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All Eyes on US Consumer Confidence, 10AM EST
By Mike Conlon | October 27, 2009
A lot of the time when I am considering potential trades, I like to “match up” what I am seeing on a chart with what might happen in the news. This means that I pay close attention to potential reports that I think might be important.
Today’s such event is the US Consumer confidence numbers that come out at 10AM EST. How do I know that this number may be significant? Well, call it just a hunch, but yesterdays price action in the US stock market and its corresponding effect on both the currency and commodities markets has led me to believe that that there is some rising fear out there.
Early this morning, the US equity index futures are flat, meaning there is indecision over which way the market might go today. Chances are the market will trade that way until this announcement at 10AM. And then the fireworks could begin.
While I don’t like to “guess” what will happen or “wager” on the number, I do like to use technical analysis to guide what I think may happen. This helps me form a general market thesis that gives me a short-to medium term macro view that can provide me with all kinds of opportunities in many markets. Because the different asset classes and instruments are both positively and inversely correlated, I can extrapolate what may happen today.
So what does that mean for today?
Well, the first thing first I am seeing is US dollar strength and a potential trend reversal. Dollar strength usually means weakness for stocks and commodities, as well as all of the “risk-seeking” currencies. When there is increased fear in the market, risk-averters sell higher yielding currencies and move back to the dollar, in the “flight to safety” trade we speak of so often.
So if the consumer confidence number comes in worse than expected, then expect dollar gains and equity market losses. I will be back a bit to later to see how this plays out, but I have orders place to sell non-dollar currencies below resistance, and to buy dollars above support. Tight stops are placed just below support and above resistance.
Check back later to see what happens!
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