Market normality

Market normality weekly summary -

Very negative, scoring only 38%. Confirming the dramatic strengthening of the USD - I don’t see any obvious signs on the charts of this movement de-railing.

I suppose US political risk is always higher with a Democrat president, though Biden does not seem compelled to act dramatically yet.


Hi Tommor.

Yeah, definitely negative.
This is what I got.

You know…I kept thinking about this, this past week.
It’s the last week of the month.
It’s the last week of the quarter.
All these flows we had were going in such different directions.
We cannot expect to have any idea of where price wants to continue going. Traders place trades with the notion of what it should be doing in the future. We are future looking, acting, agents. Well, that’s why it’s well known to follow what is trending.


Traders, funds, money managers also have a very big priority to manage.
Their accounts!
That’ll explain why mean revision takes place. A lot of exiting out of positions. Taking profits. Readjusting sizes. Just moving their money around for whatever reasons. How about the big money that the international corporations have to exchange in order to take care of their payroll. They want payment in their own currencies. Therefore, these exchanges will take place in our market (although on a slightly different playing field than our spot market). But the idea here is that all of this has nothing to do with what’s going on in the market. Changes take place mostly around the turn of a month.

I say this past week doesn’t mean a whole lot. In talking about direction.

But…I’m in the business of knowing what’s going on. In our market.
I don’t think there’s anything more important than knowing how things have transpired, historical record, and to know how things are, correctly, relating to one another. All of that explains why I do what I do. Which is keeping my own records of the markets movements.

We’ve (me, Peter, and you) have been noting how this month of Sep is historically a risk off type of month. But, I think we kind of believe that the risk on sentiment has been wanting to come back. I think that explains a lot of the changes that’s been taking place this month. It’s been very difficult to see this coming from the perspective of what’s been normal and not so normal. Right?

Well, if I may, can we see what happened this month?

Top table, monthly running %'s. Not counting the CNY, the USD ended up being the most bought currency, ending the month being +8.83% against everyone.

The middle table is the individual daily results. You can see how many days the USD came in on top for that day. 6 days.

The bottom consists of the weekly results. And do you see why I thought that the risk on currency’s would start to take over? You can’t deny the fact that they started the month out being quite bought up.

But then risk off took some shape in the middle of the month. You can see the purple (JPY) quite high. Also the pink (CHF). Just look at the 20th and 21st.

Then the CAD wants in on the action. They lifted up the other 2 Comms.

It’s been so mixed. All we can do is see what’s been happening. But this past week, I think, has been nothing but moving money around for the sake of their accounts.

Moving forward, I think we need to see what we got coming. Both the AUD and the NZD have interest rate decision days coming this week. For the AUD (their Tuesday morning), and then for the NZD (their Wed morning). And the word on the street is that the NZD is supposed to hike up their rates (to .50% from .25%). They would be the world’s first developed country to do so. Well, I think it’s a big deal. Hopefully they’ll go through with it, unlike last time. They were supposed to but someone got COVID and they backed off. We’ll have to see what happens this time.

You guys were talking about the AUD last weekend, at this time. It was very interesting to see that they definitely got a bid this week. Well, just look up above. They ended the week being +5.42%. And what did the NZD end up with? A measly -5.19%. Wow. Talk about a divergence. But remember, it was the end of the month/quarter. I’m sure there’s good reason. We just shouldn’t frame it in any risk on, or risk off type context. But I do got to say, you guys called that.
“Buy up some AUD.”
Needless to say, I kept thinking of you guys this week. That was a sound idea.

Things are gonna fly though, coming up.
And I don’t think we need to wait entirely too long either. Once the open commences, look out.



Good observations Mike, I had noted it but had not put together a causation why September is such a poor month for returns. What you have posted sounds highly convincing. It would also fit with the fundamentals argument that October’s returns will be better and easier, while on the technicals, a resumption of trend-following normality should be seen after such a negative weekly performance to the month-end.

So this is making good sense from both perspectives.

What I’m going to find hard to resolve will be a bearish trend continuation in EUR/USD, but a bullish risk-on rally in AUD/USD, but we’ll have to wait and see.


I agree. On the daily AUDUSD chart it appears to be a pullback. The weekly is also in a downtrend.
The market will let us know soon.

Not just me - check the red vs the the blue in the graph for an oversight:

Roy Morgan Business Confidence increases by 3.1pts (+3.1%) to 104.6 in September as NSW and Victoria outline re-opening plans - Roy Morgan Research

Edit; short term China is on holiday - back again next Friday - might obscure the risk element a little especially the Evergrande story.

Normality score for the forex markets this wee continues negative - 44%.

This is slightly up on last week’s 38% score but that’s probably not significant. The week comprised 3 negative days, 1 positive and 1 neutral: so did last week - 3 negative days, 1 positive and 1 neutral.

Perhaps given current geo-political circumstances there isn’t any other answer available.

Hey Tommor.

Yep, same 'ol thing.
Here’s what’s inside the numbers.

