An Update on Risk Trends After the Worst Day for SPX in Six Weeks

Talking Points:

• US equities tumbled sharply Thursday to complete a technical, head-and-shoulders pattern
• Yen crosses arguably posted the biggest move on the day with NZDJPY suffering the biggest drop since Sept 4
• Where carry and shares dropped, there was a notable lack of confirmation from other assets and motivator for drive

Having trouble trading in the FX markets? This may be why.

A sharp drop from US equities and dramatic drop from Yen crosses this past session stood out in a week that would have best been defined as range-oriented. Such remarkable moves will no doubt draw traders' attention and generate speculation of follow through. A common source of risk trends would be the most capable outlet for this volatility to spread and evolve into a trend. However, is there reason to suspect a new sentiment (in this case risk aversion) drive to develop? While I am awaiting just such a significant thematic shift sometime in the future, there is reason to believe that it doesn't necessarily start with this past session's fireworks. The consistency of the 'risk' influence was uneven across markets. The ability to generate a head of steam will be limited before the weekend. And, a fundamental momentum is notably lacking. How do I evaluate risk trends and why is it keeping me from confidence in an unfolding move for the S&P 500, NZDJPY and more? That is the topic of today's Strategy video.

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