Early 2016 has been characterized by recognizable patterns but erratic results. There have been some bizarre gyrations with seemingly incongruous movements across the varied financial markets.
This period has been a strong reminder that the art of economic forecasting is easy until the predictions are tested - anyone can make economic predictions, but most of them don't come true.
The markets have been full of contradictions lately. Through much of April, global government bond yields moved higher, a pattern that usually indicates rising expectations of growth and inflation, yet the data remains subdued. The US economy is in better shape relative to the global economy, but the dollar has been weakening, even as the Fed has contemplates further divergence from the global easing regime. Stocks continue to trend higher despite S&P500 corporate earnings sagging for three straight quarters, and yet gold, the ultimate risk hedge, has broken out to new multi-year highs.
As for our last round of predictions, they were a little more hit than miss. As anticipated, energy prices have managed to stabilize, even in the face of Saudi Arabia's last minute veto of the oil production freeze. Better crude prices have in turn eased concerns that the oil patch might implode in a whirlpool of debt defaults. On the political front, Donald Trump and Hillary Clinton took longer than expected to close out the competition. Meanwhile in the UK, polling on the Brexit vote has remained surprisingly tight despite the Prime Minister throwing his weight behind the effort to stay in the European Union. As expected the European Central Bank boosted QE and cut rates again in March, while the Bank of Japan stuck to verbal intervention in April. The Fed stayed predictably patient and cut back its forecast for 2016 rate hikes to something that more closely represent market expectations, citing risks in the global economy.
This jumble of circumstances is a set up for more volatility in months ahead. Though major averages haven't fallen in May since 2012, the "sell in May and go away" mentality may have set in a little early as stocks have sold off in the wake of the Bank of Japan's inaction and another quarter of mediocre corporate profits. The preliminary readings on Q1 GDP for many regions showed poor growth, which could trigger some retrenchment in Q2 until the data proves a better trend. Market jitters may spark another quick contraction in stocks like those seen in January and last August, and risk hedges like gold could keep plowing higher.
The political battles expected this summer will add to the risk of fresh volatility.
The Invisible Hand
The politics of the post-crisis era have been shaped by the vox populi as many voters have grown wary of the institutions that contributed to the crisis. Populist movements of many stripes have popped up almost everywhere in the West, sometimes with disastrous consequences in places like Greece, but also recasting old political machines like the two-party system in the US.
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2. Webinar: Order Flow – Keeping it Simple, Practical & Effective
Please register for Order Flow – Keeping it Simple, Practical & Effective on Wednesday May 11, 2016 1:00 PM PDT at:
Join us for a 60 -minute webinar on Wednesday May 11th at 3:00 P.M., Central Time.
In this free webinar , Peter Davies of Jigsaw Trading, takes a look at why you might want to use Order Flow in your trading. He introduces simple, yet effective methods you can use to improve your trading edge.
The following topics will be discussed:
- The “Levels Dilemma”, a look at common problems of trading pre-determined levels (and yes, you still have to do your homework). How you can be right about the level but still miss the trade or get stopped out.
- The trade-off between catching shortfalls at a level and taking on more risk. How order flow traders address this.
- Review the software, plug in, different functions of the software and tools
- The conceptual events Order Flow Traders are using to confirm trades. The theory.
- More is not always better. The benefits of sticking to the basics with Order Flow and the pitfalls of making a science of it.
- Simple, practical and effective elements of Order Flow that Peter Davies uses in his own trading
Risk: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time
After registering, you will receive a confirmation email containing information about joining the webinar.
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* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.
** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.
*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!
RISK DISCLOSURE: Past results are not necessarily indicative of future results. The risk of loss in futures trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.