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jswanson

RSI And How To Profit From It

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We all know there are no magic indicators but there is an indicator that certainly acted like magic over the past 10 years or so. What indicator is it? Our reliable RSI. In this article we are going to look at two trading systems that were first talked about in the book, ”Short Term Trading Strategies That Work” by Larry Connors and Ceasar Alvarez. It has been well established in various articles on the web that a 2-peirod RSI on the daily chart of the stock index markets has been a fantastic tool for finding entry points. Sharp price drops in the S&P E-Mini futures during bullish markets have historically (since the year 2000) been followed by reversals. These reversals can often be detected by using the standard RSI indicator with a period value of two. Place this indicator on a daily chart and look for points when the indicator falls below five, for example. These extreme low points are buying opportunities.

 

RSI2_Indicator.png

 

RSI(2) SYSTEM

We can turn this into a simple strategy to test the effectiveness of the RSI(2) indicator on the E-mini S&P. In short, we wish to go long on the S&P when it experiences a pullback in a bull market. We can use a 200-day simple moving average to determine when we are in a bull trend and using a 2-period RSI to locate high probability entry points. We can then exit when price closes above a 5-day simple moving average. The rules are clear and simple:

 

  • Price must be above its 200-day moving average.
  • Buy on close when cumulative RSI(2) is below 5.
  • Exit when price closes above the 5-day moving average.
  • Use a $1000 catastrophic stop loss.

 

The system backtest was performed from September 1997 through March 2012. A total of $50 for commissions and slippage was deducted per round trip. Below is a chart of what this system would look like along with the system results.

 

RSI(2) SYSTEM RESULTS

Net Profit: $17,163

Percent Winners: 67%

No. Trades: 64

Ave Trade: $268.16

Max Drawdown: -$5,075

Profit Factor: 1.90

 

RSI2_Strategy.png

 

RSI2_Strategy_EQ_Curve.png

 

These results are great considering we have such a simple system. This demonstrates the power the RSI(2) indicator has had now for well over a decade. Just with this concept alone you can develop several trading systems. For now, let’s see if we can we improve upon these results.

 

ACCUMULATED RSI(2) STRATEGY

 

Larry Conners adds a slight twist to the RSI(2) trading system by creating an accumulated RSI value. Instead of a single calculation we will be computing a running daily total of the 2-period RSI. In this case, we are going to use the total of the 2-period RSI for the past three days. When you keep an accumulated value of the RSI(2) you smooth out the values. Below is a chart comparing the standard 2-period RSI indicator with an accumulated 2-period RSI indicator. You can see how much smoother our new indicator is. This is done to reduce the number of trades in hopes of capturing the quality trades. In short, it’s an attempt to improve the efficiency of our original trading system.

The rules are:

 

  • Price must be above its 200-day moving average.
  • Buy on close when cumulative RSI(2) of the past three days is below 45.
  • Exit when RSI(2) of the close of current day is above 65.
  • Use a $1000 catastrophic stop loss.

 

RSI_vs_RSI_Accum.png

 

ACCUMULATED RSI(2) SYSTEM RESULTS

 

Net Profit: $17,412

Percent Winners: 67%

No. Trades: 52

Ave Trade: $334.86

Max Drawdown: -$4,850

Profit Factor: 2.02

 

RSI2_Accum_Strategy.png

RSI2_Accum_Strategy_EQ_Curve.png

 

Conclusions

 

So which one is better? The accumulated strategy worked as intended. It increased the efficiency of the standard RSI(2) trading system by reducing the number of trades, yet produced about the same amount of net profit. As a bonus, the drawdown was even slightly smaller. While both systems do a fantastic job, the accumulation strategy may do a slightly better job. The Accumulated RSI(2) strategy will work well on the mini Dow as well as the two ETFs, DIA and SPY.

 

Download

 

The EasyLanguage code is available below as a free download. There is also a TradeStation workspace. Please note, the trading concept and the code as provided is not a complete trading system. It is simply a demonstration of a robust entry method that can be used as a core of a trading system. So, for those of you who are interested in building your own trading systems this concept may be a great starting point.

 

DOWNLOAD HERE

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JSW... thanks for the article...

 

I'm a big fan of Connors and coded up his 7 strategies for ETFs in Omnitrader Pro...

 

i've been running them for about a year now with excellent results.

