Market normality

[MikeWolski]

Hey guys

Well, I’m kind of agreeing with Fish on this. I mean, I’ll just show you what I’m seeing.

Here’s the USD/CHF.

These are from 2 different sources. Cause there could be differences of prices, or starting times, etc. But they are looking quite similar to me. And I’m not seeing that criteria quite as well as your saying, Tommor.

But then when I look at the NZD/USD, and the USD/CAD charts, as Fish is enquiring about, this looks like what you’re talking about, good trending assets.

The NZD/USD.

Sloping up 50, 20 above that, and price above that.

Same with the USD/CAD.

I don’t know Tommor, maybe you’re seeing something we’re not.
Can you show a pic?
It seems like you’re not a fan of doing that.

This is the source that I use for picture taking. It really is easy to use.
Of course I’m not paying anything for this service. I couldn’t imagine that.
It’s a great tool.

TechSmith | Create high-quality images and videos for better communication

Mike

[tommor]

Hi both. I agree, there are multiple pairs with all 3 criteria in place for an up/downtrend but only 1 of the 8 biggies -
AUD/USD
EUR/CHF
EUR/GBP
EUR/USD
GBP/JPY
GBP/USD
USD/CHF
USD/JPY

I’m not surprised that we can have slightly differing D1 charts with regards specific features like the slope of an EMA. I have noted it before when seeing forex charts from different sources. Actually, I take this as confirmation that the price movement, whatever it is called, is not a clear trend. The way the USD/CHF for example keeps zig-zagging across the 50EMA - 11 times in 3mths - its possibly fair to say that in such times the EMA slope is not a reliable trend indicator. In which case, it has actually done its job.

I have a suspicion that a lot of signals, patterns and indicator behaviours that we all learned as new traders and which we now hate and distrust might be quite effective as either “do not enter” signals or exit signals, rather than entry signals, which is what they are sold as. Pin bars might be a top example.

[peterma]

@MikeWolski

Next week should be interesting. Or even in the next 2 weeks. But, the market will show us what it thinks.

Hi Mike - back a while you mentioned volume and it’s significance in the market - same time I was suggesting some risk off for Sept - especially it’s early weeks (seasonal).

Most guys equate this seasonal with 9/11 which is true, there is however another reason - volume.

Holidays come to an end with Sept and suddenly the pool is full of swimmers yet again. First thing they do is check the water before jumping in - so some money to made 2 ways - 1st take out the buyers and then a little later buy low and take out the new sellers.

Thus this past 2 weeks there has been a turnaround on risk - in Tom’s words- market normality.

This was mostly my reasoning back at the end of Aug for posting this:

@peterma

Sept can be a shaky period for risk - seems this many years past stocks have fallen (for various reasons).

[peterma]

Forgot that we are in the beginners so a chance to try out new photo software - here is spx for 1st 2 weeks of Sept: (hope this works)

[MikeWolski]

Hi Peter!

Yeah, I hear ya.
And I do have to admit. I said it. I surely thought we would be getting more risk on in the market in these past two weeks. And that hasn’t been the case. What can I say?…ok…I’m talking about a full blown AUD, NZD, CAD move up, AND the safe havens to move down. That has not happened.

I’m looking forward to (as always) diagnosing the currency’s movements, this weekend. I am surprised, though, of how strong the USD’s been lately. Oh…that’s right… and how WEAK the CHF has been! Somethings going on there. And I wonder who’s behind that.

Anyway. I’ll do the best I can to put up the best narrative of how they’re moving.

But, as always, there’s nothing better than to hear your real life narrative of what’s going on, in the market. Thanks Peter!!

Mike

[MikeWolski]

Oh that’s right. I’m sorry!!

I don’t dive into the index’s. Haven’t.

I’m just the currency’s.

Maybe I should start.

Thanks for that!!

[peterma]

There’s another thing - about the swimmers - noticed it today early in European - the Dax.

There is often a lot of talk about the Asian/European/American - who rules, which sessions and so on.

Nowadays risk is governed by the bots - often because they are always watching each other in such a crowded pool if one does something different it stands out.

This morning (UK) there were guys placing buy stops above the recent high in the Dax - the chatter was that risk was back on (likely it is but first some money to be made).

For learners see how price just broke that high but in TA terms it was a fakeout - the spx futures were not even thinking of new highs at the same time.

Both above and below are 1hr, below this time is dax.

