Market Types: The First Key to Forex System Development
We have all done it.
Embarked on the quest to find the Holy Grail of Forex trading – A system that produces consistent results week in week out with a limited drawdown and nicely upward sloping equity curve.
But there is a problem with the Holy Grail approach to system development that means the search leaves us more frustrated than enlightened.
And if you can understand that problem, then you will have the first key to Forex trading system development firmly within your grasp.
Market Types – the first key to Forex system development.
“Expecting the same system to work in all market types is the definition of insanity”
Market type refers to the different stages or states that a market flows through.
The market type concept was made popular by trading coach and psychologist Van Tharp in his books and courses. Tharp believes that while it is insanity to expect a system to work in all conditions, if you can define the market type then it is relatively easy to design a system that provides an edge in that specific market type.
Think about it.
If you are in a sideways volatile market should you be running your buy dips in a trend strategy? Or how many traders get blown out of the water trying to buy and hold a strong bear?
While there are up to 25 different market types according to Tharp, there are six that should be of primary consideration.
- Bull Normal
- Bull Volatile
- Bear Normal
- Bear Volatile
- Sideways Quiet
- Sideways Volatile
You can see market types in action if you study a price chart for a moment. You will notice that each currency pair is in constant flux. Sometimes it is trending nicely; at other times it coils into a tight range, or is choppy and volatile.
The core problem with most Forex Systems
The problem with most Forex systems (and incidentally why most Forex robots tend to fail in time) is that they are only designed for use on one market type.
If you instead shift your focus to identifying market types and then applying a system to that market type, you might find your Forex trading becomes more fruitful.
Awareness – How to identify the market types
Forex Market types are not so difficult to identify. Normally it’s just a matter of looking at a chart.
If the market is going up quietly then it is a bull normal market type. If it’s going down it’s in a bear normal. If it’s in a rapid descent or rapid ascent it’s a volatile market. If the price is oscillating between two support and resistance levels then it’s a sideways market. If the sideways range is wide then it’s sideways volatile, if it’s tight then the market type is sideways quiet.
The trick is remaining aware. Be centered enough that you can do the following.
- Notice the current market type
- Notice when that market type has changed
To assist in this there is a very useful tool you can use to help you identify the market type.
Market type identification tool: Bollinger Bands
To my mind the best tool to identify Forex market types is the Bollinger Bands.
The technique here is quite simple.
Bring up a chart and apply the Bollinger Bands.
Bollinger Bands are a volatility based indicator. When they contract it is a sign the market type is normal or quiet, and when they expand that is a sign that the market type is more volatile.
You can also use the Bollinger Band to determine direction. If the price is bouncing off either side of the band then the market is sideways, if it is hugging either the upper of lower band then you likely have either a bull or bear market type.
Look at the following EUR/NZD 30 minute chart and tell me what market types you can identify.
How did you go?
Here’s what I found:
You can see the Bollinger Bands contract into a sideways quiet, followed by a break out to a bear normal, into a bear volatile. The next part is a bit harder to classify but it could be bull volatile or sideways volatile. Next it moves into a sideways volatile followed by a sideways quiet and finally what I would call it a strong bull.
Now you can identify market types is there anything else you notice on the chart?
The secret sauce – Market type transitions.
Markets are like the ocean.
The primeval forces of human emotion drive the ebb and flow of the price just as the wild and unpredictable forces of Mother Nature drive the tides of the seas.
Like the ocean, the market transitions from calm to restless.
A stormy night clears into a sunny day.
Choppy foam settles into a peaceful blue-green glaze… or morphs into a squally and dangerous tempest.
Just as sideways volatile settles into sideways quiet and then transitions into a strong bull.
There is an edge if you understand market types, but there is a greater edge if you understand the probability of what the next market type will be.
If you know that historically more often than not a bull volatile ends in a bear volatile then you can plan accordingly.
Similarly if you understand that a sideways quiet usually results in a break out to a bull or bear then you could develop a system to capitalize on this knowledge.
Trading is a statistical game and knowing probabilities is important.
Forex Market types across time-frames
Some of you may be wondering which chart time-frame you should be looking at determine the market type.
The fact is all charts will display all market types.
Really it comes down to preference.
The lower the time-frame the more agile you need to be in adjusting to changes – and the more likely you will get fake-outs, so be wary.
Higher time-frames give you more time to adjust to changing conditions and your trading efficiency (trading without mistakes) will be higher.
Importantly, a higher time-frame is often the set-up for the lower time-frame.
For example, once you determine the market type on the weekly charts you can slide down to the daily or hourly charts to snipe for an entry.
Personally I like to define market direction on the weekly or daily charts, and then move to a lower time-frame like the 15 minute chart for an entry. Shorter term market types seem to show up pretty clearly on the 15 minute chart so it could be a good place to start.
As a tip, you might notice the market changes type at certain times of day. Knowing this can be very valuable for your trading. You might not want to take a range trading position on the London open for example.
Manage your stops based on market type
If you know that a bull volatile typically turns into a sideways or bear volatile then you can adjust your stop types based on that information.
For example you might switch to using a Parabolic SAR with a steep gradient that keeps your stop nice and tight in a bull or bear volatile market, or perhaps you limit your risk to one or two times your initial stop.
Having an appropriate exit strategy that is intelligently adjusted depending on market type is a good way to keep hold of your profits on a trade.
Systems for each market type
At the start of this post I mentioned that trying to develop a system that works in all market types is the metaphorical search for the Holy Grail.
Instead you could look to build a system that works well in each market type and switch between them as the market type changes.
A lot of work? Yes it is. But is it worth is? Definitely.
Here are a few rough concepts for strategies that tend to work in each market type.
Bull Normal – Buy and hold
In a bull normal Forex market type you can simply buy and hold with a trailing stop-loss. As long as the market type does not change this can be a pretty successful strategy.
