"We are getting to the stage whereby any negative numbers won't be taken too badly by the market because that will mean interest rates will have to remain low for longer," said Angus Campbell, head of sales at Capital Spreads
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I should mention, that there is abit of contradiction going on with the FTSE chart and the S&P 500 analysis (an thus, implying a similar scenario for Dow Jones)...I'll post another video on S&P analysis soon.Enjoy and remember, all comments are welcome. :)
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Trade financial markets for more than a week and you quickly realize at how finicky and temperamental they can be. One of our readers noted that, "The market is only a procession of 'now moments' ". A sentiment I wholeheartedly believe. That's why you have to accept the fact that whenever you trade you can get rolled by something totally unexpected. Trade long enough and you begin to understand that you cannot control your wins. You can only manage you losses.
This principle applies as much to banking profits as it does to taking stops. When you are ahead on the trade all you can do is determine how much you are willing lose off you peak profit position. Since you can never know ahead of time how far in the money the trade will go, all you can do is lock in profits along the way.
The best traders I know always scale out of their positions because they understand that trading is always the art of the probable rather than the domain of the certain. What makes trading so difficult for us is that it is much more like the invisible universe of quantum mechanics rather than the solid predictable world Newtonian physics we experience every day. We simply cannot "engineer" our way to profits in trading. The best we can do is try to contain risk one pip at a time.
At BK we always trail our stops and as result were able to capture a large portion of the EUR/JPY move before markets turned their attention elsewhere and the "procession of now moments" moved on. So while markets are chuck full of luck, trading them requires the steely discipline of a mercenary who leaves nothing to chance.
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The U.S. non-farm payrolls report has lived up to its reputation of being the most volatility inducing economic release for the foreign exchange market. To everyone’s disappointment, U.S. corporations cut 85k jobs in the month December after adding 4k jobs the previous month. Considering that investors were looking for a stronger report, the large degree of job losses sent the U.S. dollar tumbling against all the major currencies. However the initial sell-off in the dollar did not last long as the greenback recovered nearly all of its post payroll losses within the next hour and a half. Yet as bulls and bears battle it out, fundamentals eventually won with the dollar resuming its downtrend to end the day lower against all of the major currencies.
Payrolls Dash Hope for Speedy Recovery
The sell-off in the U.S. dollar, drop in bond yields and rally in U.S. stocks tell us one thing – which is that the key takeaway from today’s payroll report is the Federal Reserve won’t be raising interest rates anytime soon. Normally continued job losses would be negative for U.S. equities, but knowing that the labor market is still stronger than it was this time last year investors were simply relieved that the Fed has fewer reasons to tighten monetary policy. Overall, traders were sorely disappointed by the NFP release even though there was positive job growth in November. In an environment where 4.8 million people are claiming unemployment benefits, 4,000 new jobs hardly reflects a turnaround in the labor market, particularly if it is followed by 85k job losses in December. The unemployment rate remained unchanged at 10 percent but the 590k decline in household employment indicates that it would have been higher if not for workers dropping out of the labor force. In addition to the weak employment report, consumer credit also fell by a record $17.5B in November as banks reduce lending and consumers cut borrowing.
Positioning Into the Big Week Ahead
Expect more volatility in the U.S. dollar in the week ahead with the trade balance, Federal Reserve Beige Book report, retail sales consumer prices, Empire State Manufacturing Survey, industrial production and consumer confidence numbers due for release. Part of the reason why the dollar did not see a larger decline may be due to the fact that consumer spending is expected to be strong following the solid ICSC and Redbook chain store sales reports. Higher oil prices could also prop up inflationary pressures while the improvements in the labor market could bolster consumer confidence. Meanwhile as of this past Tuesday, futures traders increased their short EUR/USD, GBP/USD and long USD/JPY positions. It is likely that they have pared those positions following today’s NFP report. However, despite the resilience of the dollar earlier this week, futures traders increased their long AUD/USD and short USD/CAD positions. This suggests that if the dollar continues to sell off in the coming week, the EUR/USD could see steeper gains than the AUD/USD.
What the First 5 Days of the Trading Year Tell Us
Finally, there is an old saying that how stocks perform in the first 5 trading days of the year will determine how it trades for the entire year. If that is true, then 2010 should be a good year for U.S. equities since stocks hit fresh 15 month highs today. If the relationship between currencies and equities is sustained, then higher stock values should help to bolster risk appetite, which would be positive for high yielding currencies and negative for low yield funding currencies like the Japanese Yen.