[MikeWolski]

Hey guys.

It’s a little interesting.
This is what I got.

For the week, I got slightly more normal, 52%.

Monday turned out more abnormal. Most pairs ended the day against their trend. But then Tuesday came back with a heavy normal trading day. And then it just stays mixed for the rest of the week.

I think we’re in a really mixed state.
Cause if you see behind the scenes, what’s normal is changing.

Going from the bottom and moving up, you can see how the safe haven currencies have been dislodged from the top 3 spots.

• The NZD has taken the top spot now for 2 weeks in a row. Meaning, all 7 of their pairs, the 20 is above their 50 EMA.
• The EUR wants in the game. They definitely got stronger.
• The CHF falling apart. Dropped from the 5th spot down to the 2 spot, quickly.
• The AUD pulled ahead of the CAD. Meaning it was that pair (AUD/CAD) that the 20 EMA line moved above the 50 line. And that’s how AUD moved up.

I mean, we got to see what’s normal, right?
There it is.

What a disconnect.
Between the NZD and the AUD.
Also between the EUR and the CHF.

Oh, and the CAD…man…I don’t know what their up to. They’re doing their own thing (whatever that is). I’m talking about any kind of correlation to another currency. They don’t have any. Their not really acting like a commodity currency. Their not following the USD. All I know is their weak.

All I can say for sure is this.
The market has broken up the safe haven currencies from being that strong, previously.
Or else it’s just the NZD and the EUR who mixed things up lately.

Another thing to remember, is that we are talking about a longer time frame here. We’re looking back to the average price of the last 20 days in relation to the average price of the last 50 days.

Well, these are some of the things that are going through my head.

It’s a tough ball game now.
Surely not as easy as it was back a few weeks ago when the safe havens ruled.
They don’t now.

Mike

[Glastonburyk]

Strange times mate

[tommor]

Market normality this week only 44%. This doesn’t say much to me - except perhaps the obvious - we’re still falling away from the stunning with-trend price movements of the w/e 10/09. Its hard to see a dramatic resumption of with-trend price action from here, maybe more likely we drift in negative territory, probably drop a little further.

[MikeWolski]

Hi Tommor.

Well, I just got done fixing all my numbers. My normality numbers.
24 hours ago I came in here and was posting away. During the process I discovered that I was dealing with some wrong numbers. I can’t believe it. I’m so embarrassed. So, I spent the next… oh, I don’t know… 8 hours fixing them. I just finished now.

I just cannot trust my source anymore (Barchart). Well, if I want 20 & 50 EMA’s, all I really need is closing prices. Plus my excel of course. And that’s how I fixed everything. Now I got my own, correct, 20 & 50 EMA prices for everybody. So I fixed every day for this year.

I apologize. I won’t accept dealing with wrong numbers. And the thing was…for quite a while now I was wondering why things did seem right with the AUD. Well now I know. But all fixed now. So let me move on.

Finally, my %'s match yours.
Here’s what I have.

As I was posting yesterday, I’ll make the same point. And that is
What’s considered normal? In the market today?

Look at the line up since Sep. See at the start…How all 3 safe haven currency’s were at the top? But then look at the NZD, how quickly they shot up and arrived up at the top spot. That’s been the mover.

And what does that do for what we consider normal?
We have a risk on currency at the top and whenever they are strong, for a day, that’s considered normal now (has been this month). But we still have the USD and the JPY in the 6 and 5 spots. That’s also considered strong.

The market is quite mixed up. We do not have that easy all-lined-up grouping we had back in August. Where the safe havens all were at the top and the Comms were all on the bottom. We absolutely knew when it was either risk on happening or risk off happening. Right?

That’s not the case anymore.
And to make matters worse, the divergence between the NZD and the AUD is not helping matters. They should be moving in the same direction! But their not, huh.

Well, I just wanted to make the point about what’s normal and what’s not so normal. When we see that it’s 43, 44%, normal, what does that even mean? More risk on occurring? Or more risk off occurring?

We can’t easily call that. The best we can do is see what’s moving.
That’s what I think.

Maybe we can determine which way the market is moving towards. More risk on…or more risk off?

To me it seems like we’re moving more towards risk on.

• The CHF has dropped out quite heavily.
• The NZD has rocketed higher.
• This past week the CAD has moved quite higher. They just might help move the AUD (we’ll have to see about that).

