Why Friday the 16th is a Date That Needs to Be in Your Diary

For equity investors, everything appears to be in order in the financial markets. Stock futures are trading flat ahead of the start of the earnings season. More good news is that recent market-wide price rises have helped nudge up the profits of those aboard the bull run that started 12 months ago.

Scratch the surface, and it’s possible to find events that might suggest a degree of caution still needs to be applied.

USD Weakness & Equity Market Disconnect

Last week’s price surge in equities coincided with more US dollar weakness. The idea of leaving cash in a safe-haven currency which doesn’t offer much of a return on capital is becoming far less appealing than investing in stocks.

With major indices such as the S&P 500 now up 89% from its March 2021 lows, it does raise the question of whether the move into risk is inherently appealing or is it a case of investors having no viable alternative?

The USD price slide picked up pace at the close of the European trading session on Tuesday. The theory goes that stock indices would have found further strength, the fact that they didn’t marks a disconnect between the asset groups.

Wednesday Morning Indices – Flat-lining

Earnings & Option Expiry

It’s not like stock traders to miss an opportunity to push prices higher, and looking around for reasons for the surprising stand-offish behaviour brings two upcoming events to the table:

• Earnings season – kicks off on Wednesday with JPMorgan, Wells Fargo and Goldman Sachs due to announce their Q1 figures. Statistically speaking, firms tend to ‘beat’ analyst earnings predictions more often than not. How much they beat them by is the more important question.
• Option Expiry – The third Friday of the month is the date when options expire, and market makers need to deliver the underlying assets to which option holders are entitled.

A lot of Wednesday’s market commentary points to the opening of earnings season being the reason stock indices are flat-lining (and not rallying off the back of the dollar move). That will be true to some extent and is hard to challenge, but it’s also possible that it is a lazy conclusion. If it is the case, we can expect indices and the broader equity market to respond as each firm reveals its performance details. With earnings season lasting approximately six weeks, there could be a lot of short-term price moves on the way.

The alternative approach is to apply more emphasis to the option expiry date. The act of Wall Street brokers balancing their books to make sure they have covered their positions can lead to short-term anomalies such as the current USD-equity disconnect. If the option expiry date is the reason for it, prices can be expected to shift to new levels when it is out of the way. That means traders have a definitive date to keep in mind, Friday the 16^th.

The relatively benign market conditions could be due a shake up before the weekend.

If you want to know more about this topic, or have been scammed by a fraudulent broker, please contact us at [email protected]

Nigel Frith

Share

Tweet

Safest Forex Brokers 2023

	Broker	Info	Best In	Customer Satisfaction Score
#1	72% of retail CFD accounts lose money. Founded: 2014	Global Forex & CFD Broker	Best Trading Conditions Visit broker	4.9
#2	Your capital is at risk Founded: 2014	Global Forex Broker	BEST SPREADS Visit broker	4.8
#3	Your capital is at risk Founded: 2006	Globally regulated broker	BEST CUSTOMER SUPPORT Visit broker	4.9
#4	82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. Founded: 2008	Global CFD Provider	Best Trading App Visit broker	5
#5	Between 74-89 % of retail investor accounts lose money when trading CFDs Founded: 2010	Global Forex Broker	Low minimum deposit Visit broker	4.9
#6	77% of CFD traders lose Founded: 2007	Global CFD & FX Broker	ALL-INCLUSIVE TRADING PLATFORM Visit broker	4.9
#7	Your capital is at risk Founded: 2009, 2015 and 2017	Global Forex Broker	Low minimum deposit Visit broker	5
#8	Your capital is at risk Founded: 2006	CFD and Cryptocurrency Broker	CFD and Cryptocurrency Visit broker	5

Forex Fraud Certified Brokers

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.