Fundamental Analysis

 

    It is the analysis based on economic calendar and news reports. This news can be either economic,political,social or even wheather. It is obvious that the economic news is the most important one effecting the market.

    Every economic calendar contain this articles:

 

Date - Time - Location - Indicator - Forecast - Previous - Actual

 

June15 - 5:00 - us - unemployment -  5%       -      4%     -     5%

 

   Traders who speculate the market movements according to the fundamental analysis, should review the economic calendar daily and focus on the most important ones,check them accurately so they will be alert on the market at the time of the release. They should know that this news put their effect on the market immediately after the release.

   The most important economic indicators are:

 

1- consumer confidence

 

   A survey of cunsumer attitudes concerning both the present situation as well as expectations regarding economic conditions. Five hundred cunsumers are surveyed each month. The level of consumer confidence is directly related to the strength of consumer spending. This indicator has more positive influence on the stock market.

 

2- Industrial production

 

   This index measures the physical output of the nations factories,mines and utilities. It has positive influence on the currency and stock market.

 

3- New home sales

 

   New home sales measure the number of newly constructed homes with a comitted sale during the month. The level of new home sales indicates housing market trends and in turn economic momentum which affect the financial market positively.

 

4-Durable goods orders

 

  This index reflects the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods (like TV.refrigrators,cars...). An increase of this index shows a greater productive capacity in the country and will have a postive effect on the markets.

 

5-Jobless claims

 

   New unpemployment claims are compiled weekly to show the number of individuals who filed for unemployment insurance for the first time.An increasing trend suggest a deteriorating labor market and will have a negative effect on the stock and currency markets.

 

6-unemplyment rate

 

   The employment situation is a set of labor market indicators. The unemployment rate measures the number of enemployed as a percentage of the labor force. This data give the most comprehensive report on how many poeple are looking for jobs and are unemployed. This indicator is one of the most important and effective indexes that moves the markets hardly.

 

7- Non farm payrolls

 

   This indicator measures the change in the number of employed people during the previous month,excluding the farming industry. It releases monthly,usually in the first friday of the month. It is a vital economic data and have a huge effect on the markets.

 

8-CPI consumer price index

 

   This indicator is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation. Inflation is a general increase in the price of goods and services. Its relationship with interest rates affects the markets. It has negative effect on the stock market and positive effect on the currency market.

 

9- PPI poducer price index

 

   This index is a measure of the average price level for a fixed basket of capital and consumer goods paid by producers.It measures price changes in the manufacturing sector. Its influence on the market is exactly like CPI.

 

10- fomc meeting announcement

 

  The federal open market comittee consists of the seven Governers of the federal reserve board and five federal reserve bank presidents. The fomc meets eight times a year in order to determine the near-term direction of monetary policy. The most important decision made in this meeting is the release of the interest rate. The level of this rate affects the economy. Higher interest rate tend to show economic activity and lower rates stimulates economic activity.

 

11- current account

 

   This index is the most important part of international trade data. It is the broadest measure of sales and purchases of goods, services, interest payments and unilateral transfers. The increase of this index affects the financial markets positively.

 

12-Trade balance

 

   The international trade balance measures the defference between exports and imports of goods and services. Exports boost economic production and increase in it boost the trade balance and affects on the whole economy and the financial markets.

 Export - Import = Trade balance. If the import become more than the export it becomes trade deficit.

 

13- Retail sales

 

   This index measures the total receipts at stores that sell durable and nondurable goods. An increase in this index shows the increase in consumer spending which leads to economic growth.

 

14- wholesale trade

 

   This index measures the dollar value of sales made and inventories held by merchant wholesalers. Like retail sales shows the amount of consumer spending  which  leads to economic growth.

 

15- ISM

 

   The institute of supply management surveys nearly 400 manufacturing firms on employment, production, new orders, supply deliveries and inventories. An increase of this index will have a positive effect on the market.

 

16- GDP Gross domestic product

 

   This index is the broadcast measure of aggregate economic activity and encompasses every sector of economy. It shows the volume of production in all sectors and have a huge influence on the economy and the financial markets.

 

17- factory orders

 

   This index represent the dollar level of new orders for both durable and non durable goods. This report gives more complete information than the advanse durable goods report.

 

18-ECB meeting announcement

 

   The European central bank governing council consists of 16 members.The committee meets twice a month. It is devoted to monetary policy. A statement is read concerning their action. The most important issue of the statement is the release of the interest rate which affects on the whole economy and the financial market of european member countries.

 

19- BOE meeting announcement

 

   The bank of England monetary policy committee consists of nine members. The committee meets monthly in order to determine the near term direction of monetary policy. At the enc of the meeting they release the interest rate and a statement about the changes of their policy. It have a huge effect on England economy and the pound.

 

20 consumer credit

 

   The dollar value of consumer installment credit outstanding. Changes in consumer credit indicate the state of consumer finances and portend future spending patterns.

 

   

Category: Fundamental Analysis Topics