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Correlation

Decoding the BTC-ES Correlation During FOMC Meetings1. Introduction The Federal Open Market Committee (FOMC) meetings are pivotal events that significantly impact global financial markets. Traders across asset classes closely monitor these meetings for insights into the Federal Reserve’s stance on monetary policy, interest rates, and economic outlook. In this article, we delve into the correlation between Bitcoin futures (BTC) and E-mini S&P 500 futures (ES) during FOMC meetings. Focusing on the window from one day prior to one day after each meeting, our findings reveal that BTC and ES exhibit a positive correlation 63% of the time. This relationship offers valuable insights for traders navigating these volatile periods. 2. The Significance of Correlations in Market Analysis Correlation is a vital tool in market analysis, representing the relationship between two assets. A positive correlation indicates that two assets move in the same direction, while a negative correlation implies they move in opposite directions. BTC and ES are particularly intriguing to study due to their distinct market segments—cryptocurrency and traditional equities. Observing how these two assets interact during FOMC meetings provides a window into macroeconomic forces that affect both markets. The key finding: BTC and ES are positively correlated 63% of the time around FOMC meetings. This suggests that, despite their differences, both markets often react similarly to macroeconomic developments during these critical periods. 3. Methodology and Data Overview To analyze the BTC-ES correlation, we focused on a specific timeframe: one day before to one day after each FOMC meeting. Daily closing prices for both assets were used to calculate correlations, providing a clear view of their relationship during these events. The analysis includes data from multiple FOMC meetings spanning several years. The accompanying charts—such as the correlation heatmap, table of BTC-ES correlations, and line chart—help visualize these findings, highlighting the periods of positive and negative correlation. Contract Specifications: o E-mini S&P 500 Futures (ES): Contract Size: $50 x S&P 500 Index. Minimum Tick: 0.25 points, equivalent to $12.50. Initial Margin Requirement: Approximately $15,500 (subject to change). o Bitcoin Futures (BTC): Contract Size: 5 Bitcoin. Minimum Tick: $5 per Bitcoin, equivalent to $25 per tick. Initial Margin Requirement: Approximately $112,000 (subject to change). These specifications highlight the differences in notional value and margin requirements, underscoring the distinct characteristics of each contract. 4. Findings: BTC and ES Correlations During FOMC Meetings The analysis reveals several noteworthy trends: Positive Correlations (63% of the time): During these periods, BTC and ES tend to move in the same direction, reflecting shared sensitivity to macroeconomic themes such as interest rate adjustments or economic projections. Negative Correlations: These occur sporadically, suggesting that, in certain scenarios, BTC and ES respond differently to FOMC announcements. 5. Interpretation: Why Do BTC and ES Correlate? The observed correlation between Bitcoin futures (BTC) and E-mini S&P 500 futures (ES) around FOMC meetings can be attributed to several factors: Macro Sensitivity: Both BTC and ES are heavily influenced by macroeconomic variables such as interest rate decisions, inflation expectations, and liquidity changes. The FOMC meetings, being central to these narratives, often create synchronized market reactions. Institutional Adoption: The increasing participation of institutional investors in Bitcoin trading aligns its performance more closely with traditional risk assets like equities. This is evident during FOMC events, where institutional sentiment towards risk assets tends to align. Market Liquidity: FOMC meetings often drive liquidity shifts across asset classes. This can lead to aligned movement in BTC and ES as traders adjust their portfolios in response to policy announcements. This correlation provides traders with actionable insights into how these assets might react during future FOMC windows. 6. Forward-Looking Implications Understanding the historical correlation between BTC and ES during FOMC meetings offers a strategic edge for traders: Hedging Opportunities: Traders can use the BTC-ES relationship to construct hedging strategies, such as using one asset to offset potential adverse moves in the other. Volatility Exploitation: Positive correlation periods may signal opportunities for trend-following strategies, while negative correlation phases could favor pairs trading strategies. Risk-On/Risk-Off Cues: The alignment or divergence of BTC and ES can act as a barometer for market-wide sentiment, aiding decision-making in other correlated assets. Future FOMC events could present similar dynamics, and traders can leverage this data to refine their approach. 7. Risk Management Considerations While correlations provide valuable insights, they are not guaranteed to persist. Effective risk management is crucial, particularly during volatile periods like FOMC meetings: Stop-Loss Orders: Ensure every trade is equipped with a stop-loss to cap potential losses. Position Sizing: Adjust position sizes based on volatility and margin requirements for BTC and ES. Diversification: Avoid over-concentration in highly correlated assets to reduce portfolio risk. Monitoring Correlations: Regularly assess whether the BTC-ES correlation holds true during future events, as changing market conditions could alter these relationships. A disciplined approach to risk management enhances the probability of navigating FOMC volatility successfully. 8. Conclusion The correlation between Bitcoin futures (BTC) and E-mini S&P 500 futures (ES) around FOMC meetings highlights the interconnected nature of modern financial markets. With 63% of these events showing positive correlation, traders can glean actionable insights into how these assets react to macroeconomic shifts. While the relationship between BTC and ES may fluctuate, understanding its drivers and implications equips traders with tools to navigate market volatility effectively. By combining historical analysis with proactive risk management, traders can make informed decisions during future FOMC windows. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com - This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
CME_MINI:ES1!Education
by traddictiv