Tip: Watch for a change to a volatile market. You might find that that the bull market is coming to an end and it’s a good time to tighten your stop.
Here is an example on the NZD/JPY on a daily chart. Notice the long bullish candles and widening Bollinger bands at the top of the chart signaling a move to a more volatile market type. Here you would tighten your stop.
Bull Volatile – Long swing trading
Bull volatile markets are suited to a more active trading style. Profit targets are the order of the day in this market type. Look for a pull back, a reversal and then find a logical profit taking objective on the long side. You may want to consider dropping to a lower timeframe to improve the risk/reward on the entry.
Here is a bull market that has turned volatile on the AUD/JPY 30 minute chart. See how a buy and hold approach would have struggled while profit targets would have helped you capture the majority of each swing.
Bear Normal – Sell and hold
Bear normal markets are the opposite of bull normal markets. Sell short and hold with a trailing stop to help capture the majority of the move.
The recent fall in the AUD from 1.06 cents to 88 cents is a good example of this market type in action.
Bear Volatile – Short swing trading
In currencies the bear volatile is the opposite of the Bull volatile (this is not so true if you are trading stocks). Try a short swing trading approach with a profit target that gives you a good risk to reward on your trade.
Sideways Quiet – Breakout
There are two ways (at least!) that you can trade a sideways quiet market.
You can move to a lower time frame and use a band trading strategy (like in the sideways volatile section below). This approach can be very lucrative if the currency pair stays in this market type for some time. There will be lots of 2:1 and 3:1 risk reward trades you can pick off in a row.
Often sideways quiet markets result in a strong break-out and trend. Instead of trading the sideways quiet you can instead stalk the shift to a new market type by trading breakouts.
A break-out strategy is not for the faint-hearted.
You will face fake-out and false breakout and then need to have the psychology to hold on for the big wins. But a break-out strategy that is executed with efficiency is perhaps one of the most powerful strategies in the Forex market where trends can last a long time.
You can see the break out from a sideways quiet market below on this 4 hour chart of the USD/HKD.
Sideways Volatile – Band trading
Sideways volatile markets can be targeted with a band trading approach.
In the below example on the CHF/JPY 30 minute chart I have replaced the Bollinger Bands with moving average envelopes and customized the settings to the timeframe and currency pair.
With envelopes you want the majority of action (90% or so) to be contained within the envelope.
Once the price touches an outer envelope, look for a reversal off a support and resistance level to give you a nice risk/reward on your trade.
Don’t throw the baby out with the bath water.
If you have a good system that works sometimes, don’t give up on it.
Instead, identify the Forex market types it performs well in, and only trade those.
It’s like playing golf.
You pull a different club out of the bag for each different scenario you face. You would never use a putter to hit a tee shot, or a driver when you are stuck in sand.
The same applies to trading.
Build a toolkit of strategies that perform well in different conditions and use them as appropriate, depending on the market type.
The Hunt for the Holy Grail
Van Tharp still believes in Holy Grail systems.
But his definition is different.
To Van, the Holy Grail is a system that performs exceptionally well in a particular market type.
Think of it this way. If you know that you are able to meet your trading objectives for a system operating in a certain market type, then all you need to do is hunt for the market type you want to trade.
Its like being a golfer who excels at putting, and only plays on the putting green – and still win golf tournaments.
In trading you can take this approach.
You make the rules of the game so if you only want to trade one market condition you can.
As a side note, one of the reasons I like AxiTrader is that it has low spreads on cross-rates (currency pairs like the EUR/AUD or GBP/CAD) and not just the majors. Having access to more currency pairs with viable spreads provides me with plenty of forex markets to go hunting for the conditions I like.
If you would like to practice trading on different market types you can get a free demo account here.
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Market Types: The First Key to Forex System Development
We have all done it. Embarked on the quest to find the Holy Grail of Forex trading – A system that produces consistent results week in week out with a limited drawdown and nicely upward sloping equity curve.
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Stocks in the US had an interesting night opening stronger, falling into the red then recovering for a pretty solid close. That sets up a better day for the ASX, and Asia in early trade today. That's despite Nymex crude trading briefly below $30 a barrel, copper dipped again and iron ore came under heavy selling pressure.
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Oil surged last night with the front contract almost 5% higher this morning at $29.74 in WTI terms. That and the promise of more easing by ECB president Mario Draghi helped stocks in Europe and the US rally and they point to a solid day on teh ASX today. The SPI 200 is up 25 points at 4,851.
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The ASX 200 and Nikkei were already under pressure as we approached midday, the Yuan fix and opening of Chinese stocks. But it was the release of weaker than expected Chinese lending data which really pushed sentiment back into negative territory taking prices for stocks, forex and commodities with it.
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The key now is trend line support coming in around the 0.7540 region.
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A big recovery in everything except oil last night. GBP traded down near 1.40, USDJPY was around 103.55, gold was at $1315, the Aussie in the low 73’s, the S&P 500 was down at 2050. Only oil stayed materially weaker.
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A Trump tweet storm, lower oil, stocks down, and a stronger dollar: Markets Wrap
We just might be seeing a turn - in stocks, and the US dollar.
The Australian dollar is higher buoyed by data and lack of US dollar follow through
Stronger data flow is supporting the Aussie as the US dollar takes a breather.
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The SPI enjoyed a decent start to Wednesday by heading up to a high of 4946, on the back of the improving risk outlook, although since then the mood has soured sharply with the SPI now trading 100 points lower, reaching a low of 4821, last seen on 25 August.
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Friday’s move by the Bank of Japan to ease policy, further underlined the recent dovish rhetoric from both the ECB and the US Fed and reignited the mood of positive risk sentiment. The markets took this as a green light to buy any risk associated assets that they could find in expectation of further policy easing to come, particularly from the ECB.