 

however, i'm curious about your choice of $1000 catastrophic stop loss on the ES. Connors dedicates chapter 6 in the book you reference about stop losses and presents a case for not using them.

 

Connors was going to speak at a local trading organization meeting last month and I had planned on asking him directly about this while providing a few examples of some pretty serious losses that would no doubt wipe out a smaller account considering position sizing limitations. the Q&A never happened as i was unable to attend the meeting and as it turned out neither was he.

 

fwiw, one thing i did do within my 7 ETF strategies was to add an additional filter to only allow signals on strategies that backtested over 7 years with hit rate >= 85. additionally within those strategies that meet that threshold they are ranked by profit per trade.

 

you should see the equity curve:cool:

 

back to your example: i have been hesitant to use the RSI strategy variations with futures and holding overnight because of the drawdown issue.

 

Again, just curious about how you came to use $1000 catastrophic loss. Also, what account size and lot size are you using in your backtesting?

 

for example, i could see where a $10K account trading 1 contract with the $1K stop loss could possibly play out w/o blowing up an account.

 

Thanks,

 

-phil

Edited by Phil-n-Texas

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Very few trades in the testing period. Performance can be random and a statistical fluke. IMO nobody with minimum experience in trading system development relies on 60 or 70 trades in more than 15 years of data.

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The best way to profit from RSI is by steering clear of it. Basing your trading on two moving averages! There's no such thing as oversold / overbought. When will people realize the markets ain't what they were and the tried n tested methods are old hat.

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JSW... thanks for the article...

 

I'm a big fan of Connors and coded up his 7 strategies for ETFs in Omnitrader Pro...

 

i've been running them for about a year now with excellent results.

 

however, i'm curious about your choice of $1000 catastrophic stop loss on the ES. Connors dedicates chapter 6 in the book you reference about stop losses and presents a case for not using them.

 

Connors was going to speak at a local trading organization meeting last month and I had planned on asking him directly about this while providing a few examples of some pretty serious losses that would no doubt wipe out a smaller account considering position sizing limitations. the Q&A never happened as i was unable to attend the meeting and as it turned out neither was he.

 

fwiw, one thing i did do within my 7 ETF strategies was to add an additional filter to only allow signals on strategies that backtested over 7 years with hit rate >= 85. additionally within those strategies that meet that threshold they are ranked by profit per trade.

 

you should see the equity curve:cool:

 

back to your example: i have been hesitant to use the RSI strategy variations with futures and holding overnight because of the drawdown issue.

 

Again, just curious about how you came to use $1000 catastrophic loss. Also, what account size and lot size are you using in your backtesting?

 

for example, i could see where a $10K account trading 1 contract with the $1K stop loss could possibly play out w/o blowing up an account.

 

Thanks,

 

-phil

 

I trade futures, so there is minimal over night risk since the market is actively trading and my stop can get hit without fear of a large gap the next day. Furthermore, my studies have also demonstrated there is a long bias on the overnight session. Many people fear holding over night. Such thinking is common wisdom, but holding overnight can be very beneficial.

 

There is a weekend risk since the market is not open.

 

I picked $1,000 from a backtest study. I wanted a stop simply because most people don't trade without a stop. I trade a very similar RSI system with a $500 stop. If you are not going to trade with a stop, options may be a good idea.

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The best way to profit from RSI is by steering clear of it. Basing your trading on two moving averages! There's no such thing as oversold / overbought. When will people realize the markets ain't what they were and the tried n tested methods are old hat.

 

The two-period RSI has worked wonders over the past 10 years on the ES and the numbers show it. But thanks for your opinion.

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Very few trades in the testing period. Performance can be random and a statistical fluke. IMO nobody with minimum experience in trading system development relies on 60 or 70 trades in more than 15 years of data.

 

Here is the 2-period RSI system on the S&P Cash index going back to 1992. Trading a fixed lot of 100 shares.

 

RSI2_SPX.png

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Looks very nice.. Can the code be generated for using cumulative RSI in Metastock.

 

Sorry, but not familiar with Metastock otherwise I would be happy to convert it. Maybe there someone else on this forum that can do this?

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If you rsi is so good, why are you vending it for a few dollars on a forum. Buying every low and selling every high on a 30min chart has worked well over the last 10 years too! And with hindsight, I can post a chart showing this. Any newbies want to send me $100 I can also share my cointoss indicator that I use a $500 stop with. Doesn't matter how you dress it

up, BS is BS.

