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StevenSJC

Why the S&P E-Mini Stinks

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I know it's probably sacrilege around here to insult the vaunted S&P e-mini but I'm willing to bet it blows up more traders than any futures market. More than any market I would bet outside of forex which typically pulls in the lowest common denominator (read: get rich quick crowd)

 

There was a really good article in this months S&C magazine that continues to demonstrate this point.

 

The S&P e-mini is hard to trade. You are competing against mega institutions and volume. It's very difficult at times to get a fill unless price moves through your price. It is quite subjective because your system might hit target but you won't so what do you do? I find it creates all kinds of questions and those freakin 0.25 ticks are ridiculous. I'm sure it's great for others but those type of ticks (instead of 0.10) are not great for us traders.

 

The magazine article made the point that sure, the S&P e-mini has great volumes. Incredible volumes. You could easily execute 50 contracts. Which makes me laugh since 98% of traders out there will be lucky to get to 2 contracts. It's like people wanting to make sure that the tax rates at the highest bracket are low because someday they'll be there. Yeah right. Who cares if this market can execute 50 contracts in a heartbeat. You'll never do it.

 

More important is the chart that showed Average Yearly Tick Movement across all the major index futures. Lowest rank? The S&P e-mini vs. the Dow, Nasdaq, Russell small and mid-cap.

 

When you factor in dollar value so average annual dollar movement the Russell e-Mini easily comes out on top? Lagging way behind? The S&P e-mini.

 

If more people would start trading the Russell vs. the S&P I guarantee failure rates while high, would be lower.

 

Trying to jump in and trade amongst the big boys in a market that really doesn't have great range, that forces a lot of subjectivity due to the 0.25 ticks, doesn't lead in any major category but volume which you'll never need or use to me is a just a lure for trading suckers.

 

I know the best of the best here on TL will disagree. And I'm not saying it cannot be traded successfully but if more traders getting going would not chase the crowd in the S&P you'd stand a much better chance.

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trading is like playing golf

you do your own thing, and the big boys do their own thing

you play against yourself, not anybody else

the score are yours, and yours alone

the mistake are yours, and yours alone

you are your own best friend, and worst enemy.

you can blame it on the club,

you can blame it on the ball,

but ultimately... who cares, but yourself.

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It seems like you know a lot about es and given what you know about es, you should be able to take that knowledge and trade it. If it means that the best you can do is not trade it, then so be it. That would be very valuable information.

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There are probably way more traders who are also successful trading the E-mini S&P500 too. There are just way more traders in it period. If you don't like it, that's fine too. Just find a product which you 'like' and trade it.

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I know it's probably sacrilege around here to insult the vaunted S&P e-mini but . . . .

The S&P e-mini is hard to trade. . . . . It's very difficult at times to get a fill unless price moves through your price.

 

You are absolutely right. I agree with you. I don't care if you insult the S&P e-mini. It is kind of strange that some people rush in to defend trading when someone vents their frustrations. Does the market need defending? Is the market such a delicate, kind and gentle soul that it needs to be defended by people? I don't think so.

 

And then there are those people who will offer you their advice, because out of the goodness of their heart, they just want to help you. Yah! Right. . . . Like trading is a goodwill industry full of people just trying to help each other. I don't think so!

 

So why would anyone take it personally if someone else criticizes the market or the trading industry? Why would they take it personally?

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Yes very bizarre comments I must say.

 

It's as if I offended somebodies child :)

 

I'm just saying, make the case why traders who come into the emini futures world should trade the ES. Besides the fact that everyone seems to do it - and the rooms/signal services all seem to cater to it - because that's where the crowd goes.

 

I think if I can get someone to read this who is just starting out to NOT jump head over heels into the ES first it's worth the battering I'm sure I will take.

 

Regardless, still waiting to hear why the ES is factually superior to other choices.

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I don't think everyone is doing it

I know lots of people who trade other instruments

but the newbies seems to be attracted to it without question

 

about your comment that the volume is high...

sure it is high, but bear in mind that a lot of the volumes are ins-and-outs with nothing more than a tick's worth of gain or loss. A lot of the volume are not from traders, but from hedgers. They couldn't care less if the market is going up or down, they are only looking at the differentials.