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Gold took off on Thursday and once 1200 resistance gave way there was no looking back as it headed to a high of 1263 before closing the session at near 1250, with Gold briefly overcoming the 2 ½ year descending trend resistance at 1250. We are now sitting right on this level and further gains could now see a move back to the session high and beyond.
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Although it has been a US holiday, stock futures have had a solid session, following on from a strong showing from Japanese/European stocks earlier in the day. The S+P is currently at 1885, and with both the 4 hour and daily charts both looking more positive we could see further constructive progress to the topside.
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WTI initially reacted positively to the news that Iran said that it will support any move to freeze output at the January levels, but later turned lower after an unexpected build up in U.S. inventories pushed stockpiles to near full storage capacity. The price action therefore saw an early squeeze up to 31.95, before reversing lower, to finish the US session near the lows, at 30.30.
Today in S&P, DJI, SPI, Gold, Silver & Oil - 23 Feb
Global equity markets have followed the lead of China (+2.3%) earlier on Monday, with US stocks finishing the day higher, by around 1.3%.
Today in S&P, DJI, SPI, Gold, Silver & Oil - 8 Mar
The ASX SPI had a strong start to the week, breaking above various levels of resistance in following commodity prices higher, and finished Monday at close to session highs of 5170.
Today in S&P, DJI, SPI, Gold, Silver & Oil - 14 Mar
US stocks finished strongly on Friday with the S+P breaking above the 2000 level in Asia and then not looking back as it headed on to new trend highs of 2021 in the US, where it ended the week.
Today in S&P, DJI, SPI, Gold, Silver & Oil - 15 Mar
Oil headed lower on Monday, falling by about 3% today due to concerns that the recent recovery has overshot itself, with U.S. crude stockpiles continuing to build and with Iran showing little interest in joining a freeze in production.
Today in S&P, DJI, SPI, Gold, Silver & Oil - 24 Mar
Oil fell by about 3% on after U.S crude stockpiles soared to record highs for the 6th week in a row, triple analysts' expectations, and re-awakening anxieties that an oil glut may be about to reverse the market's two-month rally. The EIA indicated that stockpiles rose 9.4 million barrels last week, a long way off the 3.1 million expectations.
Today in Indices and Commodities - 21 June
WTI climbed by 3% on Monday after polls showed a lower likelihood of the UK leaving the EU, finishing the US session just below the 50.00pb level. The daily momentum indicators look constructive, so a vote to remain in the EU would do the economic growth outlook no harm.
Today in Indices and Commodities - 13 Sep
Stocks have sharply reversed Friday’s losses, while the dollar is slightly weaker across the board and commodities have recovered their previous lost ground.
Markets in Focus - Crude Oil: Here's a sign the battle between the Saudi's and US Shale will be a long one
Crude oil has recovered off its multi-year lows around $26 a barrel in WTI terms after Saudi Arabia, Russia and others agreed to a production cap. But we are a long way from production cuts and the signs are that US shale oil is batoning down for a long fight.
Video: Market Morning - 3 Jan
The trend is your friend until it bends at the end. 2018 has opened as 2017 closed with stocks higher and the USD on the run.
Asia Markets Wrap: Euro consolidates, stocks red, as markets await payrolls
Stock markets in Asia reacted to the weakness in Europe and the United States by doing the natural thing today and hit the sell button. Forex traders unwound some of last night's moves but the market is poised and ready to react to the release of US non-farm payrolls tonight.
That, Mario Draghi's speech in New York and the OPEC meeting are huge events.
Asia Markets Wrap: Stocks and the US dollar higher after the Fed delivers a goldilocks rate hike
Stocks and the US dollar are surging in Asia after the US Federal Reserve delivered one of, if not the, most anticipated interest rate hikes in years. The fact that the Fed's statement used the word gradual was enough for stock traders in the US this morning and now Asia today to hit the buy button until it broke.
At the same time though Euro, Australian dollar and other pairs are under pressure from a stronger US dollar.
Asia Markets Wrap: Nikkei and USDJPY in a funk after BoJ surprise, ASX finishes higher
A huge day of central bank induced volatility today with the BoJ surprise announcement of an easing (kind of). That set the Yen and Nikkei flying and then crashing back to earth with a huge thud. Elsewhere across the region the ASX did really well all things considered and the Aussie dollar is a little better bid and along with the Euro and Pound holding above important support.
China has again weakened the Yuan and markets in Asia are in a funk
The continued tend to weaken the Yuan has ignited a massive risk-off move in markets today. Shanghai stocks are already closed having dropped 7% in the first 15 minutes of trade. Oil has lost 2%, and stocks around Asian together with US futures are lower. On forex markets the Aussie is under pressure and the Yen bid as the normal risk/safe haven flows do their work on AUDJPY.
Markets Morning: Panic, fear and loathing grip markets again
It was another bad night for stocks as the ructions in Asia markets went global again last night. The Dow closed down 390 points the S&P 500 lost 42 points and the SPI 200 dipped 53 to sit at 4,905 this morning.
The Aussie dollar is back at 70 cents, Euro has put in a stellar rally, the yen is similarly bid. Crude fell 2% last night but is off its lows while Gold rallied again.
Asia Markets Wrap: Tokyo stocks hit 3 month low, ASX drifts under weight of resource slide, AUDUSD lower
Another tough day for traders in Asia today. The Nikkei dropped more than 2.7% to the lowest level since late September. The ASX physical was similarly pressured as oil continued its slide under $31 a barrel. But the SPI200 higher.
On forex markets, the Aussie is down a little and the Euro is higher by around the same margin. USDJPY is a little lower on the day as is Sterling which is just holding 1.45.