Well, I think there’s a lot to see from those tables above. Maybe we just need to get through this month. I have a feeling October will bring all of the Comms up and together. But we just have to see what happens.

Mike

[tommor]

Bad luck with the bad number data Mike, I feel for you, you do such thorough and deep analysis.

Yes indeed - “normal” - what is normal?

Its difficult to believe the banks would be buying NZD if they also believe AUD is going to go down in the near future. That said, my top D1 trend trade right now would continue to be short AUD/NZD.

Some really smart traders might be accumulating AUD long-side positions… Anyone?

[peterma]

@tommor

Some really smart traders might be accumulating AUD long-side positions

Until recently there was no published plan to end lockdown - Sky Aus report that Melbourne has endured the world’s longest lockdown.

Vac take-up was poor but things have changed (now over half fully vaccinated and 75% 1st dose according to Reuters - there is now a clear road map - a vac rate of either 70% or mentioned today in NY by the PM of 80%

"There comes a time when you just got to move on and get on with it," he was quoted as saying today - Morrison said his message to Australians was “that what I’d like them to have for Christmas is their lives back. And that’s within the gift of governments. And that’s a gift I’d like to see us give them.”
(Reuters today)

Thus the near term outlook for the Aussie economy is much brighter.

[MikeWolski]

Hey Tommor.
I think you got a good idea there.
Why not accumulate some AUD positions…?

If you got the capital to spare, and can hang onto it for a long time, absolutely, why not?

On the other hand, these times that we live in, I think, have changed. It’s the uncertainty. That doesn’t bode well for the market.

I actually think the most lopsided, out of character, currency dynamic that’s been playing out recently is the JPY (moreso than a weak AUD). The depreciation they’ve been going through ever since March of last year has been quite extreme. I’m waiting on a good strong boost higher from the JPY. If that will ever happen, I’ll be in with both feet. And I’m not talking about a couple good days either. I would love to see the strength they used to get. That’s all.

Mike

[tommor]

The idea of buying AUD is from my siblings theory of currencies.

AUD and NZD are siblings and the AUD has by far the larger economy. Almost everything in and out of NZ comes through Aus. Similarly, EUR and CHF are siblings, the EU has the dominant economy and currency over Switzerland in that match-up.

So if the banks are sending CHF up, its because they expect that the EUR will go higher. Likewise if they’re buying NZD, they expect AUD to rise.

Might there be other sibling relationships amongst the minor and exotic currencies?

[Zheasef]

Let’s just forget about such notion as normality. Market is never normal, it behaves the way it wants. Sometimes your conception works, but as you have mentioned it is far not obligotary for the prices to move according to the principle of normality.

[tommor]

I hope that the theory of normality will at some point prove that this thinking is utterly impoverished.

By “market normality” I mean the tendency of a market price to move in line with its own long-term trend. It is a statistical fact that price in a trend will more often continue the trend than do anything else. It is therefore possible that the reluctance of price to abide by this principle might tell us something about current market conditions.

Which might be an awful lot better than simply throwing up our hands and proclaiming that the market is random.

[meza]

@tommor

Which might be an awful lot better than simply throwing up our hands and proclaiming that the market is random.

I agree, I don’t believe it is completely random.
In addition to the siblings theory, I have another one:
On the days when USD is significantly up against all its pairs, trading anything other than USD pairs is more risky. Maybe I am stating the obvious, but IMO it may also be useful to look at the dollar index (that is, tracking USD performance against all its 7 pairs). If it is trending well, only trade USD pairs. And only trade other pairs if the USD index trend is weak.
The above, of course, is in addition to identifying a strong and a weak currency and the appropriate entry rules.
This just a theory, for now.

[tommor]

I think this is a fascinating approach. This might be called something like “currency normality”. I have occasionally looked at individual pairs to see which have been trending most normally over the previous month from time to time but not systematically - and I had not taken it a step further, looking at individual currencies.

Gotta give this some thought. It could well be that the trend behaviour of such a dominant currency as USD might have a lot of influence.

[peterma]

@tommor

Which might be an awful lot better than simply throwing up our hands and proclaiming that the market is random.

Williams discussed the notion of randomness some years back - i though he put it well, I’ll paraphrase:
To the casual observer price appears to moving in a random direction, first one way and then another, just like a drunk staggering home. But if you can figure where home is then the stagger is no longer random.