Dax in the Evening

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Traders expecting wetsnow from today's BOJ meeting

Taking a look at USD/JPY one-day options volatility we can see that at 52 this is the highest read since 2008 and the second highest ever.


It’s Bank of Japan (BoJ) Day. For short-term traders, very little else matters today.
Yesterday, USD/JPY overnight implied options volatility was at the highest since 2008 and the second highest level of all time. The market is positioned for fireworks!
There are reports that the Abe government are pressuring the BoJ to increase monetary stimulus. This has pushed USD/JPY above ¥105 and should support the Nikkei on open.
While USD/JPY has pushed higher, the USD index has fallen for a fourth day with a loss of 0.4%. Expectations of a hike from the Federal Reserve sit at 44% for December.
The S&P 500 closed off the lows with a gain of 0.2% and the NASDAQ at +0.4%. Amazon and Alphabet produced excellent results in after-market trade and both names should be core portfolio holdings.
ASX 200 to see another day of gains. The grind towards 5600 continues, with our call at 5580. June private sector credit (+0.5%) and Q2 PPI data points shouldn’t get a huge amount of focus today.
AUD/USD traded in a range of $0.7487 to $0.7549. Price currently resides mid-range and today’s Australian data should have little bearing. AUD/JPY is naturally the cross to watch.
Oil should be on everyone’s radar, with US crude falling a further 2.3% from yesterday’s ASX cash close. The momentum is accelerating to the downside; stay short or at least cautious.
Iron ore is going the other way, with a gain of 3.5%.
Also on the radar tonight will be earnings from Exxon, as well as the results from the European bank stress test. US Q2 GDP is due at 22:30 AEST, with consensus of +2.5% year-on-year.

Without going into the mechanics of implied volatility, what we can deduce is that the market is expecting a real rip today and positioned for huge volatility. The obvious instruments to keep an eye on today are JPY and Nikkei, but what materialises in these assets today will have large multiplier effects in other markets such as the Chinese yuan, US futures and even the ASX 200. While there is no set time, the announcement can take place anytime between 12:00 AEST and 15:30 AEST and this is where the liquidity will dry up and we could see random spikes in price as the market get nervous and the algo’s prepare to react to literally any headline they see.

The market is positioned for easing from the BoJ and this could come in many guises. It’s interesting to hear the Abe government are reportedly pressuring Mr Kuroda et al to bring their A-game today. The government have effectively detailed the outlines for a ¥13 trillion of new fiscal measures, as part of a sizeable ¥28 trillion package, although it has largely failed to excite the market and now it’s up to the BoJ to go hard or go home. Many feel this has been rushed through to put additional pressure on the BoJ.

The open of the ASX 200 should result in another grind higher, with 5600 in sight again. We are staring at a fifth day of gains on the local market and with ASX 200 having a 34 points average daily range (ATR) over the last five days, one would put the probability of a third week of gains around 97%. We would presumably need to see the Bank of Japan do absolutely nothing (which could easily happen!), but perhaps even give an assessment they are done easing for this to occur.

Based on their respective ADR’s we should see BHP fall 1.4% on open, while the banks should be at the heart of the move higher. Energy names may struggle with the barrel heading lower and having fallen over 20% since the 9 June high – a technical bear market if you will, although this means very little to me. US crude continues to hold the five-day average (see below chart) and as long as this occurs then oil futures traders will push price into $40. Stay short or at least cautious on the energy space for now.

The fact that NASDAQ and S&P futures have caught a modest bid should underpin confidence to some extent today. Amazon and Alphabet (Googl) have produce the goods in their quarterly numbers and both look absolutely fantastic on their respective daily charts.
 
What can we expect this week? Have been away since Thursday, so a little update would be appreciated.
 
Fallout from US GDP continues
The heady expectations for US 2Q GDP growth were dashed on Friday as inventories subtracted 1.2 percentage points from growth.

he Atlanta Fed’s GDPNow estimate dived well below the 2.5% last week based on its projection for inventories, and it turned out to be far worse than many had expected. There is no chance of a September rate hike now, and for it to occur in December the Fed will require steady job growth and a noted pick up in GDP in the second half of the year – developments that are far from certain.

US Wholesale inventories declined 0.1% year-on-year in June – the first year-on-year decline seen since the GFC.

The big miss in US 2Q GDP saw the DXY US dollar drop 1.25% on Friday. This provided welcome relief for emerging market currencies and commodity prices that had been under pressure from USD strength. The Bloomberg commodity index gained over 1%, and WTI oil broke its ten-day losing streak to close up 0.9%. This helped the S&P 500 energy sector see the second best performance on Friday after telecoms. In such an environment, gold and silver could be set for a bit of a run, and certainly the risk of US PMIs or non-farm payrolls disappointing this week offers further upside to them.