Markets Morning: Crude oil the first black swan for 2016 after Saudi be-headings enrage Iran
The first trading day of the year is usually expected to be quiet but the weekend beheading of a prominent Shia cleric by the Saudi's has increased tension across the Middle East. Potentially this has important ramifications for the price of crude oil when markets open this morning.
Asia Markets Wrap: The bulls have it, stocks, the Australian dollar, USDJPY and even oil rallied today
The bulls have it today in Asia as another stable set for the Chinese Yuan combined with the better than expected export data from China today to lift the pall that hung over markets since the start of the year.
Stocks and the Aussie dollar ralllied, oil lifted and the markets are set up for a continuation of the positive attitude in Europe and the US tonight.
Asia Markets Wrap: China data on the weak side, markets rally risk is on
A very interesting day for traders in Asia today with a continuum from yesterday's optimism running into the reality of Chinese data that underscore market fears the economy is slowing and the Yuan needs to weaken.
That knocked the wind out of the positive early morning sentiment for risk assets But only for short-while before stocks, the Aussie dollar and overall risk appetite seemed to bounce back.
Markets Morning: Fed vice-chair Stan Fischer might have put a lid on US dollar strength
Fed vice-chair Stan Fischer highlighted overnight that 4 hikes from the Fed are not a lock in 2016.
That helped stocks recover much of their losses and undermined the US dollar overnight. The Aussie dollar lagged but it's waiting on the RBA.
Asia Markets Wrap: What a difference a day makes, stocks, oil iron ore and the Aussie dollar higher
AStocks rallied in Asia today and the majors consolidated their gains against the US dollar during trade. Crude oil was similarly well bid and gold is above the 200 day moving average.
Is this the reversal we had to have?
Markets Morning: Stocks falter after weak non-farms as risk and the Australian dollar go off
Stocks in the US were down and the ASX is pointed lower after the strangely confusing jobs report Friday. Also lower was crude oil which collapsed again, and over the week while the Aussie dollar reversed hard off it's Thursday night high.
Lunar new year celebrations will make Asian trading quiet.
Asia Markets Wrap: It's a bloodbath in Asia as the Nikkei, ASX, and $USDJPY get hammered
A tough day for markets in Asia today with the Nikkei hammered more than 5% lower, USDJPY breaking important support and teh ASX having its worst day since last September's weakness.
Will Europe and the US follow up tonight? Who knows. But the overall weakness in markets is not done yet.
Markets Morning: Stocks higher, oil folds as Saudi deal disappoints, and China has a big question to answer
Stocks had a good night in the US with the Dow, Nasdaq and S&P 500 all up strongly. That's left the SPI 200 up only slightly given that it had a good start to the week over the first two days and the US market undershot to a certain extent.
Crude is down after the Saudi/Russia deal underwhelmed while the US dollar is a little stronger except against the Yen.
Markets Morning: Stocks stall, crude falls, Gold and the Yen up again
The global risk rally ran into a wall overnight as markets hit obvious resistance and the fall in crude oil put weight on energy stocks on Wall Street. That saw the Dow is down around 0.25%, the S&P 500 0.5%, while in London the FTSE lost 1%. That sets up a weaker open for local stocks on the ASX this morning.
On forex markets the US dollar was stronger against the euro which is back below 1.11. The Aussie and CAD were also weaker as was USDJPY which is back in the low 113's. That's interesting given gold's rally.
Markets Morning: Stocks and Oil rally, S&P 500 breaking up and out of the 'W'
Stocks were dragged higher by a big leap in crude oil of $1.50 a barrel arouond 2pm US time. That left the Dow up more than 200 points for a 1.3% gain. The S&P 500 leapt 21 points to 1,951 while the Nasdaq jumped 40 points to 4,582.
That sets up a good day for the Aussie and the combination of risk on helped the CAD and USDJPY surge while the Aussie dollar recovered from yesterday's weakness.
Markets Morning: February ends on a sour note for stocks but gold and oil shine
Stocks were lower in the US even though China cuts its RRR by 0.5%. Some of that is central bank fatigue and some is a recognition that policy isn't effective at the moment. That weakness suggest lower levels again for the SPI200.
On forex markets Euro is under pressure as we get closer to the ECB meeting. Gold and the Yen are stronger suggesting markets, traders, are still worried.
Markets Morning: RBNZ rate cut knocked the Kiwi for six and dragged the Aussie back under 75 cents
The RBNZ surprised the market with a 25 bps rate cut leaving the door open for another move. That knocked the Kiwi sharply lower and dragged the Aussie dollar down. Elsewhere crude rallied hard, forex traders are waiting for the ECB and stocks pushed higher as the risk rally continued
Markets Morning: The divergence in the DAX and S&P 500 overnight is a warning for forex traders
The divergent price action between the DAX and the S&P 500 overnight speaks volumes of the looming risk for forex markets as the ECB and Fed head in different policy directions. The Aussie dollar pulled back as crude, iron ore, and copper dipped.
Markets Morning: Stocks stumble losing gains, while the US dollar comes under pressure again, gold surges
Stocks in the US couldn't hold their gains as traders are still wary below important resistance as earnings season begins. On forex markets the US dollar was weaker again but the pace of the Yen's fall has slowed. All the uncertainty though has supported gold.
Markets in focus - Australia: $AUDUSD supported by a 5.7% unemployment rate, RBA on hold
The Aussie dollar hasn't performed as well as might have been expected after another strong jobs report today. There are good reasons for that. But strong jobs and business survey data push back the chance of an RBA rate cut anytime soon and should underpin the Aussie. Especially against teh Euro.
Markets Morning: US dollar weaker, Euro above 1.15, gold breaks then falls, Aussie higher pre RBA
Stocks in the US and Europe were higher but the US dollar continues to lose ground across the board. With Euro above 1.15, USDJPY near 1.06 and the Kiwi above 70 cents the prospects for a big move from the Australian dollar after the RBA announcement are high. Elsewhere gold broke $1300, then fell and OPEC production data hit oil.
