turned from virtuous to vicious, and equity markets, that at least at the index level, are extremely overvalued, may be setting the stage for a polarity switch in which bond prices and equity prices fall and rise together. That has clearly been the case so far this year. Year-to-date (YTD) the bond composite has returned approximately -12% while the S&P has returned approximately -1%. In other words, both sides of 60/40 and risk parity portfolios have lost considerable value. If the year were to end now, it would be a historically bad year for the strategy. Is the switch in correlation a short term phenomenon or the start of something much larger? To my mind, this is the central question for the remainder of this year. I think the next few months will be telling. There is also the tension between high inflation and the growing odds of a significant recession. Not only does high inflation serve as an inhibiter to real economic growth, but so will the Federal Reserves (Fed) effort to return inflation to its long term trend. Paul Volcker had to create twin recessions to beat the great inflation. I doubt very much that this Fed will escape without having to make a similar choice. Notes: It is worth remembering that in an economy that is overly financialized and debt burdened, rising rates often break the weakest link in the economic chain. Weak links can be systemically important institutions, sectors or simply a dramatic sell off in the equity markets. That markets are currently in distress is clear. What isn't clear is that the distress is enough to create a systemic risk event. Bonds and equities frequently move into and out of positive and negative correlation in shorter time frames. When I talk about historical correlation I am referring to the very long term. Good Trading: Stewart Taylor, CMT Chartered Market Technician Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
TVC:US10YEducation
by CMT_Association
26
How the Fed's Rate Hikes Affect the Market (or Not)In this post, I'll be demonstrating how the Fed's rate hikes affect the equity market (or how they don't), through historical examples and analyses of market psychology. This is an issue that has been going on for a while, and one that has caught the attention of all market participants. Yes, tapering and rate hikes aren’t necessarily good news, but I don’t think that 1) they necessarily indicate the beginning of a bear market/recession, and 2) the Fed is as powerful and influential as we think they are. This is not financial advice. This is for educational purposes only. Introduction - There’s a myth, a misconception in the market that the Fed allegedly rescues falling markets with rate cuts and easing measures, and vice versa for when the market is overheated. - This myth began in 1987 during Black Monday, when Alan Greenspan’s Fed cut rates after the crash, creating an impression that the Fed was directly responding to the stock market. - This is when the (mis)belief that the Fed would put a floor under a a falling market stuck. - Nevertheless, if we analyze the data, it actually demonstrates that the Fed stood pat for most corrections, and cutting cycles typically arrive during bear markets, just as coincidence. Historical Cases - There are only two occasions in history where the Fed’s cutting cycles corresponded with market lowpoints. - The first is the aforementioned Black Monday of 1987, and even for this case. - If we take a look at the situation back then, it’s not so much that the Fed made international moves that contributed to history, but rather that the bear market started amid a global liquidity crisis. - With excess liquidity, the rates should have been flat, or down, but that wasn’t the case. - Thus, the Fed’s rate cuts were vital to unfreezing credit and ensuring banks and clearing houses would have access to liquidity they needed, while the market was under severe stress. - The second occasion was the rate cut in 1998, when stocks were reacting to the collapse of Long-Term Capital Management (LTCM). - There was fear in the market that this collapse would lead to a domino effect, ending in a banking meltdown. - Generally, when people fear a banking contagion, liquidity in interbank funding markets dry up. - The Fed’s action to cut rates during this time helped keep money moving, and ensured that banks met their regulatory obligations. Market Psychology - In order to understand the recent discussion revolving around the importance of the Fed’s actions, we need to understand human nature. - People love finding narrative threads and grand explanations because we’re biologically wired to make sense of the world that way. - They confuse correlation and causation, and zero in on evidence that supports their view and shuns whatever suggests otherwise. - But it’s important to remember that in most cases, a fact that everyone knows, tends to be closer to myth than reality, and even if it weren’t a myth, the fact that everyone knows it does not give us an edge in the market. Summary Market shocks are caused by surprises. News about a pandemic or cyber attack that catches investors off guard is much riskier than macro events that are predictable and can be anticipated. Given that the markets are efficient (which I believe they are), it's rational to assume that news about the Fed's rate hikes, and people reaction to it are already priced in. While short term volatility is definitely expected, I believe that the likelihood of this event becoming a trigger for a multi-year recession is extremely unlikely. If you like this educational post, please make sure to like, and follow for more quality content! If you have any questions or comments, feel free to comment below! :)
