The very first theme I try to identify when I power up my computer in the morning is whether global investors are risk-seeking, risk-avoidant, or trading a mixed risk picture. This generally corresponds to whether those investors and traders are positioning themselves for global growth/expansion or for economic weakness/contraction.
Risk-seeking themes show up as:
* Buying commodities, such as oil and copper;
* Buying the currencies of growing economies (and economies exposed to emerging economies) vs. USD;
* Selling U.S. Treasuries (rising bond yields);
* Buying growth oriented stock sectors (small caps, tech) vs. blue chip indexes;
* Buying stocks from emerging markets vs. U.S.;
* Buying speculative credit vs. Treasury debt.
Risk-avoidant themes typically embody the reverse. When we don't see risk-related assets moving in unison, often we get a range, consolidation trade in which assets are reallocated within markets and sectors.
Catching the mood of large investors early in the trading day can often help traders exploit these themes on a day timeframe. It also can help traders avoid getting run over by fighting the intermarket tides.
.
Subscribe to:
Post Comments (Atom)
Posts
1 comment:
So, Dr B, I like your new toy oscillator. May I assume you are computing a standard dev for each of the risk classes in order to normalize the signal components(mentioned in today's post) on a rolling 14 trading day basis (why 14? just for starters?)? I would then assume you'd apply a weight to each factor based on the fraction each factor plays in money flow between the classes? Or is that where your tweaking would begin? Now you're in my workspace!
You've given me something to do for a couple of weeks in between classes--a worthy computation based on something that makes sense to me. Regards
Dr K
Post a Comment