Volatility Can Tell US When to Lean More on Technicals or Fundamentals
• Combining technicals and fundamentals into analysis and trading makes for a more, well-rounded market approach
• Yet, the weight we attribute the distinctive brands should change according to the market's focus
• During low volatility conditions, technicals tend to hold better and in high activity markets, they falter
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Fundamental and technical analysis can provide non-correlated views of the market, which paired can provide a better analysis of conditions and trades. When both a robust analysis of fundamentals (event risk and underlying themes) reinforces a technical picture (levels and momentum), the potential for a setup will be innately more robust. However, it is rare when both sides align perfectly. Therefore, to avoid paralysis by analysis, it is important to establish when to emphasize technicals or fundamentals in evaluations. A good measure barometer for this determination is volatility. When measures like the VIX surge, the potential for sharp moves that clear near-by technical levels or indicator boundaries rises dramatically. Alternatively, when markets are quiet and steady, boundaries like those on a range are more likely to dictate market moves. We discuss finding the balance between fundamentals and technicals in today's Strategy Video.
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