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If you rsi is so good, why are you vending it for a few dollars on a forum. Buying every low and selling every high on a 30min chart has worked well over the last 10 years too! And with hindsight, I can post a chart showing this. Any newbies want to send me $100 I can also share my cointoss indicator that I use a $500 stop with. Doesn't matter how you dress it

up, BS is BS.

 

This is all educational material I post here on Traders Laboratory. It's the very research I use to trade the markets. You don't have to believe it or accept it. Read it and if you don't have anything constructive to say or don't find it useful - then so be it.

 

The system posted in this thread is not a complete trading system. If you read the article you would have understood this. It's a launching pad or a study. A person interested in creating his/her own system can use this or the can ignore it. But as it stands, it's not a complete system.

 

I do trade a system that is a modified version of what I posted. I also trade other systems. You're right, I don't have to sell anything. However, I enjoy running a business. I've been running some type of business since I was in high school. My goal in life is to have multiple streams of income. It's called diversification and living my life the way I want to.

 

Have a great weekend.

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@Valuetrader Would you mind posting the code please for your system that buys every low and sells every high on the 30 min chart? I know $100 doesn't mean much at all to you and you aren't realy a believer in system trading, so you won't mind at all sharing such insignificant code, but I'm sure many others would be fascinated to see it. You know once yo uhave posted it, I'm sure it will help built your reputation as an honest and reputable person.

 

Regards,

Adrian

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@Valuetrader Would you mind posting the code please for your system that buys every low and sells every high on the 30 min chart? I know $100 doesn't mean much at all to you and you aren't realy a believer in system trading, so you won't mind at all sharing such insignificant code, but I'm sure many others would be fascinated to see it. You know once yo uhave posted it, I'm sure it will help built your reputation as an honest and reputable person.

 

Regards,

Adrian

 

Adrian. Oh Dear!

 

At the end of the post you are referring to, I wrote " Doesn't Matter How You Dress It Up Bs is Bs".

 

So from this sentence anyone with a functioning brain could have guessed the general theme of the reply, but not you Adrian!

 

In your hurry to supply a witty retort, you've completely missed the point of my post, and possibly made yourself look stupid. Allow me to answer in a manner that you may understand.

 

I WAS BEING SARCASTIC.

 

I was pointing out that regardless of what indicator / system used it can be proved to be successful with hindsight.

 

Cointoss System, again Adrian, I was being Sarcastic.

 

I'm not a vendor & I'm not selling or recommending anything so why should I give a shit about my reputation. All my codes are posted free on this forum.

 

Maybe Adrian, you should contact the moderator and suggest a new rule forbidding questioning vendors posts, as you seem so protective over them.

 

 

 

A healthy scepticism prevents us from all being robots Adrian. Now go tidy your room.

Edited by ValueTrader

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@Value Trader. Clearly you missed the point of my post as well. How ironic, when yours was being sarcastic, as was plainly obvious by anyone with a brain. No wonder you think it is all BS. BTW..what is BS to some is fertilizer to others. Something you might wish to giive some thought to. So seriously, there is only one perosn who looks silly here, and it definitely ain't me.

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BTW ValueTrader, you should show a little more respect to someone who has generously posted with full discloser a profitable trading system, something very very rare on any forum. Your arrogance shows you clearly have some serious issues and likely resent him for being profitable when you can't do the same. And please don't bother writing a come back with some snide remark to try and defend your situaion. It is truly black and white. You have your views and the world has another....its as simple as that.

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Why you so protective of RSI. Trying to get it to work? lol

 

You call me arrogant, but you feel it correct to speak on behalf of the world vs me!

 

 

PM me and I'll give you the company I'm employed by details. If you then contact the FSA in the UK they'll be able to confirm My P&L and account size.

 

I trust you'll do the same, however I don't think your bedroom is regulated by the FSA.

 

I'll let you have the last word Adrian, you need practice with your spelling!

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Hi Phil-n-Texas,

 

Thanks for your post. I also have OT Pro. I can probably figure out how to filter on hit rate and select based on profit per trade, but if you have any suggestions, they would be great. Do you combine the strategies into a single strategy in OT Pro and require some n number of them to fire, or just allow all of them to fire signals and then filter the way you described?

 

Last question - promise :) - is the equity curve you mention from live trading or from OT reports? I've never fully trusted the OT backtest results.