Understanding Forex CorrelationA Comprehensive Guide to Forex Pair Correlation Strategies Forex correlation is a powerful tool that can help traders understand how currency pairs move in relation to each other. It’s an essential concept that, when used correctly, can improve risk management, enhance profits, and provide valuable insights into the behavior of different currency pairs. The image you've provided breaks down key aspects of forex pair correlation, including positive correlation, negative correlation, and hedging strategies. In this article, we’ll dive deeper into what forex correlation is, how it works, and how you can use it to your advantage in your trading strategies. What Is Forex Correlation? Forex correlation refers to the relationship between the movements of two different currency pairs. When two currency pairs move in tandem or in opposite directions, they are said to be correlated. Correlation can be positive, where both pairs move in the same direction, or negative, where the pairs move in opposite directions. Traders use correlation data to understand potential risks and opportunities. Understanding the relationships between currency pairs allows you to diversify your trades, hedge positions, or double down on strategies based on the expected movements of correlated pairs. Types of Forex Correlations 1. Positive Correlation When two currency pairs move in the same direction, they are said to have a positive correlation. For example, EUR/USD and GBP/USD often have a positive correlation because both pairs share the USD as the base currency, and they tend to respond similarly to events affecting the U.S. dollar. Example of Positive Correlation: If EUR/USD is rising, GBP/USD is also likely to rise due to the influence of the U.S. dollar. Strategy for Positive Correlation: Traders can use positive correlation to open the same-direction positions in both pairs to amplify gains. However, keep in mind that a highly correlated pair will also double your risk if the market moves against you. 2. Negative Correlation When two currency pairs move in opposite directions, they are said to have a negative correlation. For instance, USD/JPY and EUR/USD often have a negative correlation. When the U.S. dollar strengthens against the Japanese yen (USD/JPY), it may weaken against the euro (EUR/USD). Example of Negative Correlation: If EUR/USD is rising, USD/JPY may be falling due to changes in the strength of the U.S. dollar. Strategy for Negative Correlation: Traders can open opposite-direction positions in negatively correlated pairs to offset potential losses. For example, if you are long on USD/JPY and the trade turns against you, holding a short position in EUR/USD can help balance the loss. How to Calculate Correlation Correlation is typically measured on a scale from -1 to +1: +1 means that two currency pairs are perfectly positively correlated. This means they will move in exactly the same direction at all times. -1 means that two currency pairs are perfectly negatively correlated. This means they will always move in opposite directions. 0 means no correlation exists, meaning the pairs move independently of each other. Many trading platforms provide correlation matrices or tools to help you understand the correlation between different pairs. These can be updated in real time or calculated over different time frames (daily, weekly, or monthly). Why Forex Correlation Matters for Traders Understanding forex correlation is crucial for several reasons: 1. Risk Management By using correlation strategies, you can manage your risk more effectively. For example, if you have two highly correlated positions, you're effectively doubling your exposure to the same market conditions, which can increase risk. On the other hand, trading negatively correlated pairs can help reduce exposure to one-sided market movements. 2. Diversification Forex correlation helps you diversify your portfolio by balancing positively and negatively correlated pairs. Proper diversification ensures that you aren’t overly exposed to one currency or market, providing better protection against volatile market movements. 3. Hedging Opportunities As shown in the image, hedging with correlations allows traders to use correlated pairs to balance risk and protect investments. If one pair moves against you, a correlated position in another pair can help minimize the loss. This is a strategy that advanced traders often use during periods of high market uncertainty. Using Forex Correlation Strategies 1. Hedging with Correlations A popular strategy involves using negatively correlated pairs to hedge positions. Let’s say you have a long position in EUR/USD. You might take a short position in USD/CHF to reduce exposure to potential USD weakness. If the U.S. dollar weakens, your EUR/USD trade may incur a loss, but the short USD/CHF position can offset that loss. 2. Trading Positively Correlated Pairs When trading positively correlated pairs, you can open same-direction positions to amplify gains. For instance, if you anticipate the U.S. dollar weakening and are bullish on both the euro and the British pound, you might go long on EUR/USD and GBP/USD. In this case, your profits could multiply if both trades move in your favor. However, this strategy also increases risk since losses would be compounded if the U.S. dollar strengthens instead. 3. Avoiding Over-Exposure While correlation strategies can help increase profits or hedge risks, they can also lead to overexposure if not carefully managed. For example, trading multiple highly correlated pairs (e.g., EUR/USD, GBP/USD, AUD/USD) simultaneously can result in taking on too much risk in a single direction, especially if the market turns against you. To avoid overexposure: Check correlation matrices regularly to understand current correlations. Adjust trade sizes based on the degree of correlation between pairs. Avoid trading multiple pairs that have a perfect or near-perfect correlation unless you are intentionally doubling down on a strategy. When to Use Forex Correlation Strategies During High Volatility: Correlation strategies are particularly useful when the market is volatile, and you want to either reduce your risk through hedging or amplify your profits by trading positively correlated pairs. Economic News Events: Major news events often affect several currency pairs simultaneously. By understanding the correlations between pairs, you can plan for potential reactions and adjust your strategy accordingly. Portfolio Balancing: Long-term traders can use forex correlations to balance their portfolios, ensuring they are not overly exposed to any single currency or market condition. Conclusion Forex correlation is an essential concept for traders seeking to manage risk, diversify portfolios, and maximize profits. By understanding how different currency pairs relate to each other, traders can build more robust strategies that leverage both positive and negative correlations. Whether you're looking to hedge your positions, amplify your gains, or simply protect your investments, correlation strategies offer valuable tools for navigating the complex forex market. Be sure to incorporate correlation analysis into your overall trading plan to enhance your decision-making process and boost your chances of success in the forex market. Happy trading!
