Fundamental analysis: the advanced market measures

If you are a good trader, then you know what to check first to get the fundamental knowledge about the markets. Everything begins...yes, that's right, from the FBS website. You check it first to be updated with the main events from the economic calendar, the freshest news, and the analysis of your favorite assets in recorded and written formats. These are just some of the hidden treasures, which you can find by visiting the "Analytics and Education" section of our website.

An experienced trader, in turn, is a true analytical digger. They not only know mainstream sources of useful data for fundamental analysis but also read "between the lines" and understand not-so-obvious connections between events and markets. Below we gathered the most intriguing sources of information out of all. Let’s start!

Indicators of risk sentiment

It’s very important to know the current sentiment of the markets. If the sentiment is risk-on, traders and investors are not afraid to buy currencies with a high yield and emerging markets currencies. Alternatively, risk-off sentiment provokes traders to escape from risky assets into safe-havens (the USD, the JPY, the CHF, and gold). You can find different ways to track the risk sentiment across the markets. The most generic one is to follow the main headlines in the relevant news sources. At the same time, it is the trickiest way, as news changes very quickly and the massive inflow of information may confuse you.

What else you can do? Of course, you can follow the performance of safe-havens. If the inflows into the Japanese yen and gold are going up, then you may suggest that the sentiment is off. You should pay additional attention to the correlation between the USD and gold (XAU/USD). If the USD goes up, then the yellow metal is most definitely falling.

However, if you want to be more specific in your analysis, you can use some other interesting sources. One of them is the Chicago Board Options Exchange's CBOE Volatility Index (VIX) or the “fear index”. It assesses the expected volatility of the stock market. If the implied volatility is higher, then the fear of the possible change of a trend is rising. As a result, the risk-off sentiment is dominating in the market. Vice versa, a falling volatility index shows a stable market environment. Let’s have a look at the example of the index and USD/JPY.

Another tool you can use for risk sentiment identification is the Commitment of Traders (COT) report, published by the Commodity Futures Trading Commission every Friday. It contains the net long and short positions of speculative and commercial traders. According to it, we can identify how the biggest market players, such as banks and corporations, set their positions and whether they are committed to the current trends. For example, if the Commitment of Traders demonstrates that most of the major traders have switched their attitude to the market from bullish to the bearish one, we may expect the change of the risk sentiment.

Speeches by presidents, catastrophes, and butterfly wings which affect the markets

Don't think that the market is only driven by economic factors. Always remember the situation of 2020. Who thought that a local infection in China would lead to the global uncertainties, recession, and correction of the market indices at the beginning of the year? Thus, you always need to take all the news into account, as many of them, especially those related to urgent updates by presidents and unexpected dramatic events may certainly affect the assets that you trade.

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