 

The separate discussion about stops is a good one. I would want to have some kind of disaster stop in place - the flash crash would be a good example of why. But in general, selecting the "right" stop is very difficult and I have also seen system results actually go down thanks to stops!

 

Thanks,

 

Gordon

 

 

JSW... thanks for the article...

 

I'm a big fan of Connors and coded up his 7 strategies for ETFs in Omnitrader Pro...

 

i've been running them for about a year now with excellent results.

 

however, i'm curious about your choice of $1000 catastrophic stop loss on the ES. Connors dedicates chapter 6 in the book you reference about stop losses and presents a case for not using them.

 

Connors was going to speak at a local trading organization meeting last month and I had planned on asking him directly about this while providing a few examples of some pretty serious losses that would no doubt wipe out a smaller account considering position sizing limitations. the Q&A never happened as i was unable to attend the meeting and as it turned out neither was he.

 

fwiw, one thing i did do within my 7 ETF strategies was to add an additional filter to only allow signals on strategies that backtested over 7 years with hit rate >= 85. additionally within those strategies that meet that threshold they are ranked by profit per trade.

 

you should see the equity curve:cool:

 

back to your example: i have been hesitant to use the RSI strategy variations with futures and holding overnight because of the drawdown issue.

 

Again, just curious about how you came to use $1000 catastrophic loss. Also, what account size and lot size are you using in your backtesting?

 

for example, i could see where a $10K account trading 1 contract with the $1K stop loss could possibly play out w/o blowing up an account.

 

Thanks,

 

-phil

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My spelling ability is fine ValueTrader, but posts like yours simply aren't worth my time to bother checking. I only do that with people I respect. But I'm well versed with people who need to resort to abusing a posters spelling, as it is a textbook sign they know they havent a leg to sptand on, and are simply trying to deflect the discussion from their own baseless claims and accustations. Next thing you'll be making a reference to sleeping with my mother I presume LOL. That would truly be sad, as only the lowest scum on the planet take that line.

 

You also seem to have a severe inferiority complex, as you like belittling people who provide GOOD information. So you are hardly the kind of person we wish to have on this forum. Quite sure at least 90% of readers will agree on that.

 

Protective of the RSI?? LOL What on earth are you talking about? It is now even more clear you need to make yourself feel good by attacking others, because you obviously don't even bother reading people's posts properly, nor even understand what they are saying. I made no mention of the RSI, nor whether I had an affinitity with it. How bizarre. In fact, if it wasn't obvious to anyone with an IQ > 50, my first post had absolutely nothing to do with the actual content of the trading model at all.

 

I didn't 'call' you arrogant, I simply stated a factual situation. Nothing more.

 

Why on earth would I care where you were employed? I don't even care who you are. And I certainly have no interest in massaging your misaligned ego trip further.

 

Finally, you seem to have an affinity with bedrooms. I am assuming you are talking about your own situation. Do you live out of a rented studio apartment? Certainly you do not know who I am, nor my living situation. Therefore, only a complete fool would even make such absurd guesses at my living situation LOL Truly hilarious. How embarassing for you, as clearly, by suggesting I am the one looking foolish, it is in fact you look about as dumb as anyone could possibly portray themselves.

 

PLEASE do not post to the Traders Laboratory forum unless you can post something constructive.

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My question to you ValueTrader is, why are you reading a Thread under Automated Trading when you don't believe in it? Surely it would be a serious waste of your time, or are you simply out to prop up your own insecurities and ego by attacking others for their generous posts? I am fascinated to understand the mind of people who are insecure, as they are usually the ones we take the money from in the end.

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Very few trades in the testing period. Performance can be random and a statistical fluke. IMO nobody with minimum experience in trading system development relies on 60 or 70 trades in more than 15 years of data.

 

If you investigate the source (Connors) of the strategy that JSwanson is discussing in brief here, you will find extensive testing over a wide range of instruments over many decades. As the strategy concept is to sell strength and buy weakness, you can also find other ways to test the general concept without relying on the particular triggers given in this strategy (in fact, JSwanson shows the results of a 3-Up Close, 3-Down close rule in another thread).

 

Of far more concern that the limited number of data points would be the number of variable parameters: length of MA, length of RSI, OB level of RSI, OS level of RSI, RSI input data (close as opposed to open, high, low, avgprice etc). You would want to see how robust the strategy remained as the parameters were varied.

 

Hope that's helpful.