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I wouldnt look at a market based on $ range in a day. A traders first priority should be not to lose money. The greedy look first at how much they can make (thus your FX comment which I agree with). Therefore, you should be looking (imo) to make regular, consistent amounts of money. Then scale up in size.

 

The good thing about ES is that it has less tendency to go careering through levels, only to reverse on a dime like ES, CL, 6E do. It does happen sometimes of course, and indeed these moves are heaven for some anyway - free money if you know whats happening.

 

This means ES can be used as a benchmark to see if the other contract (ER, YM. NQ etc) is real or not.

 

Just some thoughts.

 

Generally, 'the pro's' tend to spread es against something similar - ym, nq, cash, spy, big s&p etc. in fact, the reason es has .25 tics was to create an arb between sp & es.

 

i agree with the original premise. new traders should trade ags or FI IMO.

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Making consistent returns daytrading the ES is a lot harder than most think... in fact it might be the hardest game in town but for some reason it's what the mayority of internet forum readers want to do.

maybe it's partially about being a badass ("I'm an S&P trader") but it's much harder than trading has to be. The S&P futures are usually one of the most random and noisy markets out there.

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Well clearly I am biased....I make a nice living in this and other markets and for me...while it requires focus and preparation, once you have a viable systematic approach it is very straightfoward..

 

The original comment seems appropriate in that it reflects the retail trader's inability to find a way to "make sense of" and to recognize opportunity in this market. This is very common in persons who are inexperienced or who lack skills or suitable background...as an aside...one can fill these deficits fairly quickly if they are motivated...having trained people to do this, I can say with confidence that a motivated person can find success if they apply themselves..

 

Personally I like the S&P, bond and currency markets about equally...and once you have a workable system, (using supply/demand as a basis) they offer nice opportunity for profit...

 

Whether an individual person believes that or not is not of particular concern to me, but I do empathize with those who might be having trouble...it can be frustrating...

 

Edit

 

By the way, if the original poster wants to check out a different approach, they might want to read my thread titled "an institutional look at the S&P Futures"....If I can be of help...just PM me..

 

Best of luck to all

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Okay steve, enough of plugging your own threads already!! Lol. The ES is difficult for noobs because they are told to go for a liquid market and the ES is just that. But when they see all the action and mistake it for trading opportunities, they inevitably get sucked in and many do lose again and again. However, it is a solid and liquid market, meaning if you have an effective strategy, then you can scale up in size very well. Also, it is quite a technical market.

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I know it's probably sacrilege around here to insult the vaunted S&P e-mini but I'm willing to bet it blows up more traders than any futures market.

 

 

It doesn't matter whether emini sp is hard to trade. Futures/commodity market overall is hard to trade which is why more than 90% of small traders lose in a "Spectacular Fashion." They just lose!

 

1 out of 100 small traders will make out in this game and trade for a living.

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Okay steve, enough of plugging your own threads already!! Lol. The ES is difficult for noobs because they are told to go for a liquid market and the ES is just that. But when they see all the action and mistake it for trading opportunities, they inevitably get sucked in and many do lose again and again. However, it is a solid and liquid market, meaning if you have an effective strategy, then you can scale up in size very well. Also, it is quite a technical market.

 

What an interesting comment....Perhaps you could outline what you mean by "an effective strategy"? In my threads (the ones you prefer I don't "plug") I outline a method that I have used for over 10 years...I guess I have to remind myself that there is always something new to learn....by all means please continue your thought.....

Edited by steve46

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What an interesting comment....Perhaps you could outline what you mean by "an effective strategy"? In my threads (the ones you prefer I don't "plug") I outline a method that I have used for over 10 years...I guess I have to remind myself that there is always something new to learn....by all means please continue your thought.....

 

 

here is an advice why emini sp is hard to trade:

 

1) Under capitalized. The minimum to trade in the futures market is $100K and begin 1 contract. if begin less than $100K, it gets harder to trade. After all, we are dealing and trading with margin. it is not like stocks where u buy and own it.

