Monday, 11 April 2016


Once you have been trading a while you will notice there will be some times of increased Volatility. In Australia this can be employment numbers, Reserve Bank meetings, reporting season and ex-dividend dates of larger companies. Of course there are many more but these seem to be the main ones that cause market fluctuation here in Australia.

As I write this America is about to start it reporting season (the general consensus is that it won't be crash hot) so we have to think what kind of reaction this will have on both the American markets and the Global markets as a whole

Have the markets already factored in the figures anticipated? In this case, they are expecting the figures to be a little down so I'd say Yes.

What if the figures are better or worse than the anticipated figures? This is bound to throw around the markets if the figures come back different to what was anticipated. Will it be vastly different or moderately different?

Where are  the  markets sitting now? If the markets are abnormally high or low this could also have a bearing on the markets. In this case it seems the US markets are a little on the high side, my stock trading platform says 74% of people anticipate the price to drop (I would agree with this) I would suggest with an over bought market any uncertainty may result in a downward trend

While it will be hard to predict these things exactly ... and in current market conditions sometimes its hard to pick it at all.... I guess all you can do is weigh up the variables you can identify and see what you think will logically happen.

For this example remember it is now 11th April 2016 

I'm thinking with the general market cautiousness and fear sentiments that have caused some large market swings this year, and a generally overbought US market all it will take is a couple of bad profit statements and it could cause a bear-ish market for the duration of the reporting season or worse still a crash. In this case I'd take a punt of an at least moderate drop in the US market over the next few weeks, but any strategy I'd take would keep in mind the reasonable probability of a crash (say 10% or more downturn in the markets) and trade accordingly.

Now here's the clincher, even if you have no vested interest in the US markets it still affects market indices world wide. We all know the saying when America sneezes xxx country catches a cold.. I trade on the Australian Index and I'd also wager we'd take a hit along with any downturn in the American Market (even though we've already taken a fair hit over the last few weeks) 

The main point I'm trying to make is that you always need to be thinking about what could happen in different scenarios and have a game plan to match. Its hard to map these scenarios in your head but a good idea is to see what is coming up on your economic calendar and at least run a few scenarios through your head