Markets in Focus - Forex: Is Japan Inc revising Yen forecasts a game changer for USDJPY?
It seems corporate Japan has cottoned onto a recognition that the grand trend of Yen weakness that accompanied the Abenomics rally in USDJPY is at an end and is hedging to lock in rates of around 1.05.
But the BoJ's pass last week increasing looks like another misstep. That's left traders free to look for the bank's maximum point of pain. That suggests USDJPY could have much further to fall yet.
Today in S&P, DJI, SPI, Gold, Silver and Oil - 13 Jan
Gold traded in slightly heavy fashion today given the diminished demand for safe haven assets but essentially unchanged after a rangebound 1083/99 session.
Today in S&P, DJI, SPI, Gold, Silver & Oil - 3 Feb
In the U.S, stock markets have gone into reverse and resumed their selloff by following the oil price lower, which has headed south as concerns continue to grow over the health of the global economy, causing traders to turn their heels against owning risk assets.
Risk aversion sends USD/JPY sharply lower. More to come?
Stock markets fell heavily today on the back of the unrelenting concerns of a global economic slowdown, while oil prices also headed lower following a meeting between Saudi Arabia and Venezuela failed to reassure investors of measures to bolster sagging prices. This led to increased demand for safe-haven assets, with the Yen and Gold being in particular demand.
Today in S&P, DJI, SPI, Gold, Silver & Oil - 11 Feb
It was a wild ride for the ASX SPI on Wednesday and after a brief move up to session highs of 4811, following on from the CBA profit release, the index turned sharply down, with both the banks and the miners under heavy pressure, to trade at 2 1/2 year lows of 4643, ahead of a solid bounce as the session wore on, to currently sit at 4730.
USD firm on some upbeat US data, stocks halt rally as corporate earnings disappoint
US Stock prices ticked lower today as traders reacted to some disappointing U.S. earnings reports and signs that Britain's decision to leave the EU could hurt other economies. At the same time the US$ rallied against most of its counterparts, underpinned by solid housing data.
Earlier in the session, the Kiwi was the focus in Asia, falling sharply after the Reserve Bank of New Zealand stepped up efforts to impose fresh curbs on a hot housing market - a move seen as raising the chance of a rate cut.
Today in Indices and Commodities - Dow and S&P at new Highs
US stocks gained on Wednesday with the S&P and the DJI both setting new record highs, as Microsoft's strong results boosted the indexes and marked the latest sign that U.S. corporate earnings season may be less dour than feared. With the momentum indicators for all stock indices looking positive, buying dips remains the general theme.
Today in Indices and Commodities - 27 July
Stocks generally remain rangebound but, while still close to trend/all-time highs both the S+P and the DJI may be showing signs of topping out, albeit possibly temporarily. The FOMC will decide the direction today. From a technical stance, the dailies could be getting toppish, so a cautious stance is required and the DJI appears to have been setting itself up for a head/shoulder top formation which could see it head lower.
Asia markets Wrap: More heavy selling on the Nikkei and ASX as $USDJPY falls again
It was another terrible day on the TSE as the nikkei collapsed to close down 2.3% at 15,713. That's better than a little while back when the index was trading at a low of 15,429. Likewise USDJPY is lower today down at 114.54 after hitting a high at 115.25 earlier today and a low of 114.27.
It's a continuation of this funk that traders have got themselves into as they wonder who's actually at the helm in global finance and whether the rudder still works
CHART: China's Yuan is at the weakest level since August right before two massive data releases
China is the world's second biggest economy. So it's no surprise that with that size comes some very important data points for traders. Arguably the two most influential data points that China releases each month are its trade and inflation data. Both of which are due out in the next 24 odd hours.
That has important implications for the Yuan rate and for markets more broadly.
Markets Morning: More volatility for Crude, Yuan, Aussie dollar and stock weakness continues
Another wild night for oil last night with Brent and WTI trading through big ranges but finishing mid range. Stocks in the US did something similar, although their range was one way, down. Europe had a very weak night and it all adds up to a negative point for the ASX this morning with the SPI200 down 21 points in overnight trade. The Australian dollar found support but remains pressured.
Asia Markets Wrap: Australian dollar slips as China lets the Yuan slip to 4 year lows
The Aussie was under a little pressure drifting lower along with more weakness in the Chinese Yuan and general stock falls across Asia ex-japan. Commodities remained under pressure and the Euro, Pound and Yen were all a little lower as well.
S&P futures aren't indicating much but European stocks look set to follow Asia lower. At the open at least. Crude is still hanging around the mid $36 region but copper has regained $2.10 a pound.
Asia Markets Wrap: Nikkei below 19,000, ASX under 5,000, Australian dollar recovers early weakness
It's a down day in Asia for stocks today with the Nikkei off more than 2% and closing below 19,000 for the first time in 5 weeks. The ASX200 is also incredibly weak with the market also off more than 2% for the weakest close since the September lows and the second weakest close since 2013.
There were more signs the PBOC is serious about helping the economy through a weaker Yuan with the lowest fix since 2011 while the Aussie dollar found support after an early selloff.
Asia Markets Wrap: A day of stock weakness and forex consolidation as traders await the Fed
A very interesting day in Asia trade today with the Nikkei down again, the ASX reversing early strength to close down 0.39%. That's the 6th day of losses in a row. Shanghai stocks are down as well while the Forex markets are mixed with the Euro trying to break up but the Aussie dollar rallied having failed so far.