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@BlueHorseshoe A statistician will tell you, you need 30 trades to be statistically significant. When it comes to trading though, they haven't a clue what they are talking about. Some traders will tell you they wish to see hundreds or even thousands of trades to validate a model. They also do not know what they are talking about. I have absolutely no problems at all with the sample of 60 trades or so over the large time period. Why? Because when you understand markets and what is important, then you simply don't need a sample of hundreds of trades. Do you think Warren Buffet needs to see hundreds of sample trades to know that buying a business at a low price relative to its earning potential will work or not? Obviously not. Those with experience 'just know' because its obvious. When it comes to trading models, what's important is testing over different market environments, and understanding how and if the model is designed to deal with them adequately. Certainly you would have to be extremely patient, and be trading other models as well beside the RSI model, as the trades are few and far between, but that is irrelevant as to its validity or not. Now if a short term model was presented with 60 trades over the last month was presented, then I would laregly dismiss it until it was tested over a much larger database. Why? Because 1 month of intraday data is NOT indicative at all, of the type of market environments that lie ahead in coming years.

 

The robustness of the variables is also of clear importance, but even there you need to be very careful. You can't simply test an RSI from 1 to 10 and see if the model keeps working. Markets are more complex than that. A 10 period RSI won't reach the same extremes a 2 period will. So you might try adjusting the oversold level with it, but even there it isn't that simple. A 2 period RSI will show situations that simply cannot occur with larger period RSI's. This is why creating a successful and robust model is far more difficult than most think. It requires a great understandsing of markets in the first place.

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I would want to have some kind of disaster stop in place - the flash crash would be a good example of why.

 

The flash crash would actually be a very good example of why not to have a stop in place (in the case of this specific strategy). The flash crash would barely have made a dent in your equity curve, as the maket bounced significantly the next day. So, assuming you could meet margin calls throughout the crash you would have been fine.

 

Last summer's mammoth sell-off, on the other hand - well there's the time you needed a stop in place alongside the RSI!

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The flash crash would actually be a very good example of why not to have a stop in place (in the case of this specific strategy). The flash crash would barely have made a dent in your equity curve, as the maket bounced significantly the next day. So, assuming you could meet margin calls throughout the crash you would have been fine.

 

Last summer's mammoth sell-off, on the other hand - well there's the time you needed a stop in place alongside the RSI!

 

I agree with this 100%.

 

There are times when a stop will really hurt you. Yet, I never trade with out them.

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re: discussion on backtest sample...

 

here's the latest on my list of 20 ETF's running 7 strategies per Connors...

 

this is set for backtest of 5 years and i've marked arrows for backtest hit-rate(BTHR) and backtest number of trades(BTN)...

 

since the strategies are dependent on the SMA(200) i had to adjust the backtest range such that there was enough data to plot and calculate the SMA(200)... some ETFs have far more data than 5 years but some do not so I am using a setting that will address all of the ETFs on the list.

 

symbols with zero's are those that didn't make the threshold settings for hit-rate over backtest period.

 

note that for EWZ the BTHR shows only 84... this is for the combined BTHR for all strategies >= 85 BTHR... reason it is below threshold is that individually the strategies meet the threshold but combined they do not because of one or the other being "in-trade"...

 

a bit confusing but not really if you've worked with the voting matrix in OT and understand how it works...

 

2012-04-09_0818.png

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Portfolio simulation using various allocation methods and backtest 5 years (1250 days).

 

signals only with BTHR >= 85

 

Fixed trade size = 100 shares

% of Equity = 5%

Fixed $ amount = $1000

Fixed Risk = 2% with 1 ATR(50) stop loss

 