TVC:IXICEducation
by Michael_Wang_Official
61
Macro study of U.S. economy - Market warning signals?They do not scream "SELL" just yet, but these indicators offer strong caution of further market correction. Please take some time to study the charts so you understand the story they tell. I am not an economist; I am a trader who has been learning more about bonds and macro indicators. (I have ignored the pandemic drop because it was extraneous to normal economic factors that move markets.) ISM Manufacturing > A leading indicator - below 50 indicates contraction > Peak expansion in 2021 seems to have ended, yet wages have risen - this will pinch corporate profits > If next month is lower, it indicates further slowdown (slowing expansion) > Texas manufacturing for Jan'22 showed concerning declines > Note the readings below 50 from Aug-Dec 2019 indicated a problem. Covid-19 did not cause markets to drop; it exaggerated the move. HYG high yield bond ETF > Includes many junk bonds - indicative of economy's credit situation (corporate, municipal, consumer) > Yellow lines show the beginning of a significant drop that indicated worsening credit conditions > Note the "valleys" below 85 match with SPY corrections > Will this keep dropping to 81-80? CCI - Consumer Confidence Index > A leading indication of people's optimism about economy > Red rectangles show significant drops that corresponded with SPY correction > Does most recent CCI drop reflect more SPY correction?
ECONOMICS:USCCIEducation
by OptionsRising
4
Macro Overview: Part 4: Dollar Index:I begin each year reviewing the long term technical positions of the "Big Four." 10 Year rates, SPX, Commodities, and the US Dollar. This is the fourth of the series. The fifth and final will attempt to tie the first four together into a organized macro view. Granted, macro doesn’t typically impact shorter term (swing, daily and weekly) trading, but developing a broad framework for understanding market context and to help recognize change in the investment environment is important. It seems that for most of my 40 year career there have been two core calls among many strategists. 1) Interest rates must go up and 2) The Dollar must go down. Neither trade/opinion has worked out. 1) Despite 40 years of policy and global payments angst, the Dollar Index remains range bound. a. The wide macro range, 70.70 - 121.02 has contained price action over most of my trading career. i. The market is roughly in the center of this range. b. The more immediate range, 85.25 - 103.82 has defined trading since late 2014. 2) The 88.25 - 103.82 range is by far the most important chart feature. a. Prices are squarely in the center of this range. b. Moves inside the bounds of the range are noise, and while they may represent trading opportunities they mean little in macro terms. c. Be very careful when commentators suggest that the Dollar is trending. I hear this all the time and at least in terms of macro, these adjustments mean little. 3) A monthly close outside the range would strongly suggest a major change in the fundamental backdrop. 4) I believe that volatility is more cyclical than price. Periods of low vol. set up conditions that often lead to explosive moves. a. Note that volatility has continually made lower highs as vol. has been gradually crushed out of the market over the last 30 years. b. A breakout of this pattern combined with a range break would suggest a disruption in the long term equilibrium and move DX from trendless to trending. 5) Dollar correlations to other assets (rates, equities and so forth) are mixed. Its been several years since I did the correlation work, but I really don't recall teasing out consistent long term tradable factors other than a weak correlation to commodities/gold. But, as a caveat, it has been years since I spent significant time and I was looking over longer periods. Impetus for a range break could be provided by the Federal Reserve increasing rates significantly faster/slower than current expectations or faster/slower than other central banks. Externally, a flight to safety resulting from disruption in emerging markets, armed conflict in Europe, or significant new domestic fiscal stimulus are all possibilities. When thinking about the Dollar its worth remembering that currency is a relative game. It's not only the domestic economy and monetary/fiscal policy, but those factors relative to the same factors inside our largest trading partners. Dollar Bottom Line: It’s a range trade until it ain't no more. Good Trading: Stewart Taylor, CMT Chartered Market Technician Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