2) Of course u know the funds are controlling the es and are winning while more than 90% of small traders are losing, If u want to win the game, join the house. Why stick with more than 90% of losers group.

 

 

More to come.

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What an interesting comment....Perhaps you could outline what you mean by "an effective strategy"? In my threads (the ones you prefer I don't "plug") I outline a method that I have used for over 10 years...I guess I have to remind myself that there is always something new to learn....by all means please continue your thought.....

 

Hmm. I'm not entirely sure it needs elaborating steve. If you have a profitable method, you can do it with more contracts in the ES. I am sure your strategy has worked superbly well for you for 10 years plus. However, I wasn't commenting on your strategy. Just that although the ES is a very difficult market for noobs, it is also a very good market once it's learned.

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I would argue that the ES is the most technical instrument there is, that being said, you are competing against the best traders in the world. My second point would be that most hedge funds use the ES as a hedge for their long stock positions, to put it simply.

 

First published in the Brady report It's the consensus among many traders that the October 1987 crash was caused in large part due to this hedging known as portfolio insurance, selling large amounts of futures contracts against their long positions.

 

Will all that, I still love the ES, 2010 was a fantastic year for trading it. 2011, not so much. The Euro is a much wider instrument to trade in that the moves are still technical and it moves in price swings equivalent to 25 ES points a day. If I had one instrument to trade right now, it'd be the Euro Futures.

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One problem that I see is that many newer traders are trying to use scalping methods on the ES, and there is often so much back and forth arbitrage movement that they often get stopped out. It can get pretty noisy with all the program trading -- robots in a tug of war. But if trend following with a large enough wiggle room for an intelligent stop, then it can be a much more effective instrument. With that being said, I still prefer the NQ for its tick size, smoother movement and less arbitrage activity. And some days much better range as well.

 

As someone trained in both international economics and geopolitics, I really prefer the contracts that have much to do with the world economy in a more direct way, i.e., the currencies and quasi-currencies. I too prefer the currency futures over indexes, where I can apply my education more effectively. The 6A, 6B, 6C, 6E, 6J, 6S, all of them can be very lucrative at their own times. And GC and CL have times where the trends are amazing. Nice that we futures traders have so many options. I am very grateful for this amazing market and wouldn't trade it for any other!

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One problem that I see is that many newer traders are trying to use scalping methods on the ES, and there is often so much back and forth arbitrage movement that they often get stopped out. It can get pretty noisy with all the program trading -- robots in a tug of war. But if trend following with a large enough wiggle room for an intelligent stop, then it can be a much more effective instrument.

 

Yeah, that is a good point. To add to it, not only do the noobs often have a totally unsuitable internet connection, but they are competing with algos which have the fastest connection right next to an exchange and they have near zero reaction time for their decision-execution time. It's just a big exciting fruit machine basically for these guys!

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Okay, lets see if we can get past the urban myth about automated execution (among other things)

 

First, automated execution is not new and is just a part of this market. It affect all markets not just the NYSE so if any of you want to become professionals you are going to have to deal with it....not just the newbies...

Second...it really doesn't affect new traders much...what really causes new traders problems is their own ignorance and the fact that for the most part newbies are unwilling to take the time to get a decent education about how the markets work...and frankly reading all the misconceptions about automated trading here doesn't help..

Now I am not here to put on a seminar but what I am willing to say is this....once you understand what automated trading is about, and how it is implemented, actually you can USE that knowledge to position yourself in such a way as to benefit from it...for example in my classes we position ourselves in front of cirtical time periods when we expect automated execution to occur...when we are correct, that automated activity is the "fuel" that propels the market to our profit target...the point is that knowing when to trade...and when to stand aside is important...and newbies (and apparently newbies aren't the only ones) haven't done the homework necessary to know how to act in this regard.

So Negotiator (sir or madam) here's my offer to you...if you want I will make it possible for you to observe and see how it is done...no strings, no concern on my part either way...that way you can make an informed judgement about this subject and perhaps come away with something of value for your own trading...

let me know..