2012-04-09_0856.png

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    • Yeah, and you should never stop learning. If you wish to survive in the Forex Market, the only way to do it is by learning all the time.
    • Date : 1st December 2021. Market Update – December 1 – Taper gets a boost & Transitory gets “retired”. Powell “retires” Transitory in light of Omicron & surprisingly suggests faster taper – Stocks tank, Dollar& Yields rise on faster tightening expectations.   USD (USDIndex 95.90) back down from leap to 96.60 on Powell testimony. Saw fresh wave of risk aversion as Treasuries sold off, yields spiked (particularly the 2yr) , Stocks fell significantly with USA100 down over -2.4% (APPL bucked the trend +3.16%) USA500 -1.90% (-88pts) 4567 & USA30 off 652 pts or -1.86%. Consumer confidence saw a slump in the headline, and a rise to a 13-year high in the inflation component. The Chicago PMI fell to 61.8. Home prices increased to fresh record peaks. US Yields 10-year rates were down over 7 bps to 1.41% before closing at 1.443% before recovring to 1.468% now. Asian Markets – Equities – Topix and Nikkei are currently up 0.4%, the Hang Seng bounced 1.1% and the CSI 300 is up 0.1%. The ASX, which outperformed yesterday, dropped back -0.3%. Data over night – Japan’s manufacturing PMI came in stronger than expected and while China’s private PMI reading signalled stagnation at 49.9, that was compensated somewhat by the stronger than expected official manufacturing PMI released yesterday. AUD GDP was not as bad as expected -1.9% vs -2.7% & 0.7% last time. USOil – continues under pressure, down to $64.08 (14-week lows) yesterday – recovered to test $68.00 today – expectations continue to grow that OPEC+, will put on hold plans to add 400,000 barrels per day (bpd) of supply in January at their meeting tomorrow. Gold finally some intra-day volatility – Powell surprise spiked to $1808 – before testing $1770 with a couple of hours, back to $1788 now. FX markets – Yen rallied USDJPY dipped to 112.50, back to 113.40 now, EURUSD now 1.1326 & Cable steadied to 1.3300-1.3330. European Open – December 10-yr Bund future down -11 ticks at 172.26, slightly outperforming versus Treasury futures. Central bankers may be getting more nervous about inflation outlook, but Omicron clearly is clouding over growth outlook & in Europe at least that will boost the arguments of the cautious camp at the central banks. US yields remain firmly below the levels seen before the new virus variant hit the headlines & sentiment is likely to remain jittery, even if stocks are set to back up from yesterday’s lows, with DAX & FTSE 100 future posting gains of 0.9% and 0.7% respectively & a 1.4% jump in the NASDAQ leading US futures higher. Data releases today kicked off with a big miss for German Retail sales (-0.3% vs 1.0%), higher UK house prices & firmer CPI from CHF. Today – PMIs (EZ & UK),US Markit Final Manufacturing PMIs, US ADP and ISM Manufacturing PMI, JTC and OPEC meetings, BoE’s Bailey and Fed’s Powell & Yellen testify. Biggest FX Mover @ (07:30 GMT) NZDJPY (+0.60%) Risk-sensitive currencies remain volatile, from a slide to 76.65 yesterday, today a rally to 77.80. Currently MAs aligned higher, MACD signal line & histogram over 0 and rising, RSI dipping from 70.00 at 58, Stochastic remain OB. H1 ATR 0.172, Daily 0.84. 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. Stuart Cowell Head 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 : 30th November 2021. Market Update – November 30– Stocks at ups & downs. Omicron remains in focus and warnings that it will leave current vaccines far less effective and that it will take time to modify and produce new ones has seen markets adjusting growth forecasts and central bank projections.   USD (USDIndex 96.00 up from 95.92 low) saw a fresh wave of risk aversion as Treasuries sold off, but cautiously with only a modest back up in yields, & Stocks bounced significantly with the USA100 jumping over 2% intraday with IT a big winner. It closed with a 1.88% gain, with the USA500 1.3% firmer, and the USA30 up 0.68%. Wall Street stocks closed higher as investors were hopeful that the Omicron coronavirus variant would not lead to lockdowns after reassurance from US President Joe Biden. Moderna’s CEO told the FT that existing vaccines will be less effective and that it may take months before modified vaccines are available at scale. #Moderna +12.73% yesterday. US Yields 10- and 30-year rates were up just over 3 bps to 1.51% and 1.859%, respectively, with the 2-year 1bps higher at 0.508% The 10-year is currently corrected -3.9 bp to 1.46%, but it is still in negative territory, at -1.05% on Tuesday, keeping gold’s opportunity cost low. Equities – Topix and Nikkei are down -1.0% and -1.6% respectively, Hang Seng lost -2.3%, the CSI 300 -0.6%, while the ASX outperformed with