Friday, July 30, 2010

Risk aversions / Safe Havens

Viren here.

Since Shai, has announced that we will look at trading and analyzing everything else besides our dear Nifty, I thought that I'll put together a post to give a broader perspective on how in the giant scheme of things- the role played by 'hot money' in equities is influenced by other markets like the commodities and forex markets which determine money flow and risk appetite.


Let's look at what the ES is doing currently :



Good bounce off 1084. Shai's levels have always been accurate. No arguments.
It will be interesting to see if it remains here at 1096 or moves to 1110 today.

Most of you would have read that copper is a leading indicator to equities.



Till that beautiful uptrend is maintained, there is no threat to the equity index chart anywhere on the planet ! Hugh...maybe not with the likes of the Karachi or Dubai stock exchanges. :) . But you know what I mean.

Have a look at another chart.



The chart is that of the AUD/JPY or the Australian dollar/ Japanese yen. Most of you would be knowing of the Euro as a risk currency which appreciates in times of optimism or risk appetite.The Australian Dollar (AUD), the New Zealand Dollar (BNZ), the Canadian Dollar (CAD) and British Pound (GBP) are categorized together.This is mostly because their underlying economies are based on growth dependent exports.Note that these tend to move in the same direction as other risk assets like stocks and commodities, which also tend to rise in price during periods of growth or anticipated growth, and fall in times of fear.

On the other side is the Japanese yen which is primarily a safe haven currency.Along with the Japanese yen are the likes of the US Dollar (USD) and Swiss Franc (CHF).
These labels of ‘risk currency’ or ‘safety currency’ do not reflect on actual quality of the currency as a reliable store of value. Rather they are just labels describing how these behave in times of optimism, aka risk appetite, or pessimism, aka risk aversion.

The AUD is the ultimate risk currency i.e.it tends to rise the most in times of optimism, and fall the most in periods of risk aversion. The JPY is the ultimate safe-haven currency, and behaves the opposite way.

With AUD most vulnerable to move the most during bouts of risk aversion while the JPY is primary safe haven currency, the AUD/JPY will fall most aggressively should equities weaken or rise aggressively should equities rise.

Thus if the AUD/JPY trend is up-risk appetite is on and the trend in stocks and commodities should be higher. If it’s down, the opposite happens.



The above 3 year daily chart testifies. Note the other pair of Eur/ Usd broke Oct 08 lows recently, because both the Euro and the Dollar are susceptible to "news flows" as in the recent greek crisis.

On another note, after much coaxing, I've managed to convince Shai to launch 'Vtrender 2'.I feel that serious eduction in the markets is missing and people invest in the markets as they invest in a lottery.People will put 50,000 in a fixed deposit to get 3000/- at the end of the year after a lot of study, but will not follow 2 bits of advise to make upto 3000/- every day from 50,000/- spent on 2 good Nifty lots.

'Vtrender2' will be invitation only with a small subscription- to the serious traders who want to learn these vast financial markets with us and earn a few thousand along the way.

13 comments:

INDITRADER said...

Good Evening Viren.
I am intrested in Vtrender-2
But I have a problem I cant be able to online on screen all time during trading hours.
I have my business also.
So there is any more way for me to learn Market profile & trade with U all great People

subrat said...

dear shai and viren,what yr subscription fee for vtrnder-2?

sanju said...

Hello Shai and Viren

I am extremely interested in vtrnder-2. please tell me subscription fees and how to subscribe, whenever you launch it. so i can join this. my email id is - sanjay_peoples@yahoo.com -

thanks and regards
sanjay kaushik

Anonymous said...
This comment has been removed by the author.
Anonymous said...

Hello

I'm interested in Vtrender2 as well.
I would like to know more.

snmjm (at) yahoo (dot) com

Regards

Unknown said...

I m interested in vtrnder-2 ,kindly tell me when you are launching /what we will the subscription fee /how i can subscribe . waiting for your reply .My Id is
skg.sunil69@gmail.com
Thanx

Aayuushman said...

Viren/ Shai,

Sounds very promising. Waiting to hear more.

You are different from the rest of the crowd, (read analysts) and I am sure two good minds must have thought about something nice.

Incidentally, all your charts posted closed at the same levels also.

Shai said...

Guys,

I will post details of Vtrender2 on the blog today.If you have more questions after that send a mail to vtrender@gmail.com.

Girish Desai said...

Shai, Viren,

I am definitely interested. Just sent a mail to Viren as I didn't see your post with vtrender mail id.

POWERTRADE said...

I am to interested ..BTW Shai... A rising wedge is spotted in BN what can be the break down point... and possible targets..

Chandra said...

Hi Viren & Shai,

Quit interesting to learn & trade. I am very much waiting for your details for subscription.

SMS info requested indicting new post by Mr.Shai to avoid missing opportunities of trade few minutes delay may cost missing trade/profit.

My mail id: keerthi405@gmail(dot)com
Bose

Unknown said...

Dear Shai and Viren,

When you gave us so much free, I'm excited about how much more "value" you will provide when it is subscription.

Whatever the subscription, I am sure a few days with you will pay for it.The education will be a bonus.

golfdude said...

Hi Shai, Viren -

Definitely interested in v2. On a sidenote, given the daily value area numbers, just plotting them in excel as a line graph - joining all the VAHs, the POCs, the VALs - you think any value to it ? Maybe spot congestions etc ?