Best Regards

Steve

Edited by steve46

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Steve, thank you for your kind offer to show me the way. However, I am quite happy the way I trade and make money doing so. Not to say you are ineffective trading the methods you use. But what you are talking about is not the point I was making. I have seen noob traders with slow computers and appalling connections lose lots of money down to naive attempts at scalping the market. It isn't the main reason they lose. But it happens, period. I agree with you that algos also operate in most other markets, but I would add that the intensity is just not the same. But hey, you can agree or disagree with me! That's the beauty of debate. The key thing about it I would say is that at some point even if you have an awesome amount of knowledge, you learn something.

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Well to return your "serve"...lets be clear...I certainly do not claim to have exclusive access to "the way" to trade...its a big world and there are numerous ways to participate in the markets.

 

Also I hope never to be too proud to learn something new...one reason I stay with this is that I can often learn new things or find new concepts that serve as a point of departure for my own research.

 

With respect to high frequency execution..those programs largely exist to obtain what the industry calls a "peekaboo" look at order flow just prior to execution. Those who participate in these activities may deny that, but in reality that is just what they are doing...It requires special data feeds, high speed equipment as you have suggested and co-location. Also it requires a special type of software program to evaluate the data stream and put in place a logic driven basket execution to take advantage of the information obtained. The reason I suggest that these actions have little effect on retail traders is that they are completed in milliseconds and the effect is similar to either a "Liquidnet" pool transaction or "program A" reportable block transaction..The primary difference is that these participants are looking for incremental profits (often taking profit on fractions of a point) not a significant move in price.....and for the most part these activities are buffered amongst the vast volume of both pit executions and automated off site programs...in essence it all blends together...and frankly these transactions have very little effect on intraday market movement.

 

Finally, one can get a quick look at some of the automated executions by simply putting $TICKI chart in place on your screen (assuming you have Esignal as your data provider)...tomorrow for example you will probably see executions go off at 6:40am and again at 7am. These transactions can be seen whent the reading on the chart goes to 25 or more..

 

Well I don't want to bore people with too many details...so please do carry on as you were.

 

Good luck to all in the markets

Edited by steve46

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If you algo junkies want to get a real hard on, look at:

 

Unified Latency Management for Financial Markets - Corvil

Complex Event Processing, Event Stream Processing, StreamBase Streaming Platform

 

While you tug yourselves off, I'm gunna make me some real coin trading lean hogs, corn, soy beans, all the dull boring stuff that only the farmers trade. Candy from a baby springs to mind.....

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I wonder how many hypertraders of the ES actually make money? Any here? In my experience at least, the ES seems to have more stop-running back and forth arbitrage due to how many forces use it for that purpose, at least compared to say the NQ. When I compare the two side by side the NQ is often less herky-jerky. And yet the internet is full of advice as to how to scalp the ES for a point here and there. Scalping noise is a very, very tough game, even with fast computer connections, and if some of these ES scalpers would be much more patient and wait for pullbacks and clearer entries, based on supply and demand, they might be able to ride some nice waves for several points at a time with less chance of getting stopped out. Some trade the ES 20 times a day or more, but with transaction costs and chasing random activity, no wonder so many give up in disgust. Some few out there are brilliant scalpers of the ES, and my hat is off to them. But for most traders trying to make money with this very liquid contract, it might be better to patiently trade the two or three times a day when the probabilities are more clearly in your favor.

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I wonder how many hypertraders of the ES actually make money? Any here? In my experience at least, the ES seems to have more stop-running back and forth arbitrage due to how many forces use it for that purpose, at least compared to say the NQ. When I compare the two side by side the NQ is often less herky-jerky. And yet the internet is full of advice as to how to scalp the ES for a point here and there. Scalping noise is a very, very tough game, even with fast computer connections, and if some of these ES scalpers would be much more patient and wait for pullbacks and clearer entries, based on supply and demand, they might be able to ride some nice waves for several points at a time with less chance of getting stopped out. Some trade the ES 20 times a day or more, but with transaction costs and chasing random activity, no wonder so many give up in disgust. Some few out there are brilliant scalpers of the ES, and my hat is off to them. But for most traders trying to make money with this very liquid contract, it might be better to patiently trade the two or three times a day when the probabilities are more clearly in your favor.