Markets Morning: Stocks, commodities and Forex reverse after US dollar surge
It looks the question of whether stocks and the US dollar could both rally was answered overnight with stocks lower and the US dollar surging. At the close of US trade the big three indexes are all off around the 1.5% mark. The Australian dollar has fallen a similar amount, Euro less as it held support at 1.08 but Sterling is under 1.49 and the Yen is heading back toward 123.
On commodity markets crude is off 2.25% and back below $35 a barrel while gold around $1,050 having lost $21 overnight. That's pushing it back toward the bottom of its long-term down trend.
Asia Markets Wrap: A risk off day as stocks, Aussie and USDJPY head lower, Crude rallies
It was a tough day at the office for stock traders in Asia today with a combination of another weaker Chinese Yuan fix (6.50321), and the associated blowout in the USDCNH rate to a new recent high above 6.61, combining with a big miss on manufacturing PMI, and fears about an escalation in Middle East tensions to see risk go completely off.
Markets Morning: A sea of red as stocks, oil and the Aussie dollar crash
2016 continued with its terrible start overnight as oil collapsed down and through the recent low, stocks were in the red and the Australian dollar broke the uptrend from the lows below 69 cents back in 2015.
The Dow dropped 1.47%, the S&P 500 lost 1.3% and is back at 1990 but the SPI 200 is more sanguine having lost so much ground yesterday and is only down 5 points overnight at 5,070.
Markets Morning: Crude and stocks bounce lifting fear from markets
Markets had a much better time of it overnight with the rally in crude oil helping stocks in the US lift substantially higher. This helped overall sentiment across markets after European traders were infected with the fear that emanated out of Asia yesterday.
But much weakness was baked into the cake and this morning the Aussie is back just under 70 cents, the yen is weaker also as fear lifts, teh SPI 200 is pointing to a 40-50 point rally on teh ASX physical market today, and analysts are coming out of the woodwork to say BUY, not sell, BHP.
Markets Morning: Asian forex opening weaker after a sea of red in stocks and oil Friday
Forex markets in Asia have opened weaker this morning as traders bet on a continuation of the acute fear and risk aversion that gripped markets last week. The Australian, Kiwi and Canadian dollars are down around 0.5% or more.
That makes sense given these currencies are the commodity bloc and as a result the three are seen as proxies for risk appetite, global growth, China, and oil.
Asia Markets Wrap: It could have been worse...stocks, crude oil and forex markets back from the morning brink
It could have been so much worse today. Trade opened with forex markets under pressure. The Australian dollar made a low 0.6831 but it's rallied hard since then and is back above 69 cents. Likewise, the Canadian and Kiwi dollars are doing better than earlier in the day.
Crude oil and stock markets are also much improved from early weakness with the similar tail on the ASX. The SPI200 crashed to 4,705 before rallying to close just under the trend line from 2011 it broke down and though last week.
Markets Morning: Ugliness abounds, stocks a sea of red after crude crashes below $30 again
A sea of red on global markets after crude oil crashed dragging stocks across the globe lower. The ASX looks set for a weak day and the Aussie dollar is biased lower after the RBA set the doves loose yesterday.
Markets Morning: Yellen delivered a balanced outlook, worried on China, also $USDJPY continues to crash
It was another terrible day for stocks on the TSE and ASX traders in Europe took stocks back from recent lows. In the US, stocks finished flat to down after Fed chair Janet Yellen delivered a pretty measured performance.
On forex markets the Aussie dollar is at 71 cents again, Euro just below 1.13, Sterling a little above 1.45 but the big news story is USDJPY well below 114.
Janet Yellen will try to calm markets tonight - but can she?
Janet Yellen is heading up Capitol Hill tonight to give her semi-annual testimony before the House banking committee. With markets in a funk still and the global economic outlook uncertain this stacks up as one of the most important testimony's from a Fed chair in years.
Asia markets Wrap: $USDJPY now has a 112 handle, Hong Kong joins the selling, market funk eases
It was another day of action in Asia. But the reality is we're all waiting to see what US markets do and how they react to Janet Yellen's second testimony in as many days tonight.
Hong Kong stocks played catch-up while the USDJPY was hammered lower again and gold finally bested the $1200 an ounce mark.
Asia Markets Wrap; Risk appetite rising, but lets talk about the Yuan
Appalling trade data out of China and weaker than expected Japanese GDP today failed to dent what was a fairly good day for risk appetite in Asian markets. The Nikkei has surged more than 6% and the Shanghai composite is only down around 1.5% around lunch time. The ASX 200 is up 1.3%.
On forex and commodity markets USDJPY did react, but only just, to the weaker GDP data and it is up at 113.90 this afternoon. The Aussie dollar should be lower but it has put on 0.8% and is at 0.7155 while the Euro is near 1.12 and Sterling is at 1.4520. Oil's drop of 0.7% looks large but with prices so low these days that's only 20 cents a barrel or so. Gold is drifting back however as it continues to unwind some of its own overboughtness at the moment.
Markets Morning: The reversal continues, stocks up, Euro, Yen and Gold lower
The US was out for Presidents Day but that didn't stop their futures markets joining in on the solid rally that we saw ignite in Tokyo and spread westward to Frankfurt, Paris and London. That has helped the ASX build on yesterday's gains with the SPI 200 futures up 27 points or 0.6%. Crucially the SPI has bested the trendline resistance and looks biased higher yet.
On forex markets Mario Draghi promised to do more on the monetary policy front at the ECB's March meeting. That knocked the Euro back under 1.12 while the combination of weak GDP and the exhaustive selling from last week helped USDJPY hit a high of 114.72 last night. Amid this the Aussie is doing really well however still atop 71 cents.
Markets Morning: A day for the bears after Brexit, Crude OIl, Stocks and risk were all lower
Oil crashed 6% dragging stocks and the Aussie dollar lower. Brexit fears hit Sterling but Euro didnt benefit from safe haven flows as trader fear blow back from Brexit. Gold and the Yen were both solid while agricultural commodities had a mixed night.