FX:XAUUSDEducation
by pow_removetheguesswork
AUD/USD squeeze risk growing?With tentative signs of stablisation in commodity futures and US equity index futures pushing higher in early Asian trade, the prospects for some form of squeeze higher in AUD/USD appear to be growing. You can see just how violent the selloff has been over the past two weeks, leaving it oversold on RSI (14) for the first time since August 2023. But the modest reversal on Thursday after breaking the 61.8% Fib retracement of the April-July low-high is about the closest thing to a bullish signal we’ve seen for the AUD/USD in a while. It’s tempting to go long with a stop below the fib level for protection, but it would be nice to see RSI break its downtrend first to provide confidence that the bearish price momentum is ebbing. Given the acute focus on China, the reaction to the PBOC’s CNY fix in FX markets, and opening of Chinese stock futures, may provide a strong tell on where the near-term path of least resistance lies. If they open firmer, it may increase the probability of AUD/USD upside. AUD/USD a proxy for risk appetite The chart also shows the rolling 10-day correlation between AUD/USD with COMEX copper in orange, crude oil in black, S&P 500 in green and Nasdaq 100 futures in blue. Every single correlation sits north of 0.8 with three of the four hovering around 0.9 or higher. The higher the score, the greater the relationship between the two variables. Taking a step back, the strong correlations suggest AUD/USD is being used as proxy for risk sentiment, a role it has often played previously when we’ve seen boarder risk-on-risk-off moves in markets. That means if we see even a modest improvement in risk appetite, as seen on Thursday when the latest batch of US economic data suggested premonitions of an imminent recession may be misplaced, the AUD/USD could find buyers. The price action in commodity futures is another potential sign that the worst of the rout is over, at least for the moment.
Long
by WHSelfInvest
Lower Technology Sector Pulls Cryptos LowerCryptocurrencies are trading to the downside, and we are seeing some sharp intraday sell-offs, most likely triggered by risk-off flows. As you know, normally when stocks are down, cryptos tend to move in the same direction, especially when there are significant sell-offs in the stock market like we've seen over the last few days, triggered by missed earning reports and lower technology sector. It's not surprising that we are seeing a pullback, which we have been warning about in our past updates. Some of the coins are experiencing very sharp sell-offs and deeper retracements, while other stronger coins are hitting interesting support levels. Even Bitcoin, the most important cryptocurrency, is at a very interesting first area of support. However, looking at the total crypto market cap, there is a sharp one-leg down, suggesting a more complex and deeper ABC retracement before the market may really find new buyers. There is first tecnical strong support around the $2.24 trillion level. Looking at the NASDAQ 100, there seems to be a very strong impulse away from the highs, so toš is in, but we see prices possibly in the 5th wave approaching some support around 19,000. If we get an ABC rally in the near term, that's when cryptos could also stabilize. GH
CME_MINI:NQ1!
