In yesterday’s lesson we discussed Non Farm Payrolls (NFP’s) and why this is one of the economic indicators that causes the biggest moves in the markets. In today’s lesson we are going to discuss another economic indicator which can create large amounts of market volatility, Retail Sales.
The retail sales number is released at 8:30 am on or around the 13th of each month, and is an estimate of the sales of goods by all retail establishments in the United States. These goods fall into the personal consumption expenditures category, which as we discussed in our lesson on GDP, makes up over 65% of the US Economy. Although the number does not include anywhere near the data that is included in GDP, since this number is released for each month (where GDP is released for each quarter) it is closely watched by the Fed and other market participants as a timelier indicator of what is happening with the consumer.
In addition to the widely reported headline number, the report that is issued along with the retail sales number includes a breakdown of retail sales growth by category. With this in mind the report is not only a good indicator of overall consumer activity, but also for how different parts of the economy such as automobile, restaurant, clothing and electronics sales are fairing. If you are trading the stock of a company which sells products related to one of the categories reported in the retail sales release, then it is obviously important to understand that what happens with the growth of that category is most likely going to have a direct affect on the price of the stock that you are trading.
Like many of the things that we are discussing, the retail sales number is looked at not only for its timely reporting on growth in a large part of the economy, but also for its predictive powers regarding inflation. A healthy economy should show strong retail sales numbers, however if the number grows too quickly then there is a danger that growth in consumer demand will outpace supply growth, causing prices to rise and forcing the Fed to raise interest rates to reign in growth. To predict how the market will react to increases or decreases in the retail sales number, an understanding of where the economy is in the business cycle as we learned in our lessons on the subject is necessary.
If for example we are in a period where inflation is thought to be contained and growth is a worry, then a strong retail sales number should rally the market. If however we are in a high growth period already, then a strong number can cause market sell offs as participants anticipate Fed interest rate increases to reign in growth.
As with every economic indicator we study, remember that markets anticipate, so the market reaction will more times than not have a greater dependence on where the number comes out in regards to the consensus estimates, rather than how strong or weak the reported number is in relation to previous numbers. If the number comes out in line with estimates then at least in theory this should already be priced into the market and therefore market volatility after the number should be contained. If however the number comes in off estimates then you can see dramatic market volatility, the size of which is going to depend on how far the number comes in off estimates and where we are at in the business cycle.
As with all the indicators we are studying you really have to follow the number for several releases to get a feel for what the market is focused on and how it is going to react under different scenarios when the number is released. With this in mind, I will be posting a discussion piece in the comments section of this lesson on InformedTrades.com the day the number is released so we can all discuss and start to get a feel for this in real time. If you would like an email when that discussion begins you can click article tools once logged into the forum and then subscribe to thread and you will receive an email notification when that discussion begins. If you are watching this video on Youtube I have included a link to the lesson in the description section of this page so you can join the discussion there as well.
WEEKLY HIGH IMPACT NEWS: 30-MAY MONDAY
00:00 GB/US- Holiday 31-MAY TUESDAY
07:55 DE- Employment
09:00 EZ- flash HICP
12:30 US- Core PCE Deflator
13:45 US- Chicago PMI
14:00 US- Consumer Confidence 1-JUNE WEDNESDAY
00:30 AU- GDP
all day Global PMIs
18:00 US- Beige Book 2-JUNE THURSDAY
11:45 EZ- ECB
12:15 US- ADP
12:30 US Weekly Jobless
15:00 US- Crude 3-JUNE FRIDAY
all Day Global PMIs
12:30 US- Employment
Trading Themes --
For once Fed Chair Yellen did not disappoint the markets. On Friday she said that a rate
hike in "coming months" probably would be appropriate. I take "coming months" to mean June or July. Her statement gives her room to delay a hike should "Brexit" become an issue. Her comments came after many traders had given up hope for a policy statement.
The EURUSD has tested the psychological 1.1200 line early Friday, but then traded sharply lower close to the 1.1100 level after chair Yellen signalled a rate hike possibly as early as on June 15. There has been no doubt recently that the Fed wants to raise rates soon. Doubts only have been about timing.
Both Japanese National and Core CPI remain in contraction (-0.3% y/y) as of April. The latest data keep the pressure on the BOJ to take actions to lift the economy out of its persistent deflation.
John M.Bland MBA co-founder global-View.com
If you would like to earn up to $200 working with us, send me an EMAIL
We are conducting our own Brexit poll to see what traders expect from the referendum on June 23.
looking for your first broker or do you need of a new one? There are
more critical things to consider than you might have thought.
We were trading long before there were online brokers. Global-View
has been directly involved with the industry since its infancy. We've
seen everything and are up-to-data with recent regulatory changes.
The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.
The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.
Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.
The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.
Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.
Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.
Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.
WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES
CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN
EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE
PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE
INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC
REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL
SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR
SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.