Markets Morning: Stocks surge, Yen tanks, Aussie stronger and gold hangs tough
The S&P 500 broke up and through the top of the recent range as US data beat expectations even though it was still relatively weak. That's sends an important message about the rally and the fact that its still a recovery from recent lows.
The overall risk on tone that accompanied the stock rally saw USDJPY surge, the Aussie rally, but gold is still holding in.
Markets Morning: Australian dollar bid with Euro, Gold and Sterling as the US D falters and stocks rise
Traders are buying the Australian dollar and gold as these previously unloved assets gain on the back of renewed demand. The US dollar was a little weaker, stocks kept rallying but non-farm payrolls tonight is the key for the next week.
Markets Morning: Payrolls strong, US dollar weak, Australian dollar and commodities rocket higher
US non-farm payrolls crushed expectations. But that didn't help the US dollar which came under pressure from the Euro and an Aussie dollar that is now above 74 cents. Commodities loved US economic strength.
Markets Morning: Stocks stumble but commodities are on fire; AUDUSD near 75 cents
The AUDUSD near 75 cents, USDCAD in the low 1.32's and Crude oil up 5%. They were the key moves in a night where stocks stalled and Fed Vice Chair Stanley Fischer warned of renewed inflationary pressure.
Markets Morning: It's true, the risk rally is self correcting - stocks, crude and USDJPY lower
A night of risk off to follow the recent run of risk on as the Mr Miyagi market continues. Crude fell heavily, the S&P 500 dropped more than 1%, USDJPY is in the mid 112's yet the Aussie is solid - what a night!
Markets in Focus: Here's why the risk rally could be self correcting
The market rout of 2016 has given way to a recovery which in many traders minds has washed away the fears that lashed them just 4 short weeks ago. But like a dog chasing its tail the return of confidence brings its own risk of self-correction as it puts the Fed back in play.
Markets Morning: The US dollar is under pressure driving AUDUSD, Euro, Yen, and commodities higher - stocks got a lift too
The reverberations from the Fed yesterday morning continued with a weaker US dollar driving many pairs higher. The Aussie made a fresh 8 month high and commodities also benefitted from the weaker US dollar. Stocks rallied but the SPI 200 is yet to break.
Markets Morning: US dollar and stocks rally, crude falls, $AUDUSD back below 76 cents
The risk rally continued in US and European stocks over the weekend. That's helped the SPI200 rally but the physical ASX market needs to clear 5214 to kick higher. On forex markets the US dollar was a little firmer and the Aussie is back below 76 cents this morning. Crude reversed off the 200 day moving average.
Markets Morning: Fedspeaks weighs on the risk rally along with falling oil and a stronger US dollar
Fed speakers are unwinding the support Janet Yellen gave markets last week. That and the weakness in oil knocked the risk rally for 6 with commodity currencies like the Aussie the big losers.
Markets Morning: Non-farms Goldilocks print drives stocks and gives US dollar some strength
US non-farm payrolls printed in the goldilocks zone Friday which neither threatened Janet Yellen's dovishness nor the outlook for the US economy. That's good news for stocks trying to break higher. It's not terrible news for the US dollar either.
Markets Morning: The reversal of the reversal has begun - stocks in the red, USDJPY collapsed
Stocks were a sea of red last night as markets backed away from important resistance while the Yen roared knocked the US dollar and other currencies for six
Markets Morning: Crude is up again in Asia after a massive rally, all eyes on US earnings season which begins tonight
The Yen is still the primary focus of forex traders but it is crude oil with the most remarkable moves at the moment. Just a day before the release of the latest IEA forecasts it is up another 1.5% in early Asian trade. Elsewhere stocks around the globe are waiting on US earnings season which begins tonight.
Markets in Focus: Crude Oil Breakout
Coming just a few days after talks collapsed in Doha traders are likely scratching their heads at the surge in WTI and Brent Crude as they break higher. While fundamentally the price action may not make sense the markets inability to stay down on bad news means the bulls have control. But can this breakout last?
Markets in Focus - $AUDUSD: Getting crushed as deflation comes to Australia
The Australian dollar is getting crushed today after the release of headline CPI of -0.2% for the first quarter showed deflation has come to Australia. That puts pressure on the RBA to cut rates and with the speculative market the longest its been since September 2014 the risk of a big Aussie fall are growing.
Video: Market Morning - 13 Apr
There was big 3% surge in West Texas (WTI) crude overnight took it up through the 200 DMA for the first time since July 2014. The market could clearly be preempting a deal that the Saudis, Russians, Kuwaitis and Iraqis may be able to cobble together but the reality is a move above the 200 DMA is a really bullish sign.
Video: Market Mornings - 7 July
It could have been much worse overnight. But stocks and the Aussie dollar rallied as stronger then expected US data was a salve to the fear and weakness across markets in Asia and Europe.
Video: Market Morning - 11 Oct
Oil was sharply higher, buoying the Aussie dollar while stocks were supported by the presidential debate.
US$ under pressure ahead of Yellen testimony.
Risk aversion has driven the market direction for much of the session. The sharp fall in the Japanese Nikkei Index on Tuesday, and also in the price of oil, led to a rush to sell risk assets and to buy the safe haven currencies; the Yen and the CHF, which put both the US$ and the commodity bloc currencies under pressure.
Today in S&P, DJI, SPI, Gold, Silver & Oil - 2 Mar
Some positive US construction/manufacturing data has propelled US stocks head higher on Tuesday, with the S+P climbing from a 1920 low to overcome various areas of resistance, to finish on the highs at around 1975
Today in S&P, DJI, SPI, Gold, Silver & Oil - 4 Mar
The ASX SPI has followed in the wake of the other global indices had a positive session, reaching the resistance at 5080 (high 5086) and has finished on its highs.
