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Risk Sentiment – Equities, Commodities And Bonds
Just quickly following up with a question from Esanka, asking what equities, commodities and bond yields do we use to do our intermarket analysis?
Now, if we just quickly take a look at our trading view charts, Esanka, for the equities we normally use the three, for these charts it’s mostly the futures markets which is also important to note, so not very different of course from the cash markets but the reason why we choose to look at the futures ones is.
Because of course they’re trading throughout the session so it gives us a broad range throughout the day, as opposed to just looking at the cash opens or cash markets so looking at the US side, we do like to use the three majors which is the S&P 500, the Dow Jones as well as the NASDAQ.
Then for Europe, we like to use the major ones which is the DAX as well as the EURO STOXX 50 but of course you can also use things like the CAC and the FTSE, no problem using any of those. Turning to Asia back side, we also like to look at Australia and also the Nikkei 225.
Now if you have room for another chart, of course you can also look at things like the Hang Seng, you can look at the CSI300 in terms of getting a broad review over the Asian equities as well but we like to look at these seven to give us a good range or good idea of how our global equities are doing across the board and then of course on this screen we also have the volatility index for S&P500 as a good gauge of overall marketal equity volatility.
Then turning to the commodities side, we have the major metals so of course gold, silver and platinum, gold being also considered as a safe haven. Good gauge, not only for overall risk sentiment but also just for overall interest and expectations as a main mover for gold is obviously moving the bond market which is normally moved due to interest and expectations overall. Looking at something like WTI, Brent Crude Oil markets, also very important consideration for overall commodity evaluation and then copper, also known as Dr. Copper of course, because it normally is a very good gauge of overall economic wellness and can be a real mover in terms of risk sentiment as well.
Then turning to the bond side, the biggest one, obviously the most important one we need to watch is the US market. Now we prefer to look at the 10 years across the board for most of them so if we just quickly take a look at this one, we have the US 10 year, we also have the German, Canadian, New Zealand, Japanese, UK and Australian government 10 year yields.
Now what we’re looking at here at the bottom isn’t only the Italian or the German one, this is basically the BTB bun spread so it’s the bond yield spread between Italian 10 year and the German 10 year. That’s normally a good gauge of overall risk premiums, or a risk premium gauge for the overall euro.
Whenever this moves up, normally showing stress for the euro and whenever it’s moving down, normally showing more positive moves for the euro so that is what we’re looking at in terms of bond yields. Obviously what you can also do for the US more specifically, as it is the main driver normally for risk sentiment is only looking at the 10, you can also add the five year, add in the two year, just to see what the yields in terms of the US is doing across the board. That can also be helpful in terms of overall yields but that is what we’re looking in terms of equities, yields and commodities.
When it comes to equities, just keep in mind that these are the ones that we look at but this isn’t to say that these are the only ones you should look at. Obviously we like to look at the market across the board, which is if you look at our Zenith intermarket monitor, you can see we look at a lot more than that’s available on those charts so there is a lot more to look at, opposed to those ones, but these are the ones that we prefer to look at on a daily basis but of course that can change if there’s something specific we want to look at.
So that’s just a quick run down on those ones Esanka. Any other questions, make sure to let us know.