FOCM Jan 9 2015

BarroMetrics Views: FOCM Jan 9 2015

I am looking for a below consensus headline number. Shadowstats has been warning of a possible downside surprise. If it is likely to come, it will come tomorrow – some market participants have yet to return and sentiment is high. In addition, a low number may prove to be the S&P’s cause celebration – in the hope that the FED won’t raise rates till June 2015 or later.

 Figure shows the expectations numbers for December 2014 and January 2015. You’ll see that the bottom end of the range has risen from 140K to 202K (as rise of 62K) and the upper end from 275K to 305K (a rise of 30K). I believe comparing the expectation numbers this way provides a better guide to the market sentiment than by just comparing the consensus numbers. 

What effect will a figure of, say 210K, have on the stock market and US$?

Not sure about the stock market. There will be an immediate downward blimp; but we may see the market close up for the day. Certainly the price action will provide clues about the current market structure and sentiment.

The US$ will probably head south and close down.  As a trader who is long the USD (last thirds), I am concerned about the universal bullishness in the USD market. A short squeeze environment is there for the taking – only needs a stimulus.

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FIGURE 1 Consensus Non-Farm

Left Brain Thinking III

BarroMetrics Views: Left Brain Thinking III

Yesterday I said that Trader B had to exit immediately. Why?

Figure 1 shows that, given his win rate, his required reward:risk return (2:1) is secured at 0.8103; in our example this was where the AUDUSD was trading. So, he had no safety moat; and with the AUDUSD now trading at long-term support, a bounce has to be included in the possible scenarios – especially with the view I have taken on the FOMC (see blog later tonight around 8:00 PM HK time).

For risk management reasons, then, Trader B needs to exit now.

Trader A on the other hand, given his win rate, can afford  a bounce of 520 pips. That being the case, Trader A can review his technicals to see where he can place his trailing stop in an attempt to maximise his core profit exit. As long as the trailing stop is below .8555, he will secure his targeted outcome, even if a bounce occurs.

So there you have it. Feel to comment.

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FIGURE 1