Well, the biggest change for what’s normal goes to the CAD. Now they have 5 of their pairs strong. Last week at this time they only had 2 pairs strong. That’s for the 20/50 EMA indicator on all of their 7 pairs.

The USD got strong again. They made a bit of a U turn. See it there? On the weekend results table (right) it seemed like they were heading down lower, along with the other safe haven currency’s. But they go ahead and turn that ship around. Now at the top. Figures. What a mixed up market we have.

Speaking of mixed up.
We also have the AUD and the NZD heading in opposite directions.
The AUD have come up off the floor. But the NZD has dropped. I mean, they (the NZD) even raised their interest rates this week! I don’t get it. Their the highest of all these major players (.50%). Who wouldn’t want to make some money off of the interest rate spreads?

I guess not the big guns.

Oh, and another mover. The GBP. I mean, why did they drop out? Now they do not have any of their 7 GBP pairs being strong Pound (20/50 EMA wise). I guess they had enough for this year. Cause this entire year they’ve been supported and moving nothing but higher and higher.

Are there any fundamentals aligning with that Peter?
Or is this mostly a technical thing?

Well, needless to say, it’s all very interesting.
Things are always moving, bending and twisting.
Can’t really tell which way has the upper hand, between the risk on currencies or the risk off currencies. Well, just yet anyway. I know we just started out on this last quarter. So it is early.

We had NFP on Friday. Came in below expectations. Like, well below. We’ll just have to see if this will make up some minds, moving forward. But it does look like Canada might be more of the favored one, than the US. Cause their employment numbers came in way much more stronger than ours. I mean, all we would need to see is them start to raise their interest rates also. Then it would really get interesting.

Let me give you a visual on how strong they moved this week.

Ok. So in these last couple weeks, they’ve gone straight up.
Mr. Oil…thanks.
Also thanks to the USD. Cause they follow on their heels.
And I’m sure a lot has to do with themselves. The state of their economy.

While I’m at it. Got to see what the USD is doing.
Are they still on a bull trend?

The answer is yes.


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Cheers Mike.

This weekend I have the currencies in this sequence (no surprises I think), most bullish at the top -

AUD and NZD clearly in opposing directions. Interesting that CHF while not strong is significantly stronger then EUR - German election impact?

These aren’t trending times but I’m still eager to get in on some CAD/JPY action - I’m already short second option, EUR/USD.


Hi Tommor
EURCAD is also in a strong downtrend. Would be a good entry on pullback.

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EUR/CAD would absolutely be on my trade list if I wasn’t already short EUR/USD - I would want to see more progress on that trade before opening such a similar second position. But I am hopeful this will happen soon.

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Market normality this week has pushed into positive territory and hit 55%.

I have only once seen normality at 55% or more for two consecutive weeks. My thinking is that this week’s score marks the end of the reaction to the low score of 2 weeks back at 38% and we’re now likely to see a reversal and fall back into negative territory lasting 2-4 weeks and again getting as low as maybe 35%.

We seem to be printing a mean reversion pattern, with an average frequency of 3-4 weeks.


Hey Tommor.

I so agree.
Things are changing.

This is what I’m seeing inside the numbers.

  • Normality of 54% for the week.
  • CAD climbed to the top. Now their normal is long. Across the board.
  • JPY found their way to the bottom.
  • All 3 COMMS are in the top 4 spots.
  • GBP bounced back from last.
  • Therefore, risk - on has been prevailing over risk - off

Do you guys remember when all 3 safe haven currency’s were on top?
And the COMMS were all on the bottom?

Well, I remember how easy it was to tell what the market was doing during this time. 6 of those 8 currency’s were nicely placed and helped us know what the market was up to. And concerning our normality perspective during this time, everything made perfect sense. I don’t know about you, but it made me think that I knew something about the market. I mean, we knew what was normal and what was not normal.

But then change happens.

I just hope we can get to seeing the opposite of that scenario, which would be full risk on. And surely we are getting closer. Right? I mean, the NZD started it all. They really moved, a few weeks ago. They boosted up to the top quite quickly.

Then the AUD and the CAD joined in, these last 2 - 3 weeks (that’s pretty clear in that weekly table on the right).

Well, it seems like all we need now is the (dog-gone) USD to falter.
That surely would do it.

But, I guess it does make sense, that you just cannot expect during the month of September for risk-on to come roaring back. Cause that’s a historically bearish month. But now that we got into the last quarter of the year, things are making the change.

Well, I hope we will see this risk-on environment go all the way through the entire quarter, to the end of the year.

We’ll see.


My current thinking is to match the normality score action with market inflection points - those time zones on D1 where almost all charts seem to rotate simultaneously from bullish to bearish or vice versa. Its surprising how many pairs appear to print their 12mth or 6mth or 3mth high or low within days of each other. Its hard not to feel that risk might be managed by observing when both normality and market mode are reversing at the same time.