TVC:DXYEducation
by CMT_Association
24
Big Four Macro Overview Part 3: Commodities: I begin each year reviewing the long term technical positions of the "Big Four." 10 Year rates, SPX, Commodities, and the US Dollar. This is the third of the series. Granted, macro doesn’t typically impact shorter term (swing, daily and weekly) trading, but developing a broad framework to build understanding of market context and to help recognize change in the environment is important. I think of commodities, particularly industrial commodities, as an economic lens. Granted, economic demand isn't the only driver of the commodity cycle, but its an important one. Since the collapse of the commodities super cycle in 2008, the Goldman Sachs Commodities index has traded in a broad range, bounded essentially by the low set during the financial crisis and the resultant 2011 high. It is also worth considering that the pandemic may be somewhat distorting normal interpretation in that at least a portion of the strength may be due to logistic constraints. 1. Price is currently in the (approximate) center of a 14 year range. 2. Lows at points 1, 2 and 3 were created by the great financial crisis in 2008, The oil glut in 2016, and the pandemic in 2020. Clearly this zone, while wide, provides a substantive support floor. 3. The most notable/useful current chart feature is the clear uptrend from the 2020 pandemic low. Until that uptrend is broken, the most immediate trend is to higher prices. In general higher commodities suggest continued economic growth. 4. A break of the uptrend would strongly suggest that economic demand was weakening or that supply constraints were loosening. I think economic demand is the stronger story. 5. It is notable that the MACD momentum oscillator is close to rolling over. a. I divide MACD into four trend states/quadrants (which I promise to will cover in future posts). MACD for this index is currently in the upper right quadrant. This is the quadrant where bullish momentum is weakening. 6. The combination of the uptrend and the lateral support from the October 2018 high and the December 2021 low (504) should act as support. A violation of the support confluence would strongly suggest that, at least for now, the uptrend was complete. Particularly if MACD moved onto a pure sell signal. 7. There is also a break of the trend-line labeled as A-B. We will cover the proper drawing and use in future posts but often, trend lines and what they mean are as much art as science. In this case, while interesting, I don't view it as particularly important. 8. Commodities deserve to be broken down into industrial and energy verses agriculture and softs. The GSCI is 54% energy, 13% Industrial metals, and 28% agricultural. I tend to watch energy and industrial commodities for economic insight. 9. I have also included a chart of JJM. This is a Total Return ETN of industrial metals. I have highlighted the buying climax that occurred in October. The climax behavior offers a strong clue that the uptrend is likely over, at least for now. In future posts I will cover ending action/climax action in depth. Commodities Bottom Line: The uptrend from the pandemic lows represents the economic recovery. But, while the trend higher is intact, it appears to be weakening. My sense of the economy is that the best growth has already occurred as the result of historically supportive fiscal and monetary. Now, both paths are turning restrictive (see the second part of this series for a more in depth discussion) and markets will likely reflect that reality. One of the expressions of that restriction will likely manifest in the form of weaker, particularly industrial, commodities. Good Trading: Stewart Taylor, CMT Chartered Market Technician Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
SP:SPGSCIEducation
by CMT_Association
33
BITCOIN IN PERSPECTIVE How many times have you heard that bitcoin is very expensive? How many times have you heard that Bitcoin is a Ponzi scheme? PERSPECTIVE. That is what is needed to combat some of the myths that surround this cryptocurrency, which will probably take part in the digital economy. Regarding the first question, is $1T too much capitalization for a finite, decentralized and immutable asset, which could gradually update our entire economy? I do not think so. Could a Ponzi scheme hold 1% of all global currency for more than a decade? I do not think so. So is Bitcoin too expensive from a macroeconomic perspective? I do not think so. Before you buy Bitcoin. What are your reasons? A decision without a plan is guided by emotions. Profitability and emotions don't get along very well. Perspective. See you later.
