Ok, here's my sentiment analysis for the day.... I suggest anyone who is trying to understand how to better trade, that they review it all... but, if someone just wants to see what a summary and conclusion is... just go to the end.
However, Knowing what someone like me looks at to make these determinations is very important...anyone that I believe is seriuos about becoming a successful, discretionary day trader would be wise to review the entire analysis, if for no other reason than to learn one possible way of looking at the markets (one possible way that WORKS, mind you)
THE ANALYSIS:
Seems the biggest news of the day is that another QE is not in the near future. The worse than expected NFP was a big boost to the “more QE” rumors, and as I stated in a previous analysis, this is NOT bullish for risk markets, it is simply bearish for the Dollar (and risk will rise if priced against the dollar). With his statements, it negates the biggest sentiment reason for the rally in the first place, and a move back downward is extremely likely. This is supported now by the recent rally taking pressure off of what could have developed into a full blown short squeeze rally, but the markets are now much less vulnerable to such...at least for now.
Stock markets are heading lower as well, after the rally up to some fairly key areas of willing sellers.
China reduced it’s interest rate, but it is not enough from the “monetary supportive” camp to counteract bernake’s lack of enthusiasm for another near term QE. Also, china is due to report inflation and investment/output figures.... find out if this has come out, and if so, what hte result was. In fact, this seems to “confirm” market fears that the euro debt crisis is causing problems elsewhere...rather than as a sign of positive support for risk markets. China industrial output is seen probably rising 9.8% last month from the previous year...which would be slower than it has in 3 years.
Based on early currency market reactions, the yen seems to be stronger than the dollar as the “risk off” trade currency of preference.,...but watch for BoJ talks of course.... However, Japans GDP grew an annualized 4.7%... this beat preliminary estimates from japan of 4.1%, and the popular economic speculation of 4.5% growth. Japan really is doing quite nicely compared to the rest when viewed in this light.
Asian bond indexes are on the rise since the bernake speech... everything is pointing to risk off today.
It seems many central banks are being watched with an eye towards a more dovish monetary policy as they lower or look to possibly lower rates.
Germany is expected to release export data today, and the rumor is that exports fell in april. This seems to be the “next bad news” that the market is focusing on... however, the REAL driver is the lack of a U.S. QE on the horizon. It is looking like the popular number with economists is that german exports decreased about 0.7% from march.
Also, the AUD fell after data came out showing it posted a trade deficit for a 4th month in a row... this further boosts concerns that the risk off trading environment that has powered the markets since the poor NFP of last week is now at it’s end.
In summary: It seems fear is returning stronly to the markets... Risk off is the theme for the day, and unless I see a strong catalyst or correlated markets somehow rallying strongly today, It will be day I look to get short risk markets, against the usd and jpy. Since the BOJ isn’t meeting now, once the japanese markets and government close down (later in the london session, or during the U.S. session open) I will look to get short risk markets against the yen, should I have a chance to do so around the asian session ranges established today (or higher, if possible)
CONCLUSION: First part of the day, short risk against the USD... latter part of the day, short risk against the USD OR the JPY. This may be the most obvious trade opportunities of the week.
However, Knowing what someone like me looks at to make these determinations is very important...anyone that I believe is seriuos about becoming a successful, discretionary day trader would be wise to review the entire analysis, if for no other reason than to learn one possible way of looking at the markets (one possible way that WORKS, mind you)
THE ANALYSIS:
Seems the biggest news of the day is that another QE is not in the near future. The worse than expected NFP was a big boost to the “more QE” rumors, and as I stated in a previous analysis, this is NOT bullish for risk markets, it is simply bearish for the Dollar (and risk will rise if priced against the dollar). With his statements, it negates the biggest sentiment reason for the rally in the first place, and a move back downward is extremely likely. This is supported now by the recent rally taking pressure off of what could have developed into a full blown short squeeze rally, but the markets are now much less vulnerable to such...at least for now.
Stock markets are heading lower as well, after the rally up to some fairly key areas of willing sellers.
China reduced it’s interest rate, but it is not enough from the “monetary supportive” camp to counteract bernake’s lack of enthusiasm for another near term QE. Also, china is due to report inflation and investment/output figures.... find out if this has come out, and if so, what hte result was. In fact, this seems to “confirm” market fears that the euro debt crisis is causing problems elsewhere...rather than as a sign of positive support for risk markets. China industrial output is seen probably rising 9.8% last month from the previous year...which would be slower than it has in 3 years.
Based on early currency market reactions, the yen seems to be stronger than the dollar as the “risk off” trade currency of preference.,...but watch for BoJ talks of course.... However, Japans GDP grew an annualized 4.7%... this beat preliminary estimates from japan of 4.1%, and the popular economic speculation of 4.5% growth. Japan really is doing quite nicely compared to the rest when viewed in this light.
Asian bond indexes are on the rise since the bernake speech... everything is pointing to risk off today.
It seems many central banks are being watched with an eye towards a more dovish monetary policy as they lower or look to possibly lower rates.
Germany is expected to release export data today, and the rumor is that exports fell in april. This seems to be the “next bad news” that the market is focusing on... however, the REAL driver is the lack of a U.S. QE on the horizon. It is looking like the popular number with economists is that german exports decreased about 0.7% from march.
Also, the AUD fell after data came out showing it posted a trade deficit for a 4th month in a row... this further boosts concerns that the risk off trading environment that has powered the markets since the poor NFP of last week is now at it’s end.
In summary: It seems fear is returning stronly to the markets... Risk off is the theme for the day, and unless I see a strong catalyst or correlated markets somehow rallying strongly today, It will be day I look to get short risk markets, against the usd and jpy. Since the BOJ isn’t meeting now, once the japanese markets and government close down (later in the london session, or during the U.S. session open) I will look to get short risk markets against the yen, should I have a chance to do so around the asian session ranges established today (or higher, if possible)
CONCLUSION: First part of the day, short risk against the USD... latter part of the day, short risk against the USD OR the JPY. This may be the most obvious trade opportunities of the week.