 

Your point is valid..I think very few people really think about what it takes to profitably scalp any market much less the S&P Futures...unless you have a way to cut costs (all costs including commission) down significantly, it isn't economically feasible...In my opinion, retail traders are drawn to scalping because they cannot tolerate the physical tension associated with holding a position...they think that because they can ring the register a couple of times quickly that

THAT constitutes a viable strategy...it doesn't....to overcome expenses one has to make sure that they manage risk very carefully and on top of that you have to find a way to be bigger when you win (bet sizing) than when you lose.....there is a way to do it but most retail traders don't take the time to learn....so they are doomed from the start...its part of the reason so many fail or quit....and if I may...that is why trade rooms and the poor folks who participate in them....usually end up the same way....with a net loss...there's more to this business than setups....and once a person figures it out they have only a few choices...either learn to manage risk and to bet properly or, go find another hobby...

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In my opinion, retail traders are drawn to scalping because they cannot tolerate the physical tension associated with holding a position

 

I agree, and in a way for some, this scalping activity can be an attempt at escaping the necessity of risk management, only holding a position for a minute eliminates the need for patience, which is a key part of risk management. Risk management or uncertainty management is what trading is all about, and until one totally surrenders to uncertainty and makes peace with it, the emotional and physical tension associated with holding a position is unbearable.

 

BTW, your recent points elsewhere regarding supply and demand were much appreciated and excellent, and I personally am focusing more of my effort on patiently observing supply and demand, understanding it through observing price action as opposed to relying on market profile or any technical indicators. So many traders try to make money with such complicated charts, and I appreciate elegance and simplicity in trading.

