In the Art of financial trading, two basic approaches are well known as regards venturing into the financial market.The Technical Approach and the Fundamental Approach.
Whilst the debate regarding the relative effectiveness and advantages of technical analysis versus fundamental analysis has raged in investment circles for decades, it’s unlikely that anyone within the analysis community would have added the words “presidential tweets” on the list of high impact news events, on their economic calendars. However, currently the USA equity markets and as a consequence of being the owner of the global reserve currency the US dollar, are witnessing dynamic changes in value as a direct result of president Trump’s morning tweets. Now Picture this; He gets up, stretches, reaches for his iPhone,Blackberry,android or whatever phone he uses, sends a tweet and the markets move. You’d be forgiven for thinking we’re being trolled, or that we’re stuck in a twilight zone, in which an evil, comic psychopath, you’d find in an Austin Powers’ movie, is holding the world to ransom. Joking aside we’re making a serious point here; there’s now a separate dimension to fundamental analysis that (as an outlier) was completely unexpected. Being aware of Trump’s announcements; political, economic or both, is now essential. One piece of fundamental analysis that deserves far more attention and recognition is the COT report. We often talk of not “trading against the trend”, perhaps this is the best ‘off chart’ trend indicator and analysis there is. Each Friday the latest data illustrating the weekly Commitment of Traders (COT) report is published by the Commodity Futures Trading Commission (CFTC). Last week it revealed that large position traders and currency speculators reduced their bullish bets on the U.S. dollar for the fourth consecutive week. Non-commercial large futures’ traders, which traditionally includes hedge funds and large speculators, had an overall U.S. dollar long position of $18.47 billion up to Tuesday January 31st, a weekly change of minus $1.57 billion from the $20.04 billion total long position registered during the previous week. Speculators have reduced their net dollar positions below the $20 billion mark for the first time in fourteen weeks (since October 25th) after reaching a high of $28.14 on December 6th.
Everyone (and that included the technical traders) now seem to understand the power that seem to lye behind President trumps tweets. The Us jobs report on Friday said the US added a massive 22000 new jobs, that should make the dollar stronger right? dollar rally right? you would be supervised just how silent the market was even after such an important news update. Well for your information, that’s the power behind the new President trump tweets, it calms trends….!