COINBASE:BTCUSDEducation
by CryptoAlkaline
What happens at each stage of the market cycle?This picture is of vital importance. It's something that you simply have to try to recognise when trading, whether you're multi asset, trading only crypto, FX, equities - it simply doesn't matter, since sentiment is indiscriminate and uncaring as to your asset class. In each section, we've got what is occurring at each stage. 1) Risk off. 2) The start of the crisis management 3) Risk on 4) Caution On the right hand side of each diagram shows what generally is bought during these periods, and how your portfolio *could* be constructed. And at the bottom, is what is generally sold off. What we always have to remember is this... 'How do we optimally construct our trade ideas/portfolio to make best use of the current market condition?' A trade that you think should come off under one market condition (especially if you're technicals focused) might not work, since the market context doesn't support the trade's success. Key to this is understand the beta of different asset classes to. Let's take FX. AUD, GBP, CAD and emerging market currencies are all high beta. Here's the equation to work out beta of say, EURUSD... Beta (EURUSD) = StdDev (EURUSD) / StdDev (market average) This implies that they move pretty heavily in line with risk sentiment and probably have outsized returns relative to the average. Countering this, EUR and JPY tend to be pretty low beta, predominantly due to their respective central bank policies. Being long AUD on a return to caution (as I believe we are in now, for example, on a technicals basis would probably be the incorrect thing to do. Priming yourself not necessarily to forecast, but to get to grips with where we are now and whether anything can change based on certain factors is absolutely vital. Thanks for reading, and let me know in the comments if you would like a full image of this!
BITSTAMP:BTCUSDEducation
by FinkPro
3
How to Choose the Right Stocks to Invest inIn this analysis, I'll be talking about the two approaches you can take in choosing the right stocks to invest in: the top down, and bottom up analysis methods. I have seen posts explaining the top down and bottom up analyses by time frames, but that's not correct. Time frames don't have anything to do with this approach. If you wish to check out my other educational post on how to properly use the fibonacci retracement tool (as many people get confused with this as well), click on the post below. Bottom Up Analysis Explained - The bottom up method is the method that the majority uses to analyze stocks. - The investor first chooses a stock that he wants to potentially invest in. - Then, he analyzes the financials of the company, and compares it with that of other companies in the same industry - Afterwards, he assesses the industry itself, and decides whether the industry as a whole is prominent and healthy - Lastly, he takes a look at the entire macroeconomic situation, and assess if this is the best time to get in the stock that he has his eyes on. Top Down Analysis Explained - With the top down method, everything is done in the same way, but in reverse. - The investor first asks himself what the macroeconomic situation is like, and which country he should invest in. - He even takes a look at factors like demographics change (which is actually much more important than most people think it is) - Afterwards, the investor takes a look at which sector he should invest in. - Once he chooses a sector, he goes through all the individual companies he could potentially have his money on - He goes through a list of the companies in that sector, and compares each and every one of them. - Once he chooses the most prominent company in the sector, he takes a look at the company's financials, and decides whether to invest or not. Conclusion Broadly speaking, there are two methods of approach in choosing the right stocks to invest in. Since most retail investors hardly conduct top-down analysis, it might be a good idea to test out different approaches in choosing winning stocks. If you like this educational post, please make sure to like, and follow for more quality content! If you have any questions or comments, feel free to comment below! :)
TVC:SPXEducation
by Michael_Wang_Official
3