Today in S&P, DJI, SPI, Gold, Silver & Oil - 11 Mar
Gold ended the day sharply higher after a volatile session, as Mario Draghi rattled markets with his conflicting comments following the ECB rate cut. After a brief dip to 1237, Gold rallied sharply, to reach 1273, closing the day near its highs.
Today in S&P, DJI, SPI, Gold, Silver & Oil - 17 Feb
Commodities enjoyed the outcome of the FOMC meeting and the decision to leave rates on hold. Gold was no exception, and after having held on to the 1226 support it rallied strongly, so far heading back to the 1262 pivot, with the chance of now heading back to the recent 1283 10 March high.
Today in Indices and Commodities - 22 July
US Stocks seem to be reaching a short term high and possibly showing a small sign of exhaustion after their 8% post-Brexit rally. The gains have been largely fueled by the idea that a Brexit would keep the Fed on the sidelines for the long-term but with the FOMC less than a week away, the market is beginning to have some second thoughts.
A rollercoaster rally for stocks after Brainard maintains the dovish mantra. US$ lower
The decision as to whether the Fed will raise interest rates at next week's FOMC meeting remains in doubt after Fed Governor Lael Brainard said that the central bank should avoid removing support for the U.S. economy too quickly. She said that she wanted to see a stronger trend in U.S. consumer spending as well as evidence of rising inflation before any move in interest rates, adding that the United States still looked vulnerable to economic weakness abroad.
Asia Markets Wrap: Crude is off again, Aussie stocks reverse early gains, all quiet on the forex front
An interesting session in Asia markets today with the weakness in Crude continuing given no adults are in charge and the market is going to be left to its own devices and find it's own level.
Forex was fairly quiet but with the natural consolidative tone continuing after the fractious trade on Thursday and Friday. On Stocks the ASX rallied hard but reversed while stocks in Tokyo have regressed from earlier futures rallies as well.
Markets Morning: Crude oil's crash drags the commodity complex and currencies lower
Crude oil crashed to its lowest level in 6 years as OPEC's decision to leave the price to market forces set in train a wave of selling that saw Nymex futures close down around 6% in the $37.50 region. That weakness drove stocks in the US, commodity markets more broadly and commodity currencies lower overnight.
It has also had possibly its most important global impact on bond markets and interest rates with long end bonds rallying hard.
Asia Markets Wrap: Yuan, Nikkei and ASX still drifting but forex traders calm
Stocks in Asia were mixed today with gains in Shanghai and Seoul but other markets were pressured. The Nikkei is again the big loser. But the ASX is also lower as is the Hang Seng. Over on forex markets, Euro has regained 1.09, the Aussie continues to cling to 72 cents and Sterling is holding 1.50, just.
Markets Morning: Stocks red, RBNZ cuts, Kiwi Rallies, Euro surges
Another big night for markets with oil roaring higher and then collapsing. The Euro surging up and through 1.10 dragging the Yen and Pound with it. Over on stocks it's a sea of red again as the Santa Claus rally recedes into the background. Europe had been up in afternoon trade and US markets opened up in the green but traders turned tail and hit the sell button. That's left the ASX pointing lower today.
Asia Markets Wrap: Australia's bumper jobs drives the dollar higher and stocks down
What a day for Australian markets today. The release of the unbelievable 71,400 increase in jobs during November certainly set the cat among the pigeons. That makes the two-month gain the best since 1988. Amazing.
The Australian dollar roared higher making a high around 0.7333 before pulling back just below 73 cents as I write at 4.13am GMT. But the ASX hated it and stocks are off more than 1%.
Asia Markets Wrap: Stocks do better than expected, Yuan slide slows, Crude oil is off again
It was an interesting day's trade in Asia today with a better than expected performance of stocks, stability for Euro even though the Spanish vote suggests some tough coalition talks head, lower crude oil prices again, and the smallest of hiatuses for the Yuans recent trend of depreciation.
Asia Markets Wrap: Aussie and Kiwi the standouts in trade today, stocks mixed
The Kiwi and Aussie were the standouts today with solid rallies but other forex and stock traders were more circumspect. Commodities look like they might be in for a positive run toward year's end, even with all the negativity.
Markets Morning: A good night for stocks, the US dollar, risk on sentiment firm
The US dollar was stronger last night with Euro below 1.13 and USDJPY hitting the mid 109 region. The Aussie is fairly quiet even though there was a general level of 'risk on' as stocks ripped higher in Europe and rallied strongly in the US. Today traders will be watching Australia's jobs report which could be a blockbuster and market mover.
Morning Markets: The US dollar is on the march as commodities and the $AUDUSD come under pressure
The US dollar was stronger overnight putting the Aussie, Yen and GBP under intense pressure. US dollar strength also weighed on commodities, which were also pressured by worries about Chinese and global growth.
Stocks were mixed but are in general becalmed in a range waiting for a breeze or a storm.
Video: Market Morning - 31 Mar
Interesting moves overnight, we've seen the Aussie trade over 77 cents for the first time since late June last year, stocks continue to rally and we've also seen the continued reverberations of Janet Yellen's speech yesterday.
Today in Indices and Commodities - 20 June
The S+P was unable to build on the late Thursday bounce on Friday, and sagged to a low of 2052 before closing at 2060. We could see a continuation of the choppy 2040/80 range in the days ahead of the Brexit vote, although with the dailies still looking negative I prefer to sell into rallies, with a SL placed above 2090.
Today in Indices and Commodities - 6 July
Commodities and Stocks have generally headed lower today as risk sentiment soured on the back of Brexit issues, which in turn have again raised concerns over the outlook for global growth. Oil is 4% lower, while Silver has seen a sharp 7.5% reversal from the week's high and US stocks fell by just under 1%.
