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  • #3,361
  • Mar 5, 2011 12:30pm Mar 5, 2011 12:30pm
Quoting lovejoy80
Here's a few questions for people interested correlations or how basic fundies affect the market and where the money flows etc:

1. Why did the NFP numbers cause stocks to fall?
2. What reaction did this broadly cause in FX majors (not each individual one...collectively) and why?
3. What reaction broadly occurred on the USD and why?
4. Could you have used this knowledge together with technical analysis to take some decent probability trades after NFP?

Not necessarily one right answer for all of these i.e. many views could be correct for some...
My, probably illogical, interpretation:

NFP numbers were largely as expected (according to FF anyway), with a slight improvement in jobless numbers. This should be good for the US economy, and thus the Dollar, but as The Bernanke has mentioned, he wants a recovery in jobs before bringing QE to a close, and raising rates. So I'm guessing stocks fell on the possibility of one/both of these things occuring at some point.

The Yen and Franc seemed to strengthen after NFP, as the stock market sold off, which usually means risk aversion, but if the US economy is looking healthier, not sure why this would happen, other than the obvious strife in the middle east, which also saw oil rising.

Thinking about it, it all looks simply down to the middle east problems. Oil up, stocks down, Yen/Franc up. The Dollar didn't really react much, other than to the usual illiquidity.
  • #3,362
  • Mar 7, 2011 3:04am Mar 7, 2011 3:04am
Quoting lovejoy80
Here's a few questions for people interested correlations or how basic fundies affect the market and where the money flows etc:

1. Why did the NFP numbers cause stocks to fall?
2. What reaction did this broadly cause in FX majors (not each individual one...collectively) and why?
3. What reaction broadly occurred on the USD and why?
4. Could you have used this knowledge together with technical analysis to take some decent probability trades after NFP?

Not necessarily one right answer for all of these i.e. many views could be correct for some of...
My views on this would be as follows:

1. Why did the NFP numbers cause stocks to fall?

The NFP headline number itself was in line with the forecast number - however the market had high expectations following a slew of good data from the US in the days leading up to the numbers (ISM, ADP, Unemployment claims all exceeded expectations), thus the headline number being in line with the forecast number was actually below the expectations that had been built up.

The unemployment rate came down - but this produced a mixed message as delving into the data the official size of he US labour force is shrinking meaning the percentage of Americans not working or even trying to join the work force is increasing.

Average earnings month on month decreased and was lower than expectations.

Thus overall the jobs report was very mixed and not what the market had expected following the ADP, ISM numbers etc.

Thus, this IMO is the main reasons why YM and EP sold off on Friday afternoon after the jobs report as equity markets care about US fundamentals ...so only focus is US numbers (at this particular moment in time i.e. after NFP).
  • #3,363
  • Mar 7, 2011 3:19am Mar 7, 2011 3:19am
Quoting lovejoy80
My views on this would be as follows:

1. Why did the NFP numbers cause stocks to fall?

The NFP headline number itself was in line with the forecast number -...
2. What reaction did this broadly cause in FX majors (not each individual one...collectively) and why?
3. What reaction broadly occurred on the USD and why?

The basic correlation between stocks and FX is that when stocks fall risk aversions is present and thus money flows in CHF, JPY, USD and Gold.

In the only real risk aversion 'event' this year (the Middle East Crisis) the USD did not strengthen like JPY, CHF and USDX did.

If you compare 4hour charts of the following:
- EP & YM
- UJ + other yen majors
- UCHF and GCHF/ECHF
- USDX

you can see that when YM and EP were falling:
- UJ fell
- UCHF fell
(thus CHF and JPY much stronger than the USD)
- GCHF, ECHF, major yen pairs - all fell thus money flowing into JPY and CHF across the board
- USDX - pretty much stagnant with if anything a small fall - USD didnt rise with CHF and JPY
- Gold - rose

Thus the movement of the FX pairs was inline with what we would expect in such a situation and the movement of the USD was again line with how it moved when the Middle East crisis was at the fore.

But why is the USD weak when equity markets are weak...