How to consume the newsIf you’re new to this side of the markets, it may seem overwhelming at first. Don’t worry! "Macroeconomics" sounds way more complicated than it actually is. Getting involved & learning by osmosis really is the best way. Knowledge & understanding quickly build up. We are going to focus primarily on news flow and sentiment. It’s a broad topic, so let’s break it down. First, let's look at the information we are taking in. The Golden Rule: Leave the brainless browsing behind. Consume the news purposefully. - Data - Market Opinions/Newsletters - Market News - General News - Political News (Across the full political spectrum) It's easy to get distracted by "the news". There is a relentless battle for your attention. The news is basically a swamp of crap that we wade through every day. We are seeking out those valuable nuggets of information that might move a market. This Bruce Lee quote sums up the approach; Absorb what is useful. Discard what is not. Add what is uniquely your own. Every news source needs to be consumed for a reason. We are looking to; – Understand what the market is focusing on (and why). – Evaluate risk sentiment (Risk On or Risk Off). – Note headwinds and factors that may impact markets at a later date. Consume news from multiple sources. Make notes as you go. A picture of the market will develop. We'll come back to the notes later. A balanced informational diet is crucial and should comprise; General News & Politics (BBC, CNN, Fox, etc.) Markets (WSJ, FT, Bloomberg, Reuters etc.) Factual (Reuters) Economic Philosophy (Mises, Epsilon Theory etc.) Breaking News (Squawks, Data Releases etc.) Markets News (WSJ, FT, Bloomberg etc.) Markets General (Individuals offering commentary, opinions & research) News & Politics Centralise information into feeds wherever possible. An RSS reader is invaluable. There are hundreds of free & paid options. InoReader is free, feeds can be organised into groups, and they offer a mobile app. Diverting the fast-flowing news river into smaller, manageable streams is imperative. For example; Twitter Twitter is a fantastic resource to track the markets, monitor the news, and interact with experienced traders. It is also a wonderful way to waste time if used poorly. Dividing twitter into lists is far more effective. Much like the news groups, each list should have a purpose. Once the lists are established, Tweetdeck is a handy free tool that allows you to organise twitter lists onto one screen. You can subscribe to other users’ lists if they are publicly available. This News Feed is a good place to start. However, it it is easy enough to set up your own, and it's best not to be reliant on others in case they delete the lists... All of the above can be summarised into controlling our information “inputs”. Ensuring that every input is purposeful is the key to optimising news consumption. Next, we will use this optimised information stream to improve our trading outcomes. Those Inputs need to be Processed into Outputs. Save articles and data. Add notes. This information should be searchable and divided into broad categories so it can be found again. Applications like Evernote offer editable tags. Google Docs works too. Pocket is a great app to save/tag tweets and articles to read later. Instapaper is another. Let’s start with some basic techniques to assist in the processing. Organise The Information There are endless ways to organise, the important thing is to do it. Start looking at these at least a week or two in advance. The impact level assigned on economic calendars is unreliable. Different data points matters at different times. Prepare in advance and apply context. Assess the data point within the relevant market/macro theme. Make regular notes of market moves and match them to the news. The purpose of this market journal is to create a log of what “everyone knows” (more on this later). It is not a factual record of market history, more an exercise in matching the narrative, positioning, and emotions to the market moves as they evolve. Data Releases It is advisable to cross-check calendars too. Trading Economics have a very detailed calendar (and app), as does TradingView. Other popular calendars: DailyFX Calendar Investing.com Calendar Forex Factory Calendar Know your correlations This is your bullshit detector. If the headlines are “stock markets sell off amid fears of XYZ” and you note that the correlating fear gauges (US 10Y, Gold, Yen etc.) are relatively unmoved, perhaps this indicates that the fear is not as pronounced as reported. Why might this be? What happens next? Note it down. Is there an opportunity? Be aware that correlations frequently stretch, break, reverse etc... Correlations are not a reliable trading strategy to use in isolation. They are most useful to build an overall picture of what is happening in the markets. Interpret the news flow What are the probabilities of today’s news stories changing the overall pattern of capital flows? Apply the “so what?” principle to the news. Do the market moves make sense? Is there irrational emotion? Pay particular attention to the narratives attached to headlines such as; “market rallies on hope…” and “market falls on fears...”