by ew-forecast
Gold & ETH - Who Follows Whom?Hello TradingView Family / Fellow Traders. This is Richard, also known as theSignalyst. I always keep an eye on Gold to gauge the overall market sentiment. 📚 I found the latest correlation between Gold and ETH interesting ! You know what? I will keep this post short, as the picture is self-explanatory ! The question is... Who follows whom? 📚 Always follow your trading plan regarding entry, risk management, and trade management. Good luck! All Strategies Are Good; If Managed Properly! ~Rich
OANDA:XAUUSD
by TheSignalyst
5
Is Bitcoin a leading indicator of inflation?INDEX:BTCUSD Bitcoin is regarded (in some circles) as both a store of value and an inflation hedge. But what if Bitcoin is a leading indicator of inflation? In the chart shown, we can see the various Bitcoin peaks over the years preceding local peaks in US CPI (orange). The US interest rate is in blue. The last 4 peaks in US CPI YoY have occurred between 6.4 and 8.5 months after a peak in Bitcoin's price. Specifically: June 2016 high - 37 weeks (8.5 months) later at 2.7% December 2017 high - 28 weeks (6.4 months) later at 2.9% June 2019 high - 31 weeks (7.1 months later) at 2.5% November 2021 high - 33 weeks later (7.6 months later) at 9.1% It's also worth noting that the sequence of highs is the same; both BTC and CPI have a lower high, a higher high, lower high, then higher high. The peaks in 2011 and 2013 coincided with CPI highs 15 and 26 weeks later, but 2016/2017 was the time when crypto first entered the public's awareness. So why does this happen? Do Bitcoin whales buying lambos stimulate inflation? I'm joking, but I genuinely don't know, and I hope someone can explain lol. I've wondered if it's a case of correlation in that rising inflation is usually a sign of easy financial conditions—the ideal conditions for a risk asset like BTC to pump—with Bitcoin being the first to benefit as the ultimate risk asset (at least in the world of mainstream finance). I'm not sure though. The most concerning thing is the implication. We recently just made another all-time high in Bitcoin, but CPI sits at 3.4% at the time of writing, having moved sideways for almost a year now. As for whether this is a crazy coincidence, or me reaching to an astronomical degree, I don't know. The average period of time over these last 4 periods is 32 weeks, or around October/November time. The only catalysts I see are the US government spending money like it's going out of fashion and rising commodity prices. I'll also note that there doesn't seem to be any correlation with lows in inflation. Personal opinion on inflation: US inflation is stalling, rising, and falling across different measures. Producer prices, services inflation, annual PCE, and some core measures are tilting up. The only real decline recently has been core CPI. It's also interesting to note that 1 and 5-year Michigan inflation expectations are 3.3% and 3%, respectively. Multiple Fed officials have been hawkish lately: Fed's Barr: Q1 inflation was disappointing, it did not provide the confidence needed to ease monetary policy. Fed's Mester: Inflation risks are tilted to the upside. Fed's Bostic: It would not surprise me if it took longer to get to 2% inflation in the US than elsewhere. Given that we've reached a peak in interest rates (for the time being) but inflation has been moving sideways for around a year now, something has to change. It could be argued that monetary policy still needs time to work, but that doesn't really mesh with measures of inflation stalling or rising over the past year. Wouldn't the lag effect continue working to drive inflation lower? Likewise, why would the US economy be growing as fast as it is? One or more of three things will need to change: inflation, unemployment, or interest rates. Unemployment is at 3.9%, low by historical standards but rising since early 2022. Inflation, especially with what we've seen here, may also be on the rise soon. If the main lever the Fed has is monetary policy, it faces a dilemma. The data doesn't support a rate cut right now, while unemployment is rising slowly. If inflation begins to rise again, it may need to hike interest rates—not ideal when Joe desperately needs one for the upcoming election. This scenario of high inflation and high unemployment—stagflation—is what JPMorgan's CEO, Jamie Dimon, has been warning of : 'It’s a warning Dimon has issued before, previously saying he fears America is headed for a repeat of the 1970s when everything “felt great” and then quickly about-turned to a period of high unemployment and inflation paired with low demand, also known as “stagflation.” Appearing at AllianceBernstein’s Strategic Decisions conference on Wednesday, Dimon said he simply can’t see how the past five years of massive fiscal and monetary stimulus could result in anything other than this scenario. As it stands, the US dollar looks ready to surge higher and clear 2023 highs: While SPY and BTC, adjusted for inflation (CPI figure taken from first day of trading), sit below their 2021 highs: I am aware that the human tendency to look for patterns and confirmation bias may be clouding my judgement. However, in my view, the market is severely underestimating the risk of higher inflation and a potential interest rate hike, which I believe will drive the dollar higher throughout the rest of 2024. According to the Bitcoin chart, another wave of inflation could be back above 7%+. I personally find that hard to imagine, but second round effects in the 1970s saw inflation shoot past its previous peak. Deutsche Bank has drawn parallels with the 1970s . Long-term views: Long USD, Oil Short risk assets (equities, crypto) Unsure on gold and silver but skewed lower For these views to be truly validated, I would like to see: TVC:DXY above 105.75 NYMEX:CL1! above 84 AMEX:SPY below 494 NASDAQ:QQQ below 414 INDEX:BTCUSD below 56,500 This is not financial advice, nor a recommendation. I wrote this to bring attention to something strange I'd found, and strongly encourage you to do your own research. Thank you for reading.
