Correlationcross
Prediction of the S&P500 and NIkkei based on financials and CPIIn the following content i will explain how you can forecast the market with CPI (inflation) and Financials:
If we look at our figure we can say a few things, i will assume them below:
1. ABN AMRO (a dutch Financial) is highly correlated to the NIKKEI225 index.
2. Since nearly May 2016 we can see that the CPI (inflation)-chart has change 5 times. If we look at the Nikkei225 index we can see a few things: when the inflation in the US rose, the Nikkei225 fell 4 out 5 ( a chance of 90% or mathematical: a chance of 0.900). Using maths we know that ABN AMRO has an statistic correlation of 0.70 < r < 0.90 (70% - 90%) to the Nikkei225.
Conclusion: The fInancials are following the NIkkei225, and in turn the Nikkei is following the US CPI (inflation) in a divergence/opposite movement.
3. We can use the inflaton from the US as a staircase for the movement in the S&P500 (on this moment a consolidating market)
Sources: Bloomberg Markets, ING Technical Analyses
NOTE: I don't make any predictions, making decisions based on my reports is at you'r own risk!
AUDUSD NZDUSD 5M - Correlation ArbitrageCorrelation arbitrage - Published 04.08.2016
Please change timeframe to 5 minutes.
I'm not recommending an arbitrage play at this time. I'm only trying to open up the eyes of traders to these 'arb' plays. AUD and NZD are high correlated due to their interlocking economiesand both trade at a fair spread to the USD. So when you see these pairs go their separat ways there is usually a way to profit.
First you have to look at a fairly low timeframe 5M does it for me, also when you look at the divergence always look at a long time graph (Tradingview isn't displaying enough data) minimum of 2 months of data.
See attach photo.
If you trade small enough you can afford to keep the position even it moves rather hard against you and you don't have to close a floating loss untill the pairs are correlated again.
TRADING CORRELATION PT 2- GBPUSD: SHORT CABLE ON NEG EUR$ CORR XOn the 1D time frame, a strong positive correlation relationship emerges - where previously on the 4h time-frame the correlation looked relationship-less and "noisy".
However, looking back at the Daily correlation over the last 2-3 years for GU and EU one noticeable and significant trend emerges -
A steep fall in correlation, either from positive-lower positive, or positive to negative, is historically ALWAYS followed shortly by a plummet/ Sell-off in GBP$.
Thus as we see below GU v EU correlation has been descending and has just turned negative - so in my opinion we should consider selling GU as if history holds true an aggressive sell off on the daily is close by .
*please see next article where i confirm this trend by looking at the Daily zoomed out*