This also saw the Aussie dollar gain 1.3%, and it does look like it has an upside bias. If the RBA upsets rate cut expectations tomorrow, the Aussie could set course to retest US$0.78. And some of the upside momentum behind the currency could see it continue head that way in the near term even if the RBA does cut rates.

AUM-AUD-010816-sml
One major concern on the horizon for further commodity price and Aussie dollar gains is what is playing out in China’s heavily-indebted industrial province of Liaoning. The ongoing debate over how to deal with the defaulted bonds of Dongbei Special Steel Group is spilling over into a general concern about all bonds issued by Liaoning-based firms. Right Way Real Estate Development Co. was forced to issue bonds on Thursday at a 289 basis point premium to the national average on similar maturities. The risk for commodities and their related assets is that China dramatically toughens its stance on dealing with heavily indebted SOEs and eases the amount of credit being extended to the over-capacity industrial sector. This would be a good thing for China’s long term economic health, but the short term market reaction in the commodity space is unlikely to be pleasant. The thing to watch is whether these credit premiums start to be charged in the rest of China’s struggling industrial North-Eastern provinces.

The European bank stress test results were better than many had expected, but there was a lot of valid criticism that they failed to model any potential negative impacts from Brexit. Unsurprisingly, Italy’s Banca Monte dei Paschi di Siena flashed up serious capital concerns, but the other two worst performers were Ireland’s Allied Irish Bank (AIB) and the UK’s RBS. Although two out of the three still closed out Friday’s session higher.

Most Asian markets are looking to open higher after the S&P 500 made another new high on Friday and commodity prices bounced back. The major exception to this is Japan. The yen has continued to strengthen in the wake of the major BOJ disappointment on Friday, which was further compounded by the USD selloff in the wake of GDP. The Japanese yen strengthened more than 3% on Friday, and the Nikkei looks set to open down more than 1%.
 
Main ones for me are
RBA
BOE
US NFP

Started to play the short side with more size(not full) on ASX and DAX

Fingers and toes crossed.:LOL:
 
Trading psychology is not as important as you think it is – a mental coach explains



Psychology is not the most important part of becoming a successful trader. This may sound a little strange coming from a guy who makes a living from helping athletes, poker players and traders solve the psychological problems limiting their performance. But it’s the truth. The idea that after learning how to read a chart and other basics of trading, the only difference between making money and losing money is psychological is misleading at best.

People often come into trading with the goal of making easy money—just like the people who flocked to online poker after an accountant named Chris Moneymaker, who had never played in a live poker tournament before, won the World Series of Poker main event for over $1 million. They’re looking for a quick way to make a lot of money. Thankfully, there are plenty of people looking to take advantage of that motivation. Psychology sells because improving your mindset is easier than developing the kind of real skill that seasoned traders have developed over years. Who would want to work hard if there was an easy way to make a lot of money?

Magic bullets don’t exist. Stop looking for them. Working on your mental game, or the psychological side of trading can make a big difference in your trading, but it’s going to take real work for the impact to yield results. The changes aren’t immediate, and they may not even be what you need right now.


Technique Is More Important Than Your Mindset

I came into mental coaching from a background in golf—I was a 3-time collegiate All-American, won 9 college tournaments and had aspirations of playing professionally. In 1997, I had a shot at qualifying for the US Open, but I choked. This pattern repeated itself in other huge national events and forced me to confront the psychological side of my game. The prevailing wisdom in golf was similar to what’s often said in trading: Golf is 90% mental. This idea appealed to me because it gave me a straightforward way to correct my failures. But as I dug into the mental side of the game, it became clear how misguided that idea is. Yes my mentality needed improvement, but my technique needed a lot of work too.

Think about it, if golf truly was 90% mental the Dali Lama would be an excellent golfer. But he’s not. Why would a professional golfer spend most of their time honing their swing, and not meditating or working with a psychologist? They don’t because while the mind matters, it can’t overcome faulty technique. The mind is what allows a golfer to get the most out of their technique, it can’t replace it.

Golf is a physical game, so maybe it’s not a fair comparison to trading. How about poker? Poker is as physically demanding as trading and online poker even looks a lot like trading—players often set-up their virtual tables with a range of statistics that function and look a lot like indicators in your charts. If you think learning the rules and hand ranking sheet—the equivalent of learning how to read a chart— is going to make you a successful poker player I have some clients who would like to play poker with you. In poker, you would be called a ‘fish’ and the card sharks would love to have you sitting at their table.

