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someone PLEASE explain this market to me

  • #1
  • First Post: Aug 8, 2011 11:30am Aug 8, 2011 11:30am
Friday NFP: better numbers than anticipated...while not terrific, both the current number and the last two months were revised higher than expected. Assumption: Good for USD. Result: USD falls across the board.

Sunday S&P downgrade to US debt: Most "experts" have said it is a downgrade of the political process, but still find the US fiscal policy of some concern thus a downgrade AND negative outlook. Asumption: Bad for USD. Result: USD gaps down (expected) then rallies HARD. (EUR/USD almost 300 pips, GBP/USD 180 pips).

HUH? I've been doing this for some time now and understand the "market makers" are taking money away from us retailers...blah, blah, blah. What I don't understand is the BIG BOYS are also trading into this rally and were also fading the NFP....

I don't get it...if the fundamental analysis of the US economy is "negative" by the "experts" in not one but several rating agencies...and if the fundamental reports are increasingly poor to negative...WHY on earth is the USD rallying?

Someone please give me a lucid intelligent answer...if you have one...I know I certainly don't.
  • #2
  • Aug 8, 2011 12:09pm Aug 8, 2011 12:09pm
it's pure risk on/off play at the moment. Good data, stocks will rally, bonds fall, safe haven ccys (usd/chf/jpy) fall.
  • #3
  • Aug 8, 2011 12:38pm Aug 8, 2011 12:38pm
Quoting gspajon
Friday NFP: better numbers than anticipated...while not terrific, both the current number and the last two months were revised higher than expected. Assumption: Good for USD. Result: USD falls across the board.

Sunday S&P downgrade to US debt: Most "experts" have said it is a downgrade of the political process, but still find the US fiscal policy of some concern thus a downgrade AND negative outlook. Asumption: Bad for USD. Result: USD gaps down (expected) then rallies HARD. (EUR/USD almost 300 pips, GBP/USD 180 pips).

HUH? I've...
it was already priced in. It was not a sudden downgrade that was not expected, in fact everybody expected a downgrade sooner or later. Thus no real effect.

You need to position yourself before such things happen. You need to anticipate them.
  • #4
  • Aug 8, 2011 12:40pm Aug 8, 2011 12:40pm
Quoting Custos
it was already priced in. It was not a sudden downgrade that was not expected, in fact everybody expected a downgrade sooner or later. Thus no real effect.

You need to position yourself before such things happen. You need to anticipate them.
the move later in the day was nothing to do with nfp but the rumour of ecb buying italian bonds
  • #5
  • Aug 8, 2011 12:49pm Aug 8, 2011 12:49pm
Quoting sccz97
the move later in the day was nothing to do with nfp but the rumour of ecb buying italian bonds
that might also be.
  • #6
  • Aug 8, 2011 12:55pm Aug 8, 2011 12:55pm
Quoting gspajon
Friday NFP: better numbers than WHY on earth is the USD rallying?

Someone please give me a lucid intelligent answer...if you have one...I know I certainly don't.
you need to look at it in context of all the other currencies. While the $ might be rallying aagainst the euro, it's not against the swissie. AT the moment, everyone is worried about eruope and the potential collapse. the eropean govt's have pledgedd to use the EFSF to purchase anything and everythigni nthe secondary mkt should the need arise. the problem is .... there isnt' enough money in the fund and germany are against boosting the overall size. hence .... flight to safety ... $ is viewed as safer than the eur so eur$ will drop. chf is viewed as safer than $ so $chf will drop.

Add the S&P downgrade, the immediate reaction in $ is for it to weaken but a dgrade in the govt of the world reserve ccy coupled with the major risk off move in the last week has prompted investors to seek safe assets. Like it or not, USTs are still viewed as safer than say emerging markets and the only viable option in an illiquid and dysfunctioanl mkt. Ppl need to buy $ to purchase USTs, hence the bid under the $

hope that makes sense
  • #7
  • Aug 8, 2011 12:55pm Aug 8, 2011 12:55pm
Quoting gspajon
I don't get it...if the fundamental analysis of the US economy is "negative" by the "experts" in not one but several rating agencies...and if the fundamental reports are increasingly poor to negative...WHY on earth is the USD rallying?
It is rallying relative to some other currencies. Whatever happens in/to the US has global consequences. Investors might interpret data, for example, as "the next crisis/recession." Will it affect only the US? 'Course not. Nothing ever does, anymore.
We live in a very connected world, and if the US "falls," it will take others with it. In such global crises, investors prefer to have US$ than euro or GBP.

In addition, I agree of course that much of the "news" was already priced in. Look at longer-term charts: the USD isn't exactly breaking to new highs...

That's my take, anyway.

Cheers,
6p
  • #8
  • Aug 8, 2011 8:00pm Aug 8, 2011 8:00pm
Quoting Custos
You need to position yourself before such things happen. You need to anticipate them.
ok so what do you anticipate now? Is it a storm in a teacup or an entry into a persistent risk-off phase?