1. As stated in the anwer to question 1, equity markets care about US fundamentals ...so only focus is US numbers.

2. FX markets 'care' more about the broader picture and the fact worse than expected numbers means even higher chance QE2 will not be cut early before end of June and hence fundamentally USD is even weaker and thus when you compare fundamentally the USD where the chances of ending QE2 decrease with worse than expected with the EUR which are talking about raising interest rates last month you can see how NFP figures below expectatins cause the USD to fall instead of rise
  • #3,364
  • Mar 7, 2011 3:29am Mar 7, 2011 3:29am
Quoting lovejoy80
2. What reaction did this broadly cause in FX majors (not each individual one...collectively) and why?
3. What reaction broadly occurred on the USD and why?

The basic correlation between stocks and FX is that when...

4. Could you have used this knowledge together with technical analysis to take some decent probability trades after NFP?

Absolutely!

You can conclude from the views above that everything moved in a way that I expected.

Looking at technical setups to support this view the obvious trade was he 4HR BEOB on EP off a falling TL with a TP of the faily PPZ which was 1st time back to this area after the recent breakout above (scroll back through time on the daily and you'll see how nice that PPZ is).

So with the 4HR BEOB on EP forming, supporting fundamentals in terms of the NFP numbers themselves, looking at FX pairs, amongst others the best setups IMO were:

- UJ touch trade
- GJ 1HR PA
- AJ 4HR PA

All of these were extremely high probability trades as we had good technical setups plus confluence with correlations with both other similar pairs + intermarket correlations (EP) and supporting fundamental news (NFP numbers).
Attached Image(s) (click to enlarge)
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Click to Enlarge Name: aj - 4hr.jpg Size: 86 KB
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  • #3,365
  • Mar 7, 2011 11:46am Mar 7, 2011 11:46am
Hi Lovejoy, thanks for the insightful posts. I'm really starting to think more about this intermarket stuff. Still seems a little out of my league for the moment though - i guess the first step is to get some feeds on the go and start paying attention more to correlations which i have never even considered before. Took one trade today and have another order close to triggering. Thoughts?
Attached Image(s) (click to enlarge)
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  • #3,366
  • Mar 8, 2011 4:52am Mar 8, 2011 4:52am
Quoting Majestic12
Hi Lovejoy, thanks for the insightful posts. I'm really starting to think more about this intermarket stuff. Still seems a little out of my league for the moment though - i guess the first step is to get some feeds on the go and start paying attention more to correlations which i have never even considered before. Took one trade today and have another order close to triggering. Thoughts?
My view would be that the swing you've used on UJ is not really a proper swing high to low.

On GU, that is a good confluence area where price might rebound from, but I'd be looking for confluence elsewhere too if it were me, but as a pure technical setup I think it's miles better than the UJ from how I look at things.
  • #3,367
  • Mar 8, 2011 4:54am Mar 8, 2011 4:54am
Hi Lovejoy. Thanks much for your insights on basic fundamentals. I have a great deal I need to learn about fundamentals. I especially like the trade examples you gave based on NFP reactions. Having recently found your trade journal, I have read first few pages and found them to be very educational. I'm going to study all of your trades from the beginning.

Congrats on your trading success!
  • #3,368
  • Mar 8, 2011 11:06am Mar 8, 2011 11:06am
'confluence elsewhere'

Is this one of the things you would look for? Made exit for 20 pips which seemed logical at the time. Regretting it now though.
Attached Image(s) (click to enlarge)
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  • #3,369
  • Mar 8, 2011 2:58pm Mar 8, 2011 2:58pm
Quoting Majestic12
'confluence elsewhere'

Is this one of the things you would look for? Made exit for 20 pips which seemed logical at the time. Regretting it now though.
Yes, good work, I used the same confluence to trade AU.

Though I do think thats not a true swing for the fibs...I drew that on at first then thought it looks too much like trying to fudge it as its not a proper swing, but the clear daily resistance on USDX was good confluence for AU and EU setups that occurred at the same time.
  • #3,370
  • Mar 8, 2011 3:55pm Mar 8, 2011 3:55pm
I was temped to go long on the EURUSD, but it fell off so quickly this morning I believed there wouldn't be much movement in it left for this afternoon. I could have bagged a few pips, but I don't think staying out was a bad decision.

LoveJoy, where was your entry on the AUDUSD? Was it around 1.0070 or 1.0060?