. The media must find/invent a reason for every market move, so take the reasons given with a fistful of salt and make realtime notes alongside them. Most of it will be nonsense. Keep asking… So what? Try predicting how today’s news flow will influence the following day’s trading. Assess what happens next. It is important to distinguish between predicting and forecasting, as this is often misunderstood. Predicting is simply a statement of an expected future outcome with no real justification. e.g. “Young footballer” scoring twice on their debut is “the next Messi” (long term conclusion drawn from a singular data point – very non-scientific). By contrast, Forecasting is an exercise in modelling the future, taking into account various scenarios and data points, and coming up with reasoned conclusions. A perfect example of this is Weather Forecasting. Multiple overlapping models and data points are used to forecast the weather. These forecasts are not always perfect, but they are usually not too far wrong. “All forecasts are predictions, but not all predictions are forecasts.” This is the key distinction. Predicting the impact of tomorrow’s news flow is not about being right. Nor is it about blindly trading those predictions. Well, why bother then?! This from Scott Galloway (and President Eisenhower) sums it up nicely; Eisenhower said, “Plans are worthless... but planning is indispensable.” Predictions are useless, but scenario planning is invaluable. These predictions are really just A/B tests. They only matter for the strategy and data behind them. Making these predictions, (and noting the reactions) is a simple way to gauge what the market is actually paying attention to. The US-China trade "deal" is a great example. The market used to pay attention to these "tensions" headlines. Stocks would sell off on "tensions" and rally on "trade talks progress". In 2020, there's barely a reaction either way. We are actively observing other market participants in order to anticipate their reactions under certain conditions. We are also monitoring the markets to see if they are reacting to events in a way that is consistent with our overall forecasts. Predicting is a vehicle to continually assess our own instinctive read of the market AND evaluate if a trade opportunity is developing. Forecasts and trade ideas are developed from the information derived from these predictions. The main purpose is to understand why traders are in their positions. Then we anticipate the events that will likely create a one-sided market... How could a market imbalance be corrected, or created? John Maynard Keynes described this challenge as the “newspaper beauty contest” back in 1935. It is part of the “Common Knowledge” game which is superbly explained by the guys at Epsilon Theory. Regardless of the specific techniques the individual trader uses, there are a few defining principles behind the processing stage. Organise Information Match the news to the market impact Understand current positioning Write: Journal The Past / Forecast The Future(s) Being organised and prepared in advance removes a lot of emotion from the decision. It promotes understanding and context-building. If most scenarios are already considered, the likelihood of making emotionally-charged decisions (i.e. poor trades) is greatly reduced. Writing promotes organised thinking. Writing forces us to challenge our ideas, and determine what is actually relevant. Or as author Stephen King puts it; “I write to find out what I think.” Precisely. Now, this approach might look like a lot of work. It may feel overwhelming. But it's all a matter of perspective. Think about it. The “usual” disorganised approach to news consumption is far more taxing. If we do not process the information properly, then the news just becomes a constant reminder of how little we know. This reinforces a feeling of uncertainty when it's time to make a decision. This also opens the door to unproductive self-reflection and a load of wasted time trying to figure out “what is wrong with me?” and “why do I keep doing this?”. This leads us nicely on to my love/hate relationship with... Trading Psychology In retail trading, a huge over-emphasis is placed on psychology & mindset “problems” instead of focusing on a proper diagnosis. Most of it is complete bull. Unfortunately, bullsh- sells. You do not need to start by “fixing your mindset” or any of the other things the trading psychology gurus recommend. A "strong mindset" is a product of actually doing the work. Certain aspects of psychology are definitely worth studying, especially those relating to decision making. This knowledge allows us to build processes to avoid falling into psychological traps. It also helps us identify when others have made poor decisions and become trapped (leading to a onesided market as they are forced to exit their trades). Slowing our thinking down is critical. System 1 (fast brain) operates automatically and quickly, with little or no effort and no sense of voluntary control. System 2 (slow brain) allocates attention to the effortful mental activities that demand it, including complex computations, choice and concentration. Let’s discuss an example. For many traders, their inner voice reads the headline “Iran Tensions” and jumps straight to; “Long Oil... I’m going to make so much money!”