Weekly Market Preview:
Chicago – Establishment media continues to use the above headline as though it’s something new every week. Far from that, it’s actually been SOP in financial markets for as long as anybody can remember. The difference lies solely in the fact Wall Street’s fortunes have (rightly or wrongly) become so intertwined with those of Main St.
To be sure, recent market action has brought up serious questions over an apparent “disconnect” between the two. This is also SOP if for no other reason that employment statistics tend to lag Wall Street which by its very nature must look forward to corporate earnings and the effect of Government prophylaxis down the road.
Unfortunately, recent employment numbers have shown the time lag to be significantly shorter in downturns than it is in recoveries. Such is the way of the world in the days of (“Live at Five”) instant media coverage.
For traders, this should be of no major concern beyond the fact that we ALL happen to exist within the same overall economic environment. That said, understanding the underlying eco-trend or the current position of the markets versus the economy within the “Grand Super-Cycle” or “Kondratieff Long Wave” can be supremely helpful when considering whether to trade the trend from the long or short side. It should be noted, these trends are of as many types and durations as are riptides in the sea. Think of it as the difference between “strategic” and “tactical” thinking in the two grandest games of all… Government and Warfare.
Macro-Economics are beyond the scope of this trade-centric discussion, but may bleed into subsequent reportage over time and may at some point even constitute the thrust of an entire report, but that remains to be seen.
For this week, a number of economic releases will rise above the others as we appear to be at a critical juncture from not only an economic cycle, but also Government interventionist and seasonal viewpoint.
Rather than get into chapter and verse over the current state of the economy, allow me to direct your attention to a single page online which pulls together graphic portrayals of the economic situation from myriad sources while updating automatically in a single venue. While these graphical portrayals may seem esoteric to the uninitiated, the vast majority follow a line or two of explanation along with an embedded link to more detailed discussions on each indicator. Many are also self explanatory and the premier benefit lies in the graphs themselves which not only show where we are (as of the last reporting release), but where we have been in the last decade or so.
A word about fundamental versus technical analyses.
The thrust of this and future missives will be fundamental in nature which many technicians consider this anathema to their unique skills and mind-set. Truth of the matter is, if one drills down deeply, even pro traders in the pits and on the Clearport OTC energy desks shun taking inordinate risks in event-driven markets such as these.
Of perhaps even more surprise to the reader, these same derivatives traders were telling me as recently as Thursday nite they were intending to begin the week flat not because the week is so rife with critical data releases but because in the energy space, everybody’s concerned over the beginning of RAMADAN given recent geo-political events simmering in Iran after the election riots. While these comments were made at an industry event by independent prop-traders, they were confirmed on Friday by a very close friend who happens to be the number 2 guy overseeing trading compliance issues for British Pete from Calgary in the north to the Mexican border in the south and working out of BP’s Hinsdale trading center (now fitting out the old CME trading floor for BP’s move downtown projected for late next year). Point is to believe the dogma that market technicals have already factored in ad hoc event-driven reactions such as these is to place your trading capital at risk in such ways even the pros aren’t willing to do with their firm’s almost limitless capital.
So – one needs be at least aware of such possibilities before deciding how to weight them in one’s own overall short term tactical thinking (consider fundamentals as your longer-term strategies and technicals as your shorter-term tactics). Both have a place in your overall trading discipline.
“All can see the tactics whereby I conquer, but none can see the strategy from which victory is evolved”.
(Sun-Tsu – “The Art of War” circa 500bc)
Data expected next week, including a second prelim. est. of 2Q GDP on Thursday, may be critical in gauging market resilience. The last estimate showed a 1.0 % contraction in the April-June period after a severe 6.4 % drop in Q1.
Expectations hover around -1.4% for Thursday’s release.
Anticipated rises in consumer confidence , July durable goods and new-home sales would further boost the overall tone, should all be realized in the event(s). Data on personal income and consumption remain substantially more volatile thus harder to predict though no less important.
Related Articles
No user responded in this post