Below is a comment from a reader that some of you might find interesting. I am curious to know if any of you have used this approach before, and, if so, does it work for you? I am also curious to know what the “ratios” are that the trader uses, and how are they applied?
This is a comment about the interaction of the markets that was raised in the question on USD/JPY.
You rightly pointed out that we need to look at international markets. Here is something I often do with equities. The FTSE (UK) is so close a ratio to the Dow that I can look at the Dow one evening and predict the FTSE rise or fall the next day, within a few points. Recently, since the Asian markets are similarly closely correlated to the Dow and often contrary in their daily up/down cycle, though not always during panics, I have been able to use ratios to predict the DJ from the previous evening Nikkei.
On another note, talk is now floating about in the echo chamber that we might be headed for a summer rally in the market. Aside from any wishful thinking, what exactly will catalyze the rally? The housing market will not suddenly improve. Employment will not suddenly spike upward. The debt will not magically disappear. Europe will still be Europe with all of its economic and fiscal issues.
On the other hand, corporate earnings just might shine the light on a continuing but slow economic recovery (See Samsung quarterly report.) Retail sales might jump back up in June. Consumer confidence might improve with the relaxing sensibility of summer and vacations that refresh.
Perhaps, and perhaps most importantly, Congress will get its act together and pass financial reform. If they do this, I suspect the certainty it brings to the market will spark a minor summer rally. There’s nothing like laying down the rules of the game to get the game started and rolling right along.
On still another note, summer has yet to arrive here completely. It has been cool and slightly breezy, which is atypical for this area at this time of the year. I feel for the folks who have been suffering through the heat wave in the east and south. I have lived in New York, and I know what the combination of high heat and high humidity can be like.
On still and yet another note, I hope all of you in the northern hemisphere find time to relax and enjoy yourselves this summer. Trust me; it is important to find time to do nothing. In other words, find time to vacate both your mind and body.
Trade in the day; invest in your life …