. Now, the Long Oil premise may be right under the circumstances. An interruption to oil supply should push oil prices higher. But that’s not even half of the equation to successfully trade this macro theme. We’ll come back to this example, but first let’s take a look at why this impulsiveness happens. There is a constant battle in our minds between the fast brain and slow brain. Thinking Fast & Slow” by Daniel Kahneman is a superb book to expand on this. The (very) shortened version; We can visualise this as two characters “living” in our mind. The Impulsive Child (S1) vs The Wise Parent (S2). Take a second to visualise each of these characters in your mind’s eye. Now put them into a trading scenario. If the impulsive child is in charge, they are all about that instant reward. They steam in, place the trade, and argue with the wise parent who tries to offer advice. Ego and conflict rise, they second guess themselves and mess up the execution. Doubly frustrating if it turns out to be a good trade idea. (It also opens the door to that unproductive “Why am I such a ….”, "there’s something wrong with me” thinking.) If the wise parent is in charge, the impulsive child is calmed, and those impulsive instincts are managed. Both systems work in harmony. The execution is smoother, the anxiety is reduced. The time spent “slow-thinking” shapes the impulses/instincts (fast-thinking) we experience when executing a trade. Ensuring that we follow a proper reasoning process prior to execution produces a higher probability trade, a less stressful execution, AND something tangible to review and improve upon for the next trade idea. Even if we got it wrong. It doesn't matter if the outcome is positive or negative... Feedback is our best friend... At the base are the foundational elements; Remembering & Understanding, (the raw information inputs). The Apply & Analyze stage is the bridge to the formation of the idea. Let’s call this “First Level Processing”. The Evaluation stage is the highest level processing filter; Attempting to disprove the idea or highlight the factors that are yet to be confirmed fully (and which of those are most likely to shift the probabilities in either direction). The Creation stage = the “final” decision(s). To conclude, let’s explore a decision framework and the outputs we are looking for. The framework is the process we use to arrive at the outputs. Outputs are decisions & actions. The decision to act; place a new trade, manage a trade or close a trade. Likewise, the decision NOT to act and wait for the conditions to set up. These decisions should always be made within a personalised framework. Let’s go back to the IRAN TENSIONS – LONG OIL example and show how the BT framework can be applied. Remember – Iranians attacked the U.S. Embassy. A few months ago they attacked Saudi Aramco. Tensions are rising. Understand – Iran is a major oil supplier. Apply – Any escalation in Iran will likely lead to an increase in oil prices due to disrupted supply... Analyse – How likely is a U.S military response to this attack? What other alternatives are there? Sanctions? Already in place. What impact would a military response (or lack of one) have on the oil market? How about any other markets? Evaluate – First thought is to position long oil. But is there any strong justification for being short oil currently? Any other reasons to be long oil? What is the current market consensus? How likely that this is already priced in? If the market is positioned short oil then the re-pricing will likely be sharper... Traders will be forced to exit their short positions (buying pressure) AND add longs (more buying pressure). If the market is already positioned long, then there are only new longs coming “late” to the party. The buying pressure is less pronounced and price will probably not increase by the same factor. I will base my price targets around this information. Create – Place trade: Long Oil anticipating an increase in tensions with Iran, and possible military response. Or... Hedge/Close/Reduce any open “risk on” positions, and/or positions highly correlated with oil such as NOK or CAD longs. If U.S. escalates, stay long. If U.S is constructive and things calm down, exit. This is extremely simplified but should serve to illustrate the idea. Any framework is simply a tool to ensure that the important components of the decision(s) have been considered. I chose Bloom’s Taxonomy as it is a good way to visualise the concept. There are loads of decision-making models and techniques to explore. Farnam Street covers these in detail in various posts/articles. So a decision framework helps ensure that the decision output is “good”. But... what makes a good decision? Marketing Professor Utpal Dholakia defines it as; “A good decision is one that is made deliberately and thoughtfully, considers and includes all