INDEX:BTCUSD
by pasojov
23
$DXY down, $BTC up - The crazy (but logic) correlationCRYPTOCAP:BTC just printed a "magical" green candle, after a kinda "bearish" upward movement with a lot of divergences. No one was expecting an upward movement like this, and really caught bears and shorters by surprise. The short squeeze here was brutal and a lot of shorters must be in pain. Anyone could be asking themselves, "what the hell just happened?". This is the time where traders blame "manipulation" and "market makers" as the ones who move the market to their interests, with such a, we could say, "irracional" price action. Well... There COULD be an explanation. Historically DXY (The index that measures the strenght of US Dollar in the financial market) have had an inverse correlation to the price of Bitcoin and viceversa. It has some kind of logic, since, if Bitcoin is bought with dollars, then if dollar lose its value, then you need more dollars to buy Bitcoin! simple math, simple logic. We are not sure if the graphs are 100% correlated themselves, but it makes sense! Here you can see that I applied the TVC:DXY graph over CRYPTOCAP:BTC graph, but the TVC:DXY is INVERTED, meaning that every time TVC:DXY went up, you can see it here going down. So you can see now more clearly the direct correlation both have. TVC:DXY just broke a trendline and printed a very strong red candle JUST at the very same time BTC did y massive green candle a liquidated short positions at very important sell zones. It's kind of easy to predict a big movement of any of both, if one of them does a big move at some point, because you can expect the other to do a big move at the same time or some time later. Keep an eye ALWAYS on DXY when you are trading Bitcoin or any crypto. It IS a finantial advice.
OANDA:BTCUSD
by fortune_00
Macro Negative Correlation with BitcoinThe US Dollar Index TVC:DXY is negatively correlated with the macro Bitcoin BNC:BLX chart. Indicators like the Correlation Coefficient indicator will display swings from negative to positive correlation between TVC:DXY and $INDEX:BTCUSD. This can lead to a belief that they are not in fact negatively correlated. But, when you zoom out to a macro view of Bitcoin and compare, the dollar index's peaks correspond with Bitcoin's lows, while Bitcoin's peaks correspond with DXY's lows. At times, these corresponding peaks and valleys have occurred near the same dates and times, while at other times DXY has acted as a leading indicator for future movement for Bitcoin. Where will we go next? if DXY returns to its previous high and breaks it, I suspect Bitcoin will move lower on the other hand, should DXY move further down or get stuck within a range, it's likely that Bitcoin will move higher What do you think?
TVC:DXY
by dudebruhwhoa
6
Why Gold and DXY Rise Together in Times of UncertaintyIn times of market uncertainty, investors often seek refuge in assets considered safe havens, such as gold and the US Dollar Index (DXY). While traditionally these two assets exhibit a negative correlation, meaning when one rises, the other tends to fall, their simultaneous ascent during periods of uncertainty might seem counterintuitive at first glance. However, a deeper understanding reveals the underlying dynamics driving this phenomenon. Firstly, let's explore gold's role as a safe haven asset. Gold has long been revered as a store of value and a hedge against economic instability and geopolitical turmoil. During times of uncertainty, investors flock to gold as a reliable store of wealth, driving up its price. This demand surge can outweigh any negative impact from a stronger US dollar, leading to both gold and DXY rising concurrently. On the other hand, the US Dollar Index (DXY) also garners safe haven status during times of uncertainty. The US dollar is widely considered the world's reserve currency and is backed by the largest and most stable economy globally. Consequently, investors often seek refuge in the US dollar during periods of market turmoil, further boosting its value. Moreover, the correlation between gold and the US dollar is not solely determined by economic factors but also influenced by investor sentiment and market dynamics. During times of heightened uncertainty, investor behavior can drive unusual correlations as market participants prioritize capital preservation over traditional market relationships. Furthermore, it's crucial to consider the broader macroeconomic landscape. Factors such as central bank policies, geopolitical tensions, and global economic outlook play significant roles in shaping investor sentiment and asset prices. Changes in these factors can lead to shifts in the relationship between gold and the US dollar, especially during times of uncertainty when market participants reassess risk and allocate capital accordingly. In conclusion, while gold and the US dollar may traditionally exhibit a negative correlation, their simultaneous rise during times of uncertainty underscores their status as safe haven assets. Understanding the complex interplay of economic fundamentals, investor sentiment, and market dynamics is essential for comprehending the nuances of asset relationships, particularly during turbulent times in the financial markets.
TVC:DXYEducation
by JoeChampion
3
The top Forex Market correlations1-Gold (XAU/USD) and AUD/USD: Gold prices often exhibit a positive correlation with the Australian dollar (AUD/USD). Australia is a major producer of gold, and the Australian dollar is sensitive to changes in gold prices. When gold prices rise, AUD/USD tends to appreciate, and when gold prices fall, AUD/USD tends to weaken. 2-Gold (XAU/USD) and USD Index (DXY): Gold prices tend to have a negative correlation with the US Dollar Index (DXY). When the DXY strengthens, gold prices often weaken, and when the DXY weakens, gold prices tend to strengthen. This inverse relationship is because gold is priced in US dollars, and a stronger dollar makes gold more expensive for holders of other currencies. 3-S&P 500 Index and USD/JPY: The USD/JPY currency pair often exhibits a positive correlation with the S&P 500 Index. When the S&P 500 Index rises, USD/JPY tends to appreciate, and when the index falls, USD/JPY tends to weaken. This correlation is because both assets are seen as risk-on indicators, meaning they tend to move in the same direction in response to changes in market sentiment. 4-Crude Oil (WTI) and CAD/JPY: Crude oil prices, particularly West Texas Intermediate (WTI) crude, often have a positive correlation with the Canadian dollar/Japanese yen (CAD/JPY) currency pair. Canada is a major exporter of oil, and the Canadian dollar is sensitive to changes in oil prices. When oil prices rise, CAD/JPY tends to appreciate, and when oil prices fall, CAD/JPY tends to weaken.
