Investors were focused on the market sell-off which was first triggered by the FOMC meeting minutes on Wednesdayafternoon, not helped by the report being leaked 22 minutes earlier than the initial scheduled release time. The sell-off then accelerated Thursday night following China’s weak manufacturing data release and spilling over into the Fridaytrading session, Wall Street’s last day of trade for the week. As an active trader, one needs to go beyond the stock indices and look to other financial markets for insights to institutional trading activities as a gauge to the perceived health of the global economy and its impact on the different asset classes. Falling currency prices led investors in many emerging markets to sell stocks. The Russian Ruble dropped -5.04% followed by the Mexican Peso -3.03% and the Colombian Peso -2.83%. The MSCI Emerging Markets index fell -5.7% for the week as investors flooded to safer assets.
In the week ahead markets will be watching for China’s next move as investors fear of a slowdown in the world’s second largest economy.
“China isn’t the only country resorting to extraordinary measures to shore up its tumbling stock market. Taiwan on Sunday slapped a ban on short-selling of borrowed stocks at prices lower than the previous day’s close, while South Korea’s finance ministry said it will act “pre-emptively” after the nation’s largest exchange-traded fund suffered the biggest weekly withdrawal since its inception 15 years ago. China itself said over the weekend it will allow pension funds to invest in stocks for the first time, while penalizing major shareholders at publicly traded companies for violating rules that limit stake sales.” – Bloomberg 8-23-1015
In the developed markets the Nikkei -7.79% led the way down followed by the Euro Stoxx -7.67% then the Nasdaq -7.5% followed by the S&P 500 -5.8% and the Dow Jones Industrial Average -5.75%. Gold finished the week 4.24% higher followed by the Swiss Franc 3.1%. Keep in mind that 25% of Switzerland’s reserves are backed by gold.
In the week ahead investors will also be paying attention to the election in Greece and the Jackson Hole symposium hosted by the Federal Reserve, especially as they look to when the US may raise interest rates. As a trader, I will be paying close attention to correlations to identify trading opportunities among the multiple asset classes. In addition to the stock indices, I will be looking to the commodity markets, especially crude oil futures.
Joe Rios – Founder, Rios Quantitative LLC
Live Trading Rooms and Educational Events
The Trading Room TradeLAB – Global Trading with Quantitative Technologies
Monday through Friday
- Day trading, swing trading or day swinging – Find what’s right for you!
- New tactics for events trading – Stop leaving money on the table!
- Reduce stressful trading – Systematically improve your discipline!
- Identify organic leading indicators – Stay ahead of the markets!
- Develop a winner’s brain – Exploit your biggest asset!
- Finding performance – Avoid common flaws in performance measures!
- Varying time frames – What they can tell you!
- Institutional power – Leverage from their activities!
- Exchange Traded Funds – New twist for futures traders!
- Trade automation – Backtesting and refining strategies!
Forecasting, Planning and Developing Themes
