You may have noticed that all of the indices are at resistance – does this mean the market is about to freak out and run for the hills? No, today is Friday – typical of traders to take profit on a Friday. You want to keep an eye on them though and you also want to keep an eye on your commodity currencies – if you start seeing trend reversals or price action that goes against the trend then stop buying commodities until we are back in risk on mode. Keep an eye on US data today and the FOMC members that are speaking. Harker’s view’s are unknown, Lockhart is neutral and Mester is a hawk. So if you see dovish rhetoric coming out of Mester pay attention. If Mester is hawkish, it’s expected. Yellen has spoken and the markets have listened – I doubt their views will shift and I strongly believe smart money is looking at future data releases and any indication of the US moving close to their inflation target of 2%.
Good data = a move towards the 2% inflation target = strong dollar = good chance of a rate hike in December. Stock markets don’t like an increase in interest rates.
Also, pay attention to the Vix – you can see we have come down nicely. A sudden increase in Vix would indicate that funds are concerned about risk in the market. Should that be the case look out for strong Yen and weak commodities until the bullish stock market trend continues.
Also, while we are on the subject of commodity currencies – remember there is CAD news out today and there was a New Zealand rate decision earlier this week (possible risk off + weak CAD data + strong US data = wink, wink, nudge, nudge).
Fundamentals move the market – technicals tell us where to get in and out.