OANDA:XAUUSDEducation
by JoeChampion
Microsoft Replicating 1987 SPX ChartSince Microsoft bought ChatGPT back in March 2023, the price of NASDAQ:MSFT stock has gone on to replicate the same pattern as the 1987 S&P500 stock market rally. Does it mean anything all by itself? No. It still needs a catalyst for the drop to happen. The 1987 stock market crash had many triggers and catalysts and the drop was a sharp 40% from August 28th, 1987 to October 19th 1987. What would cause a sharp 40% drop in NASDAQ:MSFT ? You all could type in your guess in a reply to this chart. It could come about under a variety of situations, but it would take an act of Government regulation or a major sea-change in laws or the business environment. When you see people posting "overlays" of the market to past debacles, you will find almost NONE of them work. Last year in January I posted a pattern where NASDAQ:TSLA was mimicking the fundamental and technical price pattern that NYSE:MCD McDonalds had from over a decade ago when it fell 75% on a rough patch for its business. It turned out to be identical and NASDAQ:TSLA rallied over 150% last year just exactly the same as happened to $MCD. I'll post the link down below for you to view. The overlay here between NASDAQ:MSFT and the 1987 SP:SPX is pretty amazing but we have no catalysts to make it drop. Stay tuned on any weakness and look for cheap hedges (long term puts out to July-Oct-Dec for this year). Don't spend more than 1% of an account to hedge a position, but if you hedge it correctly you can protect against a large decline without much cost to a portfolio. Here's hoping this pattern doesn't 'pan-out' because it would be or could be very disruptive to the markets. Wishing you all health and success in the markets this year and thanks to TradingView for all of the great tools for doing research! Cheers, Tim Friday, February 23, 2024 8:59PM EST
NASDAQ:MSFTShort
by timwest
25
Negative Correlations in Trading: FULL GUIDEEmbarking on a journey in the world of trading demands a profound understanding of market intricacies. One often-overlooked yet powerful aspect is the domain of negative correlations — the intricate dance where the movement of one asset influences another inversely. This guide aims to be your compass in navigating these complex waters, exploring real-world examples, and providing strategies to harness this knowledge for astute and strategic trading. Section 1: Unraveling the DXY-BTC Dynamic: Understanding Dollar-Bitcoin Connections 1. The Dance of DXY and BTC: Delve into the intricate relationship between the U.S. Dollar Index (DXY) and Bitcoin. Grasp the nuances of how a strengthening DXY tends to exert a weakening influence on Bitcoin and vice versa. 2. Leveraging the DXY-BTC Correlation: Explore scenarios where the correlations of DXY and Bitcoin align. Discuss long-term trading strategies that arise from discerning the interconnectedness of these two prominent assets. Section 2: Discorrelation RSI: Decoding Signals Amidst Market Chaos 1. Understanding Discorrelation RSI: Introduce the concept of discorrelation RSI, where RSI signals diverge from price action. Emphasize the significance of recognizing when RSI provides a more accurate reflection of market sentiment. 2. Trading Wisdom with RSI Signals: Analyze real-world examples where RSI forms a higher low while the price chart indicates a lower low. Illuminate actionable strategies for entering long positions based on RSI signals during instances of price divergence. Section 3: Structural Manipulation: Navigating Opportunities Amidst Deceptive Markets 1. OP Case Study: Structural Manipulation vs. RSI Insights: Explore the dynamics of the OP token, where structural lows are seemingly updated on the price chart. Unveil instances where RSI provides a more accurate representation of market conditions, presenting buying opportunities during purported oversold conditions. 2. Seizing Opportunities in Manipulation: Discuss the art of discerning manipulation from genuine market conditions. Explore how negative correlations can guide traders to capitalize on opportunities created by market manipulation. Section 4: Crafting Your Strategy: Navigating the Complexities of Negative Correlations 1. Building a Trading Plan: Outline the essential components of a comprehensive trading plan that incorporates insights from negative correlations. Emphasize the need for adaptability and ongoing analysis to refine trading strategies. 2. Risk Management in Negative Correlation Trading: Discuss advanced risk management strategies tailored to the nuances of negative correlations. Highlight the importance of position sizing and the judicious use of stop-loss orders. Conclusion: Orchestrating Success in Market Dynamics As you conclude this profound exploration of negative correlations in trading, envision the market as a symphony of interconnected instruments. The ability to recognize and leverage negative correlations adds a powerful melody to your trading strategy. Regularly revisit and refine your approach, staying attuned to evolving market conditions, and use negative correlations as a guiding force in your trading journey. 💡 Deciphering Negative Correlations | 🔄 DXY-BTC Symphony | 📊 RSI Discorrelation Strategies | 🎭 Unmasking Structural Manipulation 💬 Engage in the discourse: Share your experiences in trading based on negative correlations, pose thoughtful questions, and connect with a community dedicated to mastering the dynamic nuances of the market. 🌐✨
