Fundamental news contradicting itself - I think!

[DDI]

My understanding of fundamentals is crap (even worse than technicals ) but these 2 reports on bloomberg about oil and copper are funny. One says Oil rose today as the cash injections will spur economic growth and the other says copper prices fell as the fed rate cut wont be enough to stimulate US expansion. I assume expansion and economic grown have the same meaning!

Bloomberg.com: Commodities


Bloomberg.com: Commodities

 

[TWI]

It is journalists interpreting the sentiment and fitting facts around them.
Copper is off cos the chinese will not be hitting the buy button til the new year and the funds are slapping it, crude was up on todays figs and the fact that a nice head and shoulders base needed to be bought by all that tech fund money not to mention the options expiry tomorrow with large oi at 90 strike this rally makes it easier on everybodies gamma.

 

[FXSCALPER2]

This is exactly what you should expect from outfits like Bloomberg. They are a joke. They say things like 'the dow rose 5 point due to...'. They also get their facts wrong very often. You shouldn't be surprised if they say, 'the Yen will move up tp 112.50' after it is already there, for example.

What no one seems to notice is priniting money never solves a problem. The fed printed money and what happened? the yen immidiately went down against the dollar, treauries fell. That is really amazing. If Bloomberg have any basic economic common sense, they would have been surprised by that. I mean one can see why the dollar rallied: people have this idea that the risk appetite is back everytime central banks print money. They certainly got their thinking upside down. I certainly would not be happy selling the yen against the dollar on a day like this if I were taking a long term position or hedging for my business

Bloomberg is entertaining though.

 

[fibonelli]

I doubt we'll ever see a Bloomberg headline like this:

"Crude moved decisively higher today from a strong support zone. An upside breakout from a triangle consolidation pattern gave additional strength to the buy side".

 

[Rhody Trader]

Having been interviewed by reporters for stories on numerous occassions I can definitely tell you to take everything you see with not just a grain of salt, but a whole shaker. I have seen many examples of journalists coming up with an theory of their own and then really only including quotes and statements from market participants which specifically agree with what they say.

FXSCALPER2, on the printing money part, the action of the central banks to opening up the funding windows is a term action, meaning it's only good for a short-term timeframe. It's not open-ended. And what we saw in forex the last couple of days has zero to do with any sort of money supply consideration and everything to do with the reaction of the stock and fixed income markets. The carry trade pairs have been getting buffetted by flight to quality flows. We've seen it over and over. Whenever there's a panic move triggering massive stock market sales, the JPY crosses get hammered.

 

[FXSCALPER2]

Having been interviewed by reporters for stories on numerous occassions I can definitely tell you to take everything you see with not just a grain of salt, but a whole shaker. I have seen many examples of journalists coming up with an theory of their own and then really only including quotes and statements from market participants which specifically agree with what they say.

FXSCALPER2, on the printing money part, the action of the central banks to opening up the funding windows is a term action, meaning it's only good for a short-term timeframe. It's not open-ended. And what we saw in forex the last couple of days has zero to do with any sort of money supply consideration and everything to do with the reaction of the stock and fixed income markets. The carry trade pairs have been getting buffetted by flight to quality flows. We've seen it over and over. Whenever there's a panic move triggering massive stock market sales, the JPY crosses get hammered.

No, they don't. Whenever the Dow goes up so does the EURJPY, for example. I suppose that is what you meant. Maybe the move has nothing to do with the money supply considertion. My point is noone knows why this stuff happens. It is all a load of bull. Bloomberg are just too obviously full of bull.

 

[Rhody Trader]

No, they don't. Whenever the Dow goes up so does the EURJPY, for example. I suppose that is what you meant. Maybe the move has nothing to do with the money supply considertion. My point is noone knows why this stuff happens. It is all a load of bull. Bloomberg are just too obviously full of bull.

That's exactly what I mean. Carry trade pairs like EUR/JPY do well when the Dow is rising and vice versa.

As for no one knowing why it happens, that's wrong. Retail traders generally don't, which is part of the reason they are behind the 8 ball in general terms. Institutional traders are privy to much more information and are wired into the actual big ticket capital flows which are the main drivers of price action. That's not to say they are necessary better traders. They just have more information.

Think about it. If you're Goldman Sachs and have your hands in basically every major financial market, you've got a really good idea where the money is going to and coming from. Whether you can put that information to use effectively is a whole other question.

 

[FXSCALPER2]

That's exactly what I mean. Carry trade pairs like EUR/JPY do well when the Dow is rising and vice versa.