I agree and my theory is that it is the USD strength index that we need to watch.
When the USD relative strength is at the extreme points, this is the time when all the charts start to rotate…

This could be right, we might see this. Although the EUR is more heavily traded as a unique currency, the USD also reflects the US stock market sentiment, which in turn drives or most other stock markets plus the global financial investment industry as a whole. As we have seen in the past, the EUR is also hardly strengthened by its subordination both to the ECB but also the EU plus also the EU’s and Eurozone’s national governments (such as they are).

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I looked at EUR’s relative strength index chart and couldn’t see any correlation. Also, EUR doesn’t seem to get to many extreme points in its strength.

Just a mid-week comment - 3 positive normality days in a row this week. Haven’t seen that since early September and before that it was mid-August.

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I made the market normality score across this week just 46%.

Having made the unusually strong first half of the week with 3 consecutive positive score Monday-Wednesday, a reverse into anti-trend price action might have been expected and we certainly got it, with Thursday and Friday printing scores below 30%.

This weekly drop back into negative territory tallies with the line of thought that last week’s 55% score marked a local “swing” high and would be followed by a decline. At 46% we’re not far into the red so I expect next week to be more negative, still thinking we might drop to as low as 35%.

So far so good, but what does this mean for forex prices next week? I’m going to say that counter-trend positions across the 28 important pairs should bring in a net profit. If normality gets worse next week as I think it should, the week on week price results by Friday’s close should be as follows -


(not trading recommendations)

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Hey Tommor.

Yep. Was very interesting how the week turned out.
This is what the details look like.

As always, my numbers are very close to yours. Got 47% for the week.

Just in case anyone hasn’t figured out how I grouped that data. 3 different contexts going on there. The first is the top row going across. I started this back to Oct 1st. In the green (top row) is how many pairs that day ended up being normal. In red, abnormal. So that’s a quick look at the individual day, whether it went with the trend or not. Then I just put the % under it. It is showing how normal the day went.

But yeah Tommor, you’re absolutely right about the beginning of the week and the end. Just look there. Tuesday and Wednesday were big trending days, going with the trend. 64% & 68%. I bet everybody who was trading with the trend those days was happy.

I would be included in that camp.

But then those last 2 days of the week went in the complete opposite direction. Look at Thursday. 42 of the 56 pairs were moving against their respective trend direction (that’s in whichever way the 20 & 50 EMA lines fall). And then pretty much continued that way through Friday also.

So then, the next context I have there is right below that. It’s the break down of every currency. Since every currency has 7 pairs to them, this table shows how many of their 7 pairs are trending strong. And I’ve just ranked them from the strongest down to the weakest. But, we can see that the CAD has all 7 of their pairs strong CAD. Each of their 20 EMA lines are above the 50 EMA lines. And therefore they are on top. But then the AUD has all 6 pairs AUD strong. And guess which one is not? The AUD/CAD of course. And the same goes for those below. The NZD has 5 of their pairs NZD strong. And the 2 that are not are the NZD/CAD, AUD/NZD.

All of this shows what’s normal.
But this is the whole idea behind it all. If one of the CAD pairs moves weak CAD, well then, that’s not normal. Same with the JPY. If one Yen pair moves JPY strong, then that’s not normal. And that’s probably what happened Thurs & Fri. Many of those went that way, to cause an abnormal day.

Being able to see these previous days results like this, gives us a birds eye view of how the market is moving. Have you noticed that all the Comms are on top now? That means the risk-on sentiment has been prevailing.

Then on the right is the weekly break down. That lets us see how things have changed over a longer time period. Quite quickly.

See how the USD has come down? That usually means the Comms will rise.
And they did.

The GBP has come on up also. They are known more for a risk on type currency, more so than risk off.

I’ve just seen your post now, Tommor.
I’ll do the same.
Next week.

You’re calling for more counter-trending moves. Which means the Majors will, for the most part, dominate. Which means more risk-off sentiment. Right?

Man…I don’t know. I really could go either way.

On the one hand, I do agree with you. The fundamentals behind a risk-off environment do make sense. There’s so much not right going on in the world today. So many unknowns. Uncertainty. The market does not like that, at all.

But on the other hand, what is the trend? We cannot argue that the risk-on currency’s (Comms) have the upper hand. Right? It’s all right there in black and white. Therefore, that makes me think the market wants to go that way. I mean, regardless of what makes sense or not, rational or not, that’s the way in which it’s moving. And I say it could just keep going that way. They’ve only got up there very recently. How do we know this is not the beginning? Of course it could be a quick, short lived trend that comes and goes. No doubt.

Man…I just don’t know.
I can see both scenarios playing out.
Either a continuation of the risk on sentiment.
Or a move back to some risk off sentiment.

All I know is that I’m staying on the sidelines for now. I made a lot of money last week. Up through Wed. Then jumped. But staying out now. Cause I got to see how things go. Who knows? Why can’t this risk on keep it up to the end of the year?

I think it’s possible.
Nowadays, anything the market does could be possible.