a modest gain of 0.2%. USOil – down by 2%, drifted to $66.73 – after FT cast doubt on the efficacy of COVID-19 vaccines against the Omicron – expectations are growing that OPEC+, will put on hold plans to add 400,000 barrels per day (bpd) of supply in January. Gold spiked to $1795 – World Health Organization said on Monday carried a very high risk of infection surges. #TWTR was UP 12% pre-market on news Dorsey was leaving as CEO – it closed DOWN 2.74%. The USA100 rose+1.88%. FX markets – Yen rallied (a new flight to safety), Aussie and kiwi slide. USDJPY at 112.94, EURUSD now 1.1326 & Cable steadied to 1.3300-1.3330. European Open – The December 10-year Bund future is up 46 ticks, Treasury futures are outperforming and in cash markets the US 10-year rate has corrected -3.9 bp to 1.46% amid a fresh wave of risk aversion. DAX and FTSE 100 futures are down -1.5% and -1.1% respectively, while a -1.1% drop in the Dow Jones is leading US futures lower. In FX markets both EUR and GBP gained against the Dollar. EGB yields had moved higher against the background of improving risk appetite and a jump in German inflation yesterday, but while Eurozone HICP today is likely to exceed forecasts, central bankers have already been out in force to play down the importance of the number for the central bank outlook and rate expectations. Virus developments will also help to take the sting out of the number. Today – German labour market data, EU Inflation, Canadian GDP and US Consumer confidence are due today. Fed Chair Jerome Powell and Treasury Secretary Janet Yellen are due to testify before the US Senate Banking Committee at 15:00 GMT. Biggest FX Mover @ (07:30 GMT) AUDJPY (-0.68%) Risk-sensitive currencies slid and safe havens gained. AUDJPY dropped to 80 lows (S2). Currently MAs point rightwards, MACD signal line & histogram below 0, RSI rising above 30 but Stochastic OS. Hence a mixed picture intraday. 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 November 2021. Market Update – November 29 – Omicron dominates sentiment. USD (USDIndex 96.30) recovers from Fridays slump (95.98), Stocks lost over –2.2% in thin half-day trading, Oil FUTS lost –13%, Gold slumped and Yields tanked (10-yr 1.482%) on a safe haven (JPY & CHF bid) risk off day. (and a strange carry trade bid for EUR). Weekend news, as Countries block flights and tighten restricts, but first Omicron cases in SA appear mild and hospitalizations have not spiked, has seen a bounce in sentiment and Asian markets. Pfizer suggested it would take 100 days to adapt new vaccine, if required. US Yields 10yr trades up 5.1 bp at 1.52%, after Friday’s slump. Equities – tanked in thin and short day on Friday USA500 -106.84 (-2.27%) at 45941 – USA500.F trades higher at 4639. USOil – collapsed to $67.08 – now up nearly $4 at $71.00. OPEC+ have delayed this weeks meeting by 2 days & likely to delay planned January production increases. Gold spiked under $1780, has bounced to $1795 but struggles to recoup $1800   FX markets – EURUSD now 1.1270, after a +125pip rally on Friday, USDJPY now 113.36, from 115.50 to 113.00 on Friday & Cable back to 1.3325. Overnight – JPY Retail Sales recover but miss expectations (0.9% vs 1.2% & -0.5% last time). European Open – The December 10-year Bund future is down -27 ticks, US futures are also in the red & the US 10-year rate is up 5.1 bp at 1.52%. Stock markets remained under pressure during the Asian part of the session, but DAX and FTSE 100 futures are up 1.2% and 1.3% respectively and a 1.2% rise in the NASDAQ is leading US futures higher. A part reversal of Friday’s flows then as virus developments remain in focus. Travel restrictions are making a come back and the services sector in particular is facing fresh pain, but as Lagarde suggested over the weekend, the impact of Omicron is unlikely to throw economies back to the situation at the start of the pandemic, meaning the overall situation has not really changed. We continue to see the ECB on course to end PEPP purchases on time in March next year, although developments will add to the arguments of those who want to keep the flexibility on the distribution of asset purchases at least for future emergencies. The BoE meanwhile may be postponing the planned rate hike into next year. Today – German regional and national CPIs, Eurozone Consumer Confidence (final), US Pending Home Sales, ECB’s de Guindos, Schnabel, Lagarde, Fed’s Williams, Powell. Biggest FX Mover @ (07:30 GMT) CADCHF (1.00%) The risk-off collapse on Friday 0.7400-0.7200 has recovered to 0.7280. MAs aligned higher, MACD signal line & histogram rising but still below 0 line, RSI 53.80 & rising H1 ATR 0.0018, Daily ATR 0.0062. 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. Stuart Cowell Head 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.
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