Updated: Jan 30
Your guess is as good as mine and probably as good as Bank of America Securities.
Some readers may think that they have a missing piece of the puzzle, and that it is the cause of their recent losses. Maybe all of their losses. Knowledge is power after all. Here is the latest report from BofA Securities https://docdro.id/9oHAU20 in which they gave their best points of view of what to expect from today's economic reports.
And here is what I think you need to know above anything else. The market is essentially waiting for next week's FOMC meeting! That's it :) Until then we're in a choppy trade and getting in and out of your trades is key, or you could be patient and just sit on the sidelines.
The US dollar index (DXY) is in a weekly range after this month's NFP report trapped the buyers, and pushed the index a measured move lower. Until the DXY moves out of this current range, probably stopping people out a long way, we're not going to see anything US dollar-related trend. If the current news doesn't have enough impact for the market to mark up to a new price, then we have to regard it as noise and keep to the short-term trading opportunities.
The BofA's note confirms the FOMC as being the most important data point by starting their analysis with: In focus
Recent commentary from the Fed underscores the consensus forming nature of their deliberations:
• With the exception of Bullard, every recent speaker seems to be signaling that the next hike will be 25 bp.
• They also seem to agree that rebalancing the labor market is the key to winning the war on inflation.
• Following the Fed is not about counting votes, but about figuring out the shifting consensus on the Committee.
Many commentators insist that the way to forecast the Fed is to count votes. There are several corollary confusions:
• speeches by nonvoters are not important
• the shifting composition of who votes drive decisions
• shifts in power are signaled by hawks or doves taking leadership
On the last point, a common misperception was that because Bullard was first out of the gate pushing a hawkish narrative, he is now a good leading indicator of the Committee. Contra wise, now we should look for a dove—Brainard, Daly or other—to take the lead.
This was today's economic news to consider:
And it is the BofA estimates that I am going to focus on.
Initial Jobless Claims (IJC) came in at 186k which is great for anyone looking for a drop in unemployment. BofA was under the consensus but thought IJC would climb above the previous figure. Durable Goods Orders came in at 5.6% versus the BofA guestimate of -0.5%, which is not anywhere near the ballpark. How can someone who is paid so much money with all the data get it so wrong?
As you start comparing what the market analysts' consensus was before the data drop and what the analysts at BofA were looking for, you can see that it's not just us mere retail traders that have no clue as to what the data will be. And to top it off, the previous readings also get revised, that little triangle to the right of the data point is the equivalent of an (R) Revised from the last published Monthly reports.
This high-frequency data ahead of something like an FOMC statement and Interest Rate decision becomes noise.
Because it is noise, you need to either be on the sidelines ahead of the data, close out just before the data release, wait until after the data release, or get hedged, so as not to get whipsawed about.
If the market is choppy, look ahead through the upcoming economic calendar and try and piece together what it is the market is most interested in. If the DXY is in a range or testing an edge of a range as it was today, be prepared with a mean-reversion strategy. But don't think that following the analysts who tell you what the market should or shouldn't do, have any more idea of what will actually happen because they clearly don't.