The Market: The Buyers Were Screwed. 8-30-23
The Market ☕️
Yesterday’s short squeeze gives us a perfect example of why we say to pay attention and not predict.
The stock market by all accounts confirmed a change of trend from bullish to bearish. The change received a giant validation in a massive bearish (red) candle last Thursday.
Also known as a bearish engulfing candle. A powerful pattern because it typically means one side is caught on the wrong side. In this case the previous day’s high was taken out, then the previous day’s low’s were broken.
So the buyers were screwed.
Only to see a bullish reversal on above average the very next day. Enough confusion, and whip-saw price action to make your head spin.
But not for us.
We spend a massive amount of time putting price action into a nice, neat little box so that everything has meaning. Without structure the market looks random, almost chaotic.
Our game plan was to respect the confirmed bearish order flow, but “notice” that the big bad bearish day was followed up by buying.
File that in the category of “what should happen next, but didn’t.” Once you learn and start to notice these things, trading becomes much easier because you’re never predicting, you’re simply making observations on what happened, and what should happen next.
You don’t have a bias, or opinion. A much easier way to interact with the markets.
Pay attention, don’t predict.
So yesterday our community was not shocked, confused or fighting the order flow. We have structure, and that told us how to trade.
Easy peasy.
TRADING EDUCATION 📚
As earnings season winds down, it’s time to focus on the FOMC and economic data that will influence the remainder of 2023.
Here’s a list of must-know terms and reports.
– Interest rates – Changes in interest rates, or even expectations of future rate changes, can cause large movements in currency values as investors shift money in search of higher yields. Central bank rate decisions are critical.
– Inflation – Rising inflation typically leads to interest rate hikes, so inflation data like the Consumer Price Index (CPI) is watched closely for its impacts on monetary policy. Higher inflation can also drive down a currency’s value.
– Employment data – Key reports like nonfarm payrolls, jobless claims, and wage growth are monitored as indicators of economic strength. Stronger job growth tends to boost a country’s currency.
– GDP growth – Gross Domestic Product changes show overall economic expansion or contraction. Faster growth points to a stronger economy and currency.
– Trade and current account balance – Deficits or surpluses in trade and current accounts suggest the relative strength or weakness of an economy. Widening deficits tend to negatively impact a currency.
– Economic surveys – Forward-looking surveys like Purchasing Managers Indexes (PMIs) provide insight into future growth trends. Improving business confidence can be positive for a currency.
– Geopolitics – Major political events, elections, unrest, or changes in government policy can all impact currency valuations.
– Commodity prices – Major commodity exports like oil and metals represent big portions of some countries’ overall exports. Rising prices can lift their currencies
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