That is about the only area I can see to get into the AUDUSD in hindsight mode.
  • #3,371
  • Mar 8, 2011 6:21pm Mar 8, 2011 6:21pm
Quoting unlv_tj
I was temped to go long on the EURUSD, but it fell off so quickly this morning I believed there wouldn't be much movement in it left for this afternoon. I could have bagged a few pips, but I don't think staying out was a bad decision.

LoveJoy, where was your entry on the AUDUSD? Was it around 1.0070 or 1.0060?

That is about the only area I can see to get into the AUDUSD in hindsight mode.
Entry was @ 1.0060...ppz + 61% fib, 25 pip SL.
  • #3,372
  • Mar 8, 2011 8:52pm Mar 8, 2011 8:52pm
Quoting lovejoy80
Entry was @ 1.0060...ppz + 61% fib, 25 pip SL.
Beautiful! Thank you for your help Lovejoy!
  • #3,373
  • Mar 9, 2011 7:31am Mar 9, 2011 7:31am
I like these correlations! snatched 20 pips from GU here with a 25 pip stop. Would you consider usdx as a stand alone setup LJ?.

Also is there anything to be gained from the fact that equities are choppy and ranging at the moment?

Can't wait to start experimenting with yen pairs when we some decent levels appear on the indice charts.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: 17. guw.dltt.gif Size: 22 KB
Click to Enlarge Name: usx.gif Size: 15 KB
  • #3,374
  • Mar 9, 2011 7:38am Mar 9, 2011 7:38am
Quoting Majestic12
I like these correlations! snatched 20 pips from GU here with a 25 pip stop. Would you consider usdx as a stand alone setup LJ?.

Also is there anything to be gained from the fact that equities are choppy and ranging at the moment?

Can't wait to start experimenting with yen pairs when we some decent levels appear on the indice charts.
Nice work, I was waiting for it to get higher...

I would trade USDX if there was a setup I liked, but most of the time I use it for confluence purposes....again was wating for USDX to shoot towards 61fib and for au, gu, eu, uchf to line up at the same time and none of them quite went to where I wanted them to get to.
Attached Image (click to enlarge)
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  • #3,375
  • Mar 9, 2011 9:36am Mar 9, 2011 9:36am
And back again. LJ, do you go deeper intraday like this to find 50/61 retraces, or do you prefer to stick to the setups that can be easily seen on a D1 chart?

Thanks

Attached Image (click to enlarge)
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  • #3,376
  • Mar 9, 2011 10:14am Mar 9, 2011 10:14am
EC- Stopped out. This setup was either not good enough or a had my stop too low at 30 pips. Looks like it may work now though. Maybe i should stay away from the minors unless the setup is extra special?

ECHF - Had my order in for a while but when price finally hit it at 2894's it was not filled due to a margin mistake on one of my brokers. Worked well though.

Thinking maybe i should stick to the majors.
Attached Image(s) (click to enlarge)
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Click to Enlarge Name: 19. ehw.dltt.jpg Size: 108 KB
  • #3,377
  • Mar 9, 2011 1:29pm Mar 9, 2011 1:29pm
Majestic, My EUR/CAD feed/chart looks different than yours. I took Pinbar long with stop below the wick. Still in trade, but not looking good tho.
Attached Image (click to enlarge)
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  • #3,378
  • Mar 9, 2011 1:33pm Mar 9, 2011 1:33pm
Hi ty, thats because we have a different broker and the 4 hour candles start and finish at differnent times. GL on the trade.
  • #3,379
  • Mar 9, 2011 2:07pm Mar 9, 2011 2:07pm
Majestic,

Take a look at the 4hr candles on both charts. One bottoms at about 1.3210 and the other at 1.3260.

Strange.

Those 50 pips would definitely change the angle of your trendline and how you managed this trade.
  • #3,380
  • Mar 9, 2011 2:10pm Mar 9, 2011 2:10pm
Quoting joe d
Majestic,

Take a look at the 4hr candles on both charts. One bottoms at about 1.3210 and the other at 1.3260.

Strange.

Those 50 pips would definitely change the angle of your trendline and how you managed this trade.

That's what I noticed as well Joe.
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