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    • "The politicians are put there to give you the idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own and control the corporations. They’ve long since bought and paid for the Senate, the Congress, the state houses, the city halls. They got the judges in their back pockets and they own all the big media companies, so they control just about all of the news and information you get to hear. They got you by the balls. They spend billions of dollars every year lobbying. Lobbying to get what they want. Well, we know what they want. They want more for themselves and less for everybody else, but I’ll tell you what they don’t want. They don’t want a population of citizens capable of critical thinking. They don’t want well-informed, well-educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interests. They want obedient workers. Obedient workers, people who are just smart enough to run the machines and do the paperwork…. It’s a big club and you ain't in it. You and I are not in the big club. ...The table is tilted, folks. The game is rigged and nobody seems to notice…. Nobody seems to care. That’s what the owners count on…. It’s called the American Dream, 'cause you have to be asleep to believe it."  George Carlin   see  https://www.rutherford.org/publications_resources/john_whiteheads_commentary/the_election_has_already_been_hijacked_and_the_winner_decided_we_the_people_lose
    • Date : 30th September 2020.ADP, NFP and the change in their correlation.Today ADP reported a 749k sure in private payroll employment in September, almost double the 400k expectation, after an upwardly revised 481k (was 428k) increase in August.There were solid gains across industries. The service sector added another 552k jobs, with the goods sector adding 196k. Manufacturing jobs were up a hefty 130k. In services, trade/transport posted a big 186k gain, while leisure/hospitality jobs increased 92k, and education/health employment was up 90k. Professional/business services added 78k jobs. The ADP gains have massively undershot improvement in BLS payrolls and other labor market indicators since the growth rebound began, suggesting that this could continue despite this month’s solid gain. However please note that during the pandemic year ADP has done an awful job as an indicator of NFP number. In general after since May we have seen the absence of correlation between the ADP employment change figures with Nonfarm Payrolls.The September Nonfarm Payroll gain is seen at 900k, as most measures of output extended their rebounds in September. Initial claims have slowly tightened, and we saw another big -1,912k continuing claims plunge between the August and September BLS survey weeks. The jobless rate is expected to hold steady from 8.4%, alongside a 0.8% September hours-worked increase with a 34.6 workweek and hourly earnings to be unchanged, following August’s 0.4% rise, as the measure gives back more of the 4.7% April pop with the shift in the composition of jobs back toward lower-paid workers. The nonfarm payroll forecast assumes a 1,075k private jobs increase.Seasonal Trends and WeatherFor disruptions to employment from weather as gauged in the household survey, the biggest disruptions occur in the winter months generally with the average peaking in February. There is an additional climb through the late-summer months due to disruptive hurricanes in some years. This September has seen hurricane activity but they’ve been less disruptive than some of the major events in years past, leaving modest upside weather-risk for payrolls. Of course, any weather related disruptions will be eclipsed by COVID-19.Hourly EarningsAs stated above, a flat figure for September average hourly earnings is anticipated, after gains of 0.4% in August and 0.2% in July, but drops of -1.3% in June and -1.1% in May, as we further unwind the 4.7% April surge. Job losses have been skewed toward lower paid retail, leisure and hospitality workers, and this prompted the April spike in average hourly earnings that is now being reversed. A 4.6% y/y increase in September from 4.7% in August is forecasted.Continuing and Initial ClaimsContinuing claims fell -1,912k between the September and August BLS survey weeks, after a drop of -2,459k between August and July, and a -2,280k drop between June and July survey. The economy is unwinding the 24,912k continuing claims peak in the second week of May. Initial claims fell to 866k in the September BLS survey week from 1,104k in the August survey week, and 1,422k in the July survey week. The September initial claims anticipate to average at 870k from 992k in August.ConclusionEmployment should rose further with output in September, despite delayed stimulus and ongoing disruptions in the re-opening process. The September hours-worked is expected to increase of 0.8%, with a 34.6 workweek, while hourly earnings remain flat. The jobless rate should hold steady at 8.4%, leaving the rate below the 9.98% cycle-high from the last recession in October of 2009.Always trade with strict risk management. Your capital is the single most important aspect of your trading business.Please note that times displayed based on local time zone and are from time of writing this report.Click HERE to access the full HotForex Economic calendar.Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE!Click HERE to READ more Market news. Andria Pichidi Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Date : 29th September 2020.Time for the first face-off.The first presidential debate is due to take place today, ahead of an election that is turning into a major event risk. At the same time markets are waiting for developments on further US stimulus measures as US Democrats released a USD 2.2 trillion proposal in a bid to break the deadlock in talks with Republicans. The debate is at 01:00 GMT while the focus turns on any potential market fallout especially as it coincides with indications of a possible approval of the fiscal stimulus but crucial with the approach of month- and quarter-end which could exacerbate volatility.Additionally in the US this week, there is also the threat of massive layoffs/furloughs from the airlines come October 1 as the CARES package provisions expire. Data remains thin for now. September consumer confidence headlines Tuesday, and is followed Wednesday with the ADP private payroll report, September