As for no one knowing why it happens, that's wrong. Retail traders generally don't, which is part of the reason they are behind the 8 ball in general terms. Institutional traders are privy to much more information and are wired into the actual big ticket capital flows which are the main drivers of price action. That's not to say they are necessary better traders. They just have more information.

Think about it. If you're Goldman Sachs and have your hands in basically every major financial market, you've got a really good idea where the money is going to and coming from. Whether you can put that information to use effectively is a whole other question.

I am certain that people at Goldman do not know why a move happens before the fact. So, there must be lots of people sitting there watching the USDJPY and have no idea where it is going to go. Sometimes they get it right, we are all right sometimes. Are you saying people at places like Goldman know where currency prices are going? I bet they don't.

 

[Rhody Trader]

I am certain that people at Goldman do not know why a move happens before the fact. So, there must be lots of people sitting there watching the USDJPY and have no idea where it is going to go. Sometimes they get it right, we are all right sometimes. Are you saying people at places like Goldman know where currency prices are going? I bet they don't.

Not saying they know ahead of time, but they know why in many cases. That can - but doesn't necessarily mean will - help them in developing expectations of future price direction.

 

[DDI]

Actually while on the subject why are carry trades proportional to the stock market? is it because as stocks rise it shown investor appetite for risk so thus appetite for carry trades?

 

[Rhody Trader]

It's not a question of proportion, though I'm guessing that wasn't the word you were going for there.

Before we can address the reason the carry trade is linked in with other markets we need to look at how the positions are put together. It's not just a question of shorting Yen and converting them in to Euros or Sterling or Aussie dollars. The big players are borrowing the Yen in some fashion, shorting Yen assets or issuing debt of some kind. They are then taking that money and putting it to work in other markets, after converting it obviously. If something happens in either the market for the Yen part of the position (the short or debt) or on the other side of the equation where they are holding the other assets (or whatever) then it impacts the value and/or return of their positions. That potentially ties in with all kinds of other stuff they might be holding.

The bottom line is it's all inter-connected. The irony of trading houses and funds becoming more sophisticated in managing their portfolios is that they have created linkages between markets that otherwise would not have been as linked because they have sought to create non-correllated positions. That's why when things thing start to go bad, they can really, really go bad.

 

[DDI]

It's not a question of proportion, though I'm guessing that wasn't the word you were going for there.

Before we can address the reason the carry trade is linked in with other markets we need to look at how the positions are put together. It's not just a question of shorting Yen and converting them in to Euros or Sterling or Aussie dollars. The big players are borrowing the Yen in some fashion, shorting Yen assets or issuing debt of some kind. They are then taking that money and putting it to work in other markets, after converting it obviously. If something happens in either the market for the Yen part of the position (the short or debt) or on the other side of the equation where they are holding the other assets (or whatever) then it impacts the value and/or return of their positions. That potentially ties in with all kinds of other stuff they might be holding.

The bottom line is it's all inter-connected. The irony of trading houses and funds becoming more sophisticated in managing their portfolios is that they have created linkages between markets that otherwise would not have been as linked because they have sought to create non-correllated positions. That's why when things thing start to go bad, they can really, really go bad.

Thanks. Yes when I look at real volatile days such as 16/08/07 or 27/02/07 we see the ranges are big for almost all financial markets. I guess soft commodities are the only markets where each indivicual instrument is independent.

 

[Rhody Trader]

Thanks. Yes when I look at real volatile days such as 16/08/07 or 27/02/07 we see the ranges are big for almost all financial markets. I guess soft commodities are the only markets where each indivicual instrument is independent.

No such luck. They are inter-related too. Watch Corn, Wheat, and Soybeans move in tandem on many occassions. The links are sometimes obvious, but sometimes not.

 

[BSD]

No such luck. They are inter-related too. Watch Corn, Wheat, and Soybeans move in tandem on many occassions. The links are sometimes obvious, but sometimes not.

That's actually a pretty good point.

Do you or does anybody else have a regularly updated correlation table on the web somewhere for the major trading instruments, just to make sure you aren't actually inadvertently trading just one big position vs the several you'd thought you had on ?

This here is unfortunately only for FX:

Trading tools | Mataf.net

Thanks

 

[fred333]

Thanks for the link. I was just about to do a Google search for such a table.

 

[nine]

If you want a broader Correlation table this one is good:

MRCI's Inter-Market Correlations


Their summary of all contracts across the futures markets is also useful.