relevant factors, is consistent with the individual’s philosophy and values, and can be explained clearly to significant others.” This is an excellent definition. Thanks Uptal! Now that we know what good decisions are, let’s get on with making them! Not so fast. This definition is an ideal. There is nothing wrong with using ideals to guide us, but how likely is it that any decision we make will consider all relevant factors? It’s entirely unrealistic to believe that we will always make good decisions. Us humans are imperfect in every way. We also live in an imperfect and uncertain world. Perfection and ideals are definitely not the world we operate in, especially in trading. Just ask those hedge funds how their “models” are holding up against the Corona Virus… So, rather than looking to be “right”, shouldn’t we set our sights a little lower? Perhaps we should aim to be “less wrong” instead? Well... Avoiding stupidity is often easier than seeking brilliance. The number one trading cliché is based around that same principle; “Cut Your Losses Short & Let Your Winners Run” Basically, Be “less wrong” and “more right”. Sounds so easy written down, but every trader knows this is the constant battle. How do we address this when building and improving our frameworks? Keep in mind the end goal. Our desired output; A well considered trade idea with defined action triggers. In other words, we aim to have a plan of action that produces confident execution. Regardless of the exact trading strategy, action triggers are a vital component of trading decisions. If “This” happens “Then” I will….. (Add To The Position/Tighten Stops/Scale Out/Exit). To quote Tom Dante; Know what you want to see. (Price Action/Data Point/News – The Triggers) Know where you want to see it. (At Price/Level/Zone) Know when you want to see it. (Active Trading Hours) A final point. For the evaluation, creation (and review) of the trade ideas it is imperative to produce testable (falsifiable) theories. When the Iran situation kicked off there were a few variations of this on Twitter; “Trump will go to war with Iran so he can distract from impeachment, reinforce his strongman image coming into the elections and get re-elected in 2020”. This sounds plausible, (and may in fact form part of Trump’s strategy), but it is a non-falsifiable statement. The ego gorges on this stuff. None of us can read Trump’s (or anyone else’s) mind. It’s that predicting vs forecasting again. Trading = Forecasting. Gambling = Predicting. All forecasts are predictions. Not all predictions are forecasts. All traders are gamblers, but not all gamblers are traders. Think I’ve nailed the clichés there. Ok, back to the point... The following extract (from this article about super-forecasters) reinforces the importance of testable hypotheses when attempting to forecast the future; “If I had to identify one particular thing, it is that whereas most people think of their beliefs as something very precious and self-defining, even sacred sometimes, super-forecasters tend to see their beliefs as testable hypotheses that should be revised in response to evidence,” Tetlock says. “That means they tend to be better belief-updaters… as news comes in and requires either moving a probability up or down.” Sounds just like trading to me. “A good forecaster is not smarter than everyone else, he merely has his ignorance better organised”. Thanks for reading.
Education
by FinkPro
39
Beat the Crypto Market & Earn Bitcoin by Trading Trends!Welcome to Crypto Stanley Trading! Our success over the last year as a group has been predicated on trading our tried and true group algorithm bot. Since the beginning, we have preached that in order to consistently beat the market, a trader must remove his or her emotions from the trade. By using the Crypto Stanley Trading signal bot, you can effectively remove your biases and trade mechanically, thus improving your overall odds of success. For those seeking to become a Crypto Stanley trader, you Crypto Stanley Trading System is a position based, trend trading strategy that looks to capture the “meat” (~80%) of a trend and ignore intra-day volatility. Its premise is simple: enter when the prevailing trend seems to be shifting and add to your position as you get additional confirmation of the trend reversal. From the start we aspire you to take action and trade the way YOU want to trade. Already a seasoned vet and want to take advantage of our trend trading signals? Do it. Eager to learn the complete trading system that has taken people with zero experience and turned them into full-time traders? Do it. Want access to the indicator in order to develop your own trading system? Do it.  Our group is open to ANYONE and EVERYONE willing to put in the time to change their financial lives. If you're interested in learning more, please message us for an invite to our Discord server!
BITMEX:BTCUSD.PEducation
by cryptostanleytrading