Education
by Yaroslav_Krasko
2
Domination of USDT + USDC and lows/maxims of BTC. CorrelationIn the graph, combined into one graph of the dominance of such stablecoins as USDT and USDC. Orange color—chart of the bitcoin price against the dollar. The time interval is 1 week. The graph is logarithmic. The same chart and the same parameters on the candlestick chart . All BTC price lows and highs are specially shown. Compare what the capitalization of stablecoins was at the time. At an earlier time, the dominant stablecoin was one USDT, later USDC was added. They occupy a significant capitalization. BUSD and DAI are less capitalized. They too can be added to this “indicator” of the Pumps/Dumps market. I think the dominance history and the bitcoin overlay chart illustrate well which market phase and in which areas to buy and sell bitcoins and other speculative crypto coins. Centralized Stablecoin capitalization of a decentralized market . Sounds crazy, doesn't it? The dominance of centralized in a decentralized market. The 3rd,4th,6th places are naturally occupied by centralized stablecoins such as: #USDT #USDC #BUSD. This kind of decentralized cryptocurrency financial world (freedom from the dictatorship of banks, power states, and so on) did you imagine, for example, in 2015-2017? Is it good or bad? What will happen after a while? What trend will develop further after the community bait has been swallowed? 3rd place . USDT ( .... "Reds" .... ) $67,562,687,657 4th place . USDC (Circle, Coinbase, JPMorgan, Blackrock .... ) $51,726,419,583 6th place . BUSD (Binance) $20,003,320,692 13th place DAI ETH (!) BTC and ETH dominance. Continuing on this “democracy” theme of crypto sandbox capitalization. Today 14 09 2022. Market Cap: $989,560,104,72 Dominance: #BTC: 38.9% #ETH: 19.9% Total 2 assets: 58,7% Also add 3,4,6,13 top stablecoins to this. Stablecoins over 20%. Almost 60% of the market is 2 assets. Over 80% of the market is 6 assets. So much for the true mythology of decentralization ))). How to look for a “live chart” for yourself and combine the dominance of USDT and USDC: 1) Look for the MARKET CAP USDT DOMINANCE, % 2) On the right side of the chart in the search field, press the + button 3) Write MARKET CAP USDC DOMINANCE, %. For the analysis, it will also be useful to track at the same time: 1) BTC dominance 2) US dollar index (DXY, USDX) BTC dominance BTC to altcoin dominance. Stablecoin dominance and market pamp. US Dollar Index (Fed)with prices of BTC lows/maxims. Correlation of assets. DXY and PampDump BTCMarkets Cycles. This is what it looks like on a line chart to illustrate simple correlation things. Preparedness for force majeure. I would also like to say that all stabelcoins are focused on the "stability" of the U.S. dollar. Think about what would happen if, for some reason, that stability were to be undermined in the blink of an eye. Then you are faced with a very difficult choice. What to do? Sell/buy cryptocurrency/shares? Just think ahead "What do you do" if, purely hypothetically, for some fantastic, hard-to-imagine reasons this happens. Think ahead in today's calm time (are you sure it's not calm now?), so you won't be caught off guard in a turbulent time.
CRYPTOCAP:USDT.DEducation
by SpartaBTC
24
BTC to ValhallaQuantitatively speaking all of my systems aggregated are long. There will of course, be a lot volatility. Like any other normal crypto upwards trending market. Not providing and esoteric uber complex system on here since they are private. Now with that being said, a myriad of things are in the right direction for HTF investing and also if you had a good swing entry on the recent price action. As this continues to play out many small-cap coins have had their waves with their small glimmers of alpha, short-lived. Easy exits thought lol. In a macro sense, all TradeFi systems are long and most asset classes are max long, and yeah you can find out the quantitative backing yourself. The recent reduction in correlation between crypto and traditional markets, has seen a more strongly positive correlation in the past 21 days. Confusing the mind of the retail trader. There is still low sentiment on crypto in its entirety and moreso elicits the stage of disbelief. But, that does not matter in the slightest. Qualitative "Analysis" is boring anyway. Take your leverage off degen. GM GM GM
INDEX:BTCUSDLong
by BackQuant
Major Market Correlations Between Yields, Stocks And USDollarIn 2022, the stock market took a hit and the US Dollar gained strength due to higher yields in the US. Toward the end of that year, as yields eased off, the US Dollar lost some of its power, and this coincided with a rebound in stock market performance. Now, as yields are climbing once again, the US Dollar is regaining strength, but it seems like stocks are beginning to lose their previous momentum. However, the situation might shift if these rising yields are in the process of completing their fifth wave and are on the verge of slowing down. In that case, the US Dollar could actually become weaker again, and the stock market might continue its upward trend. Of course a lot will depend on the FED policy decisions, where dollar can turn down if FED will stop the hiking cycle. Well, a lot will depend on the US data, so market participants will surely watch the NFP very closely tomorrow.