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By Chief Market Strategist Gareth Soloway on January 8th, 2010 1:02pm Eastern Time
As the markets float slightly to the downside, the market continues to digest the Non Farm Payrolls and Unemployment data from this morning. Non Farm Payrolls for December dropped by 85,000. This was slightly below estimates as many analysts had expected a positive growth in the jobs number. The November Non Farm Payroll number was adjusted slightly to a positive number. While overall, this report was not what many were hoping for, the real drama should be the unemployment rate.
While at first glance, the unemployment rate stayed at 10%, the same as in November, the key to this number is looking at how many people took themselves out of the work force. This number was 600,000+. That means that if those people were still looking for jobs, the unemployment rate would have been close to 10.5%. What causes people to take themselves out of considering a job or looking for a job? The easy answer is lack of jobs and the holidays. When someone searches and searches for a job for months and finds nothing, they may just stop looking for a job. In addition, the holidays are a time when most people think companies are not hiring and people spend more time with their families. That can also be a key to excluding oneself from looking for a job. As soon as someone stops looking, they are not considered unemployed.
If you add together the unemployed, under employed and those that are not currently seeking work, the real unemployment rate is estimated at 17.3%. This shows that there is still no recovery in jobs. A jobless recovery means a stimulus spending recovery. Yes folks, the only reason this market is recovering is due to the printing of trillions of dollars. In addition, long term this means soaring taxes and a crashing dollar. The writing is on the wall.
As the markets are holding steady, slightly to the downside, we are seeing technology which had been hammered over the last two sessions begin to recovery a little. Stocks like Google Inc. (NasdaqGS: GOOG), Amazon.com, Inc. (NasdaqGS: AMZN), Apple Inc. (NasdaqGS: AAPL) are bouncing. GOOG dropped 35 dollars in the last three days and was long due for a bounce. In addition, the dollar is coming down sharply on the poor jobs data. That is giving a small push to commodities. The laggards today are the financial stocks like Goldman Sachs Grp (NYSE: GS) and JP Morgan Chase Co (NYSE: JPM). The financial stocks have had a great run over the last week off of a tremendous bull flag pattern I recognized. I signaled a pullback was in order yesterday to my premium subscribers. Sure enough, the financial stocks are pulling back nicely. Stay tuned to future analysis and calls. Live, Learn, Profit!
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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As i am playing in the snow next week, i will leave this. If we close at this level or lower, Cable puts in a pin bar. it has obeyed the channel and only retraced to 38% level where it rejected a higher move.Lower perhaps but15902 is strong resistance, but may offer a buying opportunity on the bounce. Good luck all.
All the optimism about the U.S. recovery that we have seen in the past few weeks have been erased by the sharp decline in non-farm payrolls last month. Many traders were positioning for a positive NFP report and job growth did return - but unfortunately it happened in November and the increase was modest. November non-farm payrolls was revised higher from -11k to +4k, reflecting a pickup in hiring before the holidays. However in an environment where 4.8 million people are claiming unemployment benefits, 4,000 new jobs hardly reflects a turnaround in the labor market, particularly if it is followed by 85k job losses in December.
The price action in the currency market following the NFP number indicates that traders were sorely disappointed by the release. The U.S. dollar fell aggressively post payrolls and the weakness should last since the only reason why the dollar recovered in December was because November's NFP report pointed to an accelerating U.S. recovery, leading traders to believe that NFPs would improve once again. However not only have job losses continued but the pace of attrition accelerated. The unemployment rate remained unchanged at 10 percent but the 590k decline in household employment indicates that it would have been higher if not for workers dropping out of the labor force. A closer look at the NFP number reveals the biggest job losses in private goods producing and construction sectors. The only sectors that reported job growth were temporary hiring for business services, education and health care. Average hourly earnings increased by 0.2 percent while average weekly hours remained unchanged.
The disappointing release should have a lasting impact on the dollar because it will force traders to pare back rate hike expectations. Federal Reserve officials have already been very cautious and repeatedly warned that interest rates will stay low for a long time. Traders previously shrugged off their warnings but now they will heed them.
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