What Moves Emini Markets
What Moves Emini Markets
10/01/07
We do not have an answer to this multi-trillion dollar question today (tune
in tomorrow), but I would like to share some insight on what mainstream
media says "moves futures". I should get alot of arguments from this piece.
Most folks would agree that news and the big dogs move markets the majority
of the time, but what about the boring days? My hunch is that our news
hungry media of today are fed a bunch of bull by speculators and company,
but we'll dig into their dung anyways.
And the Fed Says...
Tomorrow the Fed is expected to cut interest rates anywhere from a quarter
to half a point. This is an easy and one of the most obvious reasons that
all of the equity indices swing when the Fed speaks. Investors are expecting
at least a quarter point reduction so we must assume that this expectation
is currently priced into the markets today. Anything less is bad news and,
well, you know.
Liquidity Crisis
If banks are scared to lend to other banks, then people do have a legitimate
concern. Problem is that the problem really is not that big. The Fed injects
a couple billion dollars here and there and problem solved. So why are
markets reacting that way? My guess is that it's good ole fear beyond a
legitimate concern. But as long as my broker still loans me cash in the form
of leverage to purchase emini futures, I'm fine.
Subprime Moves
As lenders fall deeper and deeper into their own mess, equity markets are
shedding dollars at a faster daily rate than anytime in the last 6 years.
Why? I don't know. I'm not that educated on who backs what in terms of
mortgages and the like. All I know and care about is that it affects stocks
(for the worse apparently).
Bond Rates Rise
We watched all of the big financial news outlets claim that investors were
getting spooked about 3 to 4 months ago (before the heavy volatility
started) when the 10 Year Treasury Bond topped 5%. As the benchmark bond
went up and down throughout the trading day, the major eminis that we watch
would USUALLY do just the opposite.
Earnings Are OK
So, from what I've seen so far this year, if none of the 3 previously
mentioned events are taking place, then earnings trumps everything. You know
that we are not talking fundamentals when Home Depot (HD) takes a hit and
the Nasdaq emini feels it short term.
Unemployment
If the job report is favorable and none of the above apply, watch it.
Futures will move.
Mergers and Acquisitions
These beasts usually work only for the good when they come around. They also
usually travel in pacts and show themselves on Mondays. Our ability to trade
the emini on Saturdays doesn't do us much good in this case.
Support and resistance and cycles are what usually move eminis the rest of
the time. You could get a really good deal when stock fundamentals are out
of the question and folks are buying or selling based on emotion and current
events. Selling the media panic and fear is the job of big money
speculators. Don't buy it. By the way - conventional market timing wisdom
says to do the opposite of what those folks do.