TVC:US10Y
by ew-forecast
1
Relationship between US 10yr yield & the DXYAs traders look for signals on potential moves in the FX market, a frequent question I receive is regarding the relationship between the 10yr yield and the DXY. US 10-Year Treasury Yield: The US 10-year Treasury yield represents the interest rate on the 10-year government bonds issued by the United States. It is considered a benchmark for long-term interest rates and is often used as a reference for borrowing costs across the economy. This yield is influenced by various factors, including inflation expectations, economic growth, and monetary policy. US Dollar Index (DXY): The US Dollar Index, or DXY, measures the value of the US dollar against a basket of major foreign currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. It provides a snapshot of the US dollar's strength or weakness relative to these currencies. Relationship of US 10yr yield & DXY The US 10-year yield and the DXY have a relatively strong positive relationship. Increases in the yield on 10-year Treasuries have the tendency to draw capital into the US bond market because investors find US government bonds more attractive with higher yields. Because of the increasing demand for the US dollar to buy these bonds, the dollar gains strength leading to a rise in the DXY. As with any relationship between financial instruments, it is seldom 100% positively correlated given that there are a variety of factors, including inflation expectations, economic growth conditions, market sentiment, and central bank monetary policy.
TVC:US10Y
by JinDao_Tai
📈 BTC vs. S&P500: Broken Correlation & The Next Big Move!🔥🔀💰Wishes for a nice month everyone and let's all pray for logic and Peace in the World.🌍 🎓 November has started with a bang, and we're seeing some interesting movements in the financial market. 📊 🔍 Observations: Bitcoin's Rollercoaster: BTC took a slight dip today, even after a splendid performance post the Federal Reserve announcement. 💸 Inverse Correlation Emerges: Historically, Bitcoin & S&P 500 moved hand in hand. But now? They're moving in opposite directions at times! 🔄 Past Patterns: Dive into 2018, 2019, and 2020, and you'll see this dance between BTC and S&P 500. Correlation breaks, then normalizes, and ultimately... BOOM! 🚀 A significant price movement ensues. 🤔 Thoughts: ChatGPT Insights: Looked up ChatGPT for more on this correlation break. Factors like market sentiment, liquidity, and micro events could be playing a role. Current Market Trend: Bitcoin's moving up while indices correct. What's next? We might see this correlation normalize soon. 🔄 The BIG Resistance: Keep an eye on Bitcoin as it approaches the major resistance level I've been talking about. This could be a pivotal point! 🔝 🔥 Hot Takes: Bitcoin: Feeling bullish! Major support lies around 34,000, and I'm optimistic about BTC reaching the 37,000 mark and beyond. 🚀 S&P 500: Spotted a significant resistance at 4,327. Bearish trends have been dominant since last year, but a break above this resistance could change the narrative. 🐻 vs 🐂 In conclusion, watch out for the correlation between Bitcoin and the S&P 500. When it breaks and normalizes, it might just present a golden opportunity! 🌟 Keep observing, analyzing and take grown up decisions; stay vigilant, and remember to do risk management and have patience 💰 One Love, The FXPROFESSOR 💙 link:
SP:SPX
by FX_Professor
📊 Correlations Unveiled: NIKKEI vs. BTC! 📈Mirror Image: NIKKEI vs. BTC Upon closer inspection, you might be astounded by the uncanny similarity between NIKKEI, Japan's stock market index, and BTC, the poster child of cryptocurrencies. 📊 Leading or Following? NIKKEI's chart seems to be almost leading the way, showcasing patterns and trends that BTC later follows. This observation highlights the importance of studying correlations in financial markets, offering potential insights into one market's effect on another. The Power of Correlations Understanding and harnessing the power of market correlations can provide traders and investors with the ability to predict potential price movements. By recognizing these relationships, you can make more informed decisions in your investment strategies. Conclusion: Correlations Matter The resemblance between NIKKEI and BTC charts is a testament to the power of correlations in the financial world. Being aware of these connections can provide valuable insights and, ultimately, contribute to more successful trading and investing. Feel free to like, share, and leave your thoughts in the comments! 💚📈💚 ❗See related ideas below❗
BNC:BLXLong
by Yaroslav_Krasko
1