Today’s traders are facing a new type of market manipulation — it’s called tweets. Not so long ago, traders knew to watch out for market reports as they would create volatility. We even had the occasional surprise report — like when the Swiss National Bank decided to unpeg the Euro. However, in today’s markets, traders have to watch out for the ominous tweet. Yesterday was a great example but first a little background information.
The FOMC has been under heavy fire — for raising rates, for not lowering interest rates, and, when they finally did (due primarily to the trade war with China), they were blasted for lowering the rate only 1/4 of a percent and not a 1/2 percent. Fed Chairman Powell admitted that the most prevalent reason behind the rate cut was that “trade tensions and slowing global growth are hurting the U.S. economy.”
New Type of Market Manipulation
After the FOMC announcement on Wednesday that they were only cutting interest rates 1/4 percent, the mini Dow Jones fell from the high at 27258 to a low of 26693 (565 points). However, on Thursday the mini Dow Jones was on the road to recovery, soaring up to 27147. And then…………………the tweets came out.
First, there was a tweet about “constructive talks” with China but then came the whammy. News of a new additional Tariff of 10% beginning on September 1st or possibly even higher. The mini Dow Jones fell to a new low at 26512 and has continued to fall this morning. Plus, an additional report that the White House will make an announcement on EU Trade at 1:45 pm New York time.
As already stated, the trade tensions are hurting the economy so these tweets are creating massive moves and, if implemented will likely cause even further rate cuts, which seems to be the goal. After all, Fed Chair Powell did mention that the FOMC would be monitoring the data and there may not be any further rate cuts this year. However, if the trade war intensifies (as would occur with additional tariffs) then, more likely than not, a further rate cut would be warranted. Is this the new market manipulation technique that traders have to anticipate when trading futures and forex?
These issues make trading even more difficult in today’s markets — for intraday, medium-term, and long-term traders. At the very least