Buying opportunity in crude and weaker USdollar ahead I expect.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #9
  • Aug 8, 2011 8:19pm Aug 8, 2011 8:19pm
Quoting The Fool
ok so what do you anticipate now? .
In trading never anticipate anything, always trade what you see right now on the chart, not what you expect the market to do.
  • #10
  • Aug 8, 2011 8:33pm Aug 8, 2011 8:33pm
Quoting Mr Breakout
In trading never anticipate anything, always trade what you see right now on the chart, not what you expect the market to do.
Right, just open your trading platform and make a snap decision based on some indicators, or better yet, your gut. If your gut is queasy just flip a coin. By all means, don't spend any time considering, reflecting, analysing, or anything like that.... and, oh yeah, this is the main thing: go all in on every trade! Booyah!
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11
  • Aug 8, 2011 8:49pm Aug 8, 2011 8:49pm
Quoting The Fool
Right, just open your trading platform and make a snap decision based on some indicators, or better yet, your gut. If your gut is queasy just flip a coin. By all means, don't spend any time considering, reflecting, analysing, or anything like that.... and, oh yeah, this is the main thing: go all in on every trade! Booyah!
Very good, you have just described how losers trade.
  • #12
  • Aug 8, 2011 9:04pm Aug 8, 2011 9:04pm
... man ... FF should be known as a debating forum
  • #13
  • Aug 8, 2011 9:37pm Aug 8, 2011 9:37pm
When nfp is positive and usd falls, everyone has a reason for it. But when it rallies on positive nfp, everyone says it is BECAUSE of a positive nfp. Forget about trying to read news as bullish or bearish, think only about how things affect demand for that currency.
si hoc legere scis nimium eruditionis habes
  • #14
  • Aug 8, 2011 9:50pm Aug 8, 2011 9:50pm
Quoting gspajon
Friday NFP: better numbers than anticipated...while not terrific, both the current number and the last two months were revised higher than expected. Assumption: Good for USD. Result: USD falls across the board.

Sunday S&P downgrade to US debt: Most "experts" have said it is a downgrade of the political process, but still find the US fiscal policy of some concern thus a downgrade AND negative outlook. Asumption: Bad for USD. Result: USD gaps down (expected) then rallies HARD. (EUR/USD almost 300 pips, GBP/USD 180 pips).

HUH?...
I stopped trading fundamentals because of this kind of things. Either I don't get, or this thing is manipulated. Since i started trading based in techinicals I'm doing better.
  • #15
  • Aug 8, 2011 9:58pm Aug 8, 2011 9:58pm
Quoting Mr Breakout
Very good, you have just described how losers trade.
irony lost on you - what a surprise
"If The Fool persists in his Folly he will become wise." - William Blake
  • #16
  • Aug 8, 2011 10:00pm Aug 8, 2011 10:00pm
Quoting eagle4x
which makes fundamental analysis especially difficult and is why I'm a technical trader.
I would go even further Eagle4X, fundamental analysis is totally worthless, everything we need to know is already reflected in the price, end of story.

Fundamental "analysis" can, at best, explain the past.
  • #17
  • Aug 8, 2011 10:08pm Aug 8, 2011 10:08pm
Quoting Mr Breakout
fundamental analysis is totally worthless
This is what most people think in their first few years of trading. It's easy to understand drawing lines on a chart... but understanding the complexities of money flows and how they react to economic changes takes years of experience.
  • #18
  • Aug 8, 2011 10:14pm Aug 8, 2011 10:14pm
Quoting Custos
...You need to position yourself before such things happen. You need to anticipate them.
Perhaps you could loan me your crystal ball...mine doesn't work, which is why I am asking these questions...

DUH...every entry or exit is basically anticipation of what I think will likely happen in the market. If I know when the market was going to turn I'd wait for the very pip and put in a 10 pip stop loss and realize a 1000:1 risk-reward-ratio

Quoting numbnuts
When nfp is positive and usd falls, everyone has a reason for it. But when it rallies on positive nfp, everyone says it is BECAUSE of a positive nfp. Forget about trying to read news as bullish or bearish, think only about how things affect demand for that currency.
I understand that during the day there really is no "logic" to trading (especially in the pits) and that "reasons" are like a$$holes, everyone has one and they all stink. Looking at your suggestion, demand for US bonds rose today (Monday) AFTER the downgrade...I'm not sure your suggestion will work. Whether or not I think demand will rise or fall is of little consequence to the market.

Quoting sccz97
...Like it or not, USTs are still viewed as safer than say emerging markets and the only viable option in an illiquid and dysfunctioanl mkt. Ppl need to buy $ to purchase USTs, hence the bid under the $

hope that makes sense
I think this is the only thing that DOES make sense, although I am still stumped as to WHY UST's are still considered "safe". Especially when you consider not only current US debt...now increased to 16T but also when you consider unfunded future liabilities that will total more that 115 T within the next 10 years. Lets see congress just agreed to a 1T spending cut over those same 10 years and will start looking for another whopping 2T "soon". Even paying these debts with devalued currency it still seem insurmountable and likely to cause a financial failure.

I'm unable to understand why this makes the UST a "safe haven".
  • #19
  • Aug 8, 2011 10:21pm Aug 8, 2011 10:21pm
Quoting Goat
but understanding the complexities of money flows and how they react to economic changes takes years of experience.
Sure, that's why professors in economics are all billionaires.
  • #20
  • Aug 8, 2011 11:03pm Aug 8, 2011 11:03pm
No, that's why hedgefund managers are billionaires.
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