If trading was mostly psychological wouldn’t a meditation instructor make a great trader? Heck by that logic I should even be a decent trader—my mindset is pretty strong having cured the mental leaks in my golf game and I even understand the basics of trading. But I’m not delusional. I know that an experienced trader riddled with emotional issues will make more money than me over a large sample. (Anyone can get lucky in a few trades.) His understanding of markets forces, indicators, and other technical knowledge is what makes a great trader. Psychology can’t fix a faulty golf swing and it can’t fix faulty trading technique.


When Psychology Matters

I’m not railing against my own profession. I simply want it to be used in the right way. Here’s my advice:

1. If you are relatively new to trading, focus on increasing your trading knowledge and technique. That’s the only way you can be competent; really at anything. For you, spend 90% of your time devoted to developing this expertise and 10% on the psychological side. If you have an interest in psychology, by all means keep an eye on it. Make notes about small mental issues you notice and read psychology articles and books that interest you. But don’t let this time or effort distract you from your main priority to become a skilled trader. Don’t be someone just looking to get lucky and conveniently blame greed, fear, or a lack of discipline when trades do not go your way. If you find that at this point, you have psychological issues blocking your ability to even become profitable, it means that your issues are more personal and likely show up in other aspects of your life presently or in the past. In other words, they aren’t trading psychology issues, they’re personal ones that happen to show-up in trading.

2. After your knowledge has become stronger and you’ve proven that you can execute a trading strategy can be profitable, then psychology becomes more important. At that point, you can spend 30% of your time working to improve your psychological approach to trading. Much beyond that at any point in your career and you’re likely to lose focus on developing the skills needed to be profitable. Sure you can spend more time when psychological issues pop-up, but on average you don’t want this side of the game to consume you.

As it turns out the idea that golf was 90% mental was a simple misquote. The original quote referenced how golf played at the elite level is 90% mental. This is implies that most of the edge against other players with similar levels of technical competence was mental. I still don’t agree with this sentiment entirely, but I do agree that when you get to the top of any profession, the skill differences between top performers is tiny. At that level, something relatively small like psychology suddenly provides a huge opportunity to gain an advantage. That’s where trading psychology matters most. It still matters in helping you to get to that level, but not as much as people often think.


http://jaredtendler.com/about/
 
Gosh, I've spent half of my time on forums reading about how important psychology is for a trader, and now you go backwards and claim "meh, all this psychology stuff - not so important". It's so confusing...
 
Fed’s Jackson Hole meeting at the Jackson Cowboy bar is front-and-centre for global markets this week

The DXY US dollar index already seemed to be looking ahead for some slightly more upbeat language on the US economy coming out this week as it rallied 0.4% on Friday. Fed Vice Chairman Stanley Fischer will have given added impetus to some of these US dollar moves after his speech on Sunday. Fischer was very upbeat on the outlook for the US economy stating that he expected investment to pick up imminently and that PCE core inflation at 1.6% was within hailing distance of their 2% inflation target.

Given that materials and energy stocks did a lot of the heavy lifting for main stock indices globally last week, the prospect of a noticeable US dollar bounce this week could provide some headwinds for these recent gainers. The oil price, in particular, has had a massive rally, entering a technical bull market last week after rising more than 20% from its recent lows. How commodities fare this week in what could be a strengthening US dollar environment, could tell us a lot about the conviction behind the rally in a lot of spot prices.
But Jackson Hole is a setting that is not designed for short-term market moves, in many respects it could not be further from participants’ minds. Much bigger questions will be debated about the efficacy of the inflation targeting regime. John Williams, president of the San Francisco Fed, made a speech last week foreshadowing some of the discussion topics. Williams argued that perhaps the Fed should target a higher level of inflation, say 3%, to give the Fed more room to cut rates in a future downturn.

These arguments reflect a growing feeling that the experiments with negative interest rates in Europe and Japan have not resulted in desirable outcomes. And also the calls for higher inflation targets mesh with growing calls that the Fed should be targeting nominal GDP rather than inflation. But these conclusions would also seemingly argue for greater fiscal stimulus in market downturns as well, something that is driven by the vagaries of elected officials and is unlikely to be ceded over to independent technocratic institutions such as central banks.

These discussions are not set to have an impact on Fed policy in the near term, but some of their implications could well fuel some volatility in markets this week. Janet Yellen’s speech on Friday will have the biggest impact on short term market moves, especially if she follows in Stanley Fischer’s relatively hawkish tone.

A week of talking up the US dollar will be good for US financial stocks that would benefit from a rate rise and some of that positivity could spread over into financials globally. But the big rally in resources-related stocks could struggle in a strengthening USD setting.

The ASX and the Nikkei were indicating that they were set to open lower after the end of trade on Friday. Currencies may well have a big impact on how stocks move this week with a lot of volatility for stocks with large amounts of foreign earnings.
 

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