ISM, vehicle sales, August income and consumption. Thursday has the high frequency jobless claims before Friday’s September nonfarm payrolls release.Now in regards to tonight’s debate, the importance of it does not rely solely due to the fact that is the every first debate but mainly because it might present the clear winner especially this year in which the candidates have not been as highly visible with limited campaigns done because of Covid-19.The candidates will be questioned for 90 minutes, without commercial breaks, according to the Commission on Presidential Debates. Ahead of the debate the vulnerable one look to be Trump following a New York time report that the president paid no income tax for 11 years. However is an excellent brutally effective debater so it will interesting to see how he will overcome any attacks. Please note that in some states voting has already started via mail or in person.The debate will take place at Case Western Reserve University and Cleveland Clinic in Cleveland, while the topics selected by Wallace, moderator of the first 2020 presidential debate, are the:   The Trump and Biden Records The Supreme Court Covid-19 The Economy Race and Violence in our Cities The Integrity of the Election Below you can also find the latest national polls prior the debate.Based on UBS research below we enclose the campaign policy platform of each Party:What is the 2020 Republican Party platform?President Trump abandoned the usual practice of endorsing a lengthy campaign policy platform in conjunction with the GOP national nominating convention. Instead, he released an abbreviated written agenda for a planned second term in office. The GOP policy statement is largely aspirational, with fewer details than one is accustomed to seeing from a presidential candidate. The president’s proposed fiscal policies include additional tax cuts for individuals and federal tax credits and deductions for corporations that repatriate jobs to the US from overseas locations. The statement also explicitly supports additional capital gains tax relief through an expansion of the Opportunity Zone program.Numerous provisions from the Tax Cuts and Jobs Act (TCJA) are scheduled to expire at the end of 2025, but the president does not discuss how the resulting tax hikes will be averted. Absent additional congressional action, the individual income tax cuts, an increase in the standard deduction, and the expanded child tax credit will all revert to prior levels in just over five years. Voters are left to assume that the president will be able to convince Congress to make the tax cuts permanent.The policy statement, which was released in conjunction with his acceptance speech, also focuses on the adoption of a more adversarial posture toward China, strict enforcement of immigration laws, and support for law enforcement personnel. While all three are viewed by the GOP as winning campaign strategies, the reference to “ending our reliance on China” suggests that the president is willing to continue to use tariffs as a tool of foreign policy if elected to a second term. He has threatened to selectively impose tariffs upon, and to strip government contracts from, companies that refuse to relocate their operations to the US.Meanwhile, in a rare instance of tacit agreement with his challenger, the president reaffirmed a desire to cut prescription drug prices, lower healthcare insurance premiums, and require coverage of all preexisting conditions. On the whole, the impact of the president’s policies on Treasury receipts (and on the US economy generally) is difficult to calculate. Whether or not this is purposeful is debatable, but the inevitable conclusion is that a second Trump administration would be similar to the first and forced to rely on deficit financing to accomplish its goals.What is the 2020 Democratic Party platform?In contrast to the president’s abridged policy statement, the Democratic Party platform is a protracted recitation of policies as disparate as the need for federal bankruptcy reform, a Green New Deal, and reinvestment in rural America. The Biden campaign has not released a consolidated fiscal plan but instead weaved his call for higher taxes to partially fund a series of spending proposals related to infrastructure investment, climate change, and an expansion of healthcare coverage. At its core, however, the Biden campaign is focused on strengthening the federal regulatory regime, reversing many of the provisions of the Tax Cuts and Jobs Act, and increasing federal funding of long-time Democratic policy priorities.The former vice president advocates an increase in the highest marginal tax rate to 39.6%, and higher payroll taxes for individuals earning more than USD 400,000 a year. He also proposes to tax capital gains at the same rate as ordinary income for taxpayers earning more than USD 1 million. The corporate tax rate is targeted for an increase, albeit less than the rate prevalent before the enactment of the Tax Cuts and Jobs Act. The corporate tax rate would increase from 21% to 28%, and an alternative minimum tax of 15% would be levied on companies that report more than USD 100 million in book income.The Democratic campaign platform also takes aim at the estate tax by recommending a reduction in the exemption to USD 3.5 million and the elimination of the stepped-up basis rule. Tax preferences for the fossil fuel industry would be eliminated, while those for energy efficiency would be increased. With the exception of the payroll tax increase, most of Biden’s fiscal policy platform could be implemented with a majority vote in the Senate through budget reconciliation.The Tax Policy Center has estimated that Biden’s tax proposals would increase federal revenue by about USD 4 trillion between 2021 and 2030, or 1.5% of GDP over a decade.1 Roughly half of the revenue gain would be derived from higher taxes on US households, with the remainder coming from businesses and corporations. The Tax Foundation expects the Biden tax plan to reduce after-tax income for the top 1% of taxpayers by 7.8%. The top 5% would see their after-tax income drop by 1.1%, with diminishing reductions thereafter as income declines.Click HERE to access the full HotForex Economic calendar. Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! Click HERE to READ more Market news. Andria Pichidi Market Analyst HotForex
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