The Daily Market Forecast... think global

Today’s Lesson: Think global.

Successful investors and traders alike have a rule-based strategy that provides them a financial advantage or “edge.” A combination of fundamental and technical analysis are typical components. Another analysis you can add to the recipe is investor “mood” commonly called sentiment. In other words, do market participants feel bullish, bearish or neutral about the future?

While every region and country has a unique economy, given the volume of international trade those individual economies are part of a larger “global” economy. The U.S. economy is the largest in the world but more importantly for us it is also the last market traded on the daily clock. This allows U.S. traders a glimpse at how the Asian and European markets are trading before our stock market opens.

Many years ago, I developed a simple indicator for world sentiment, which I call the World Index. The foundation of which is the daily cash market percentage change of the major Asian and European indices along with the U.S. futures percentage change of the S&P 500 index leading into the U.S market open. The indicator outputs an oscillator ranging from +100 (very bullish) to -100 (very bearish).

What good is this for day trading? After thousands of trades analyzed, we find that it is a contrarian indicator. Short trades run further when the world is very bullish, and vice versa. Good to know. If you want the formula so you can construct this daily on your own, send me an email. [email protected].

Trade Well,

Mike Siewruk

P.S. For a free “mini-course” packed full of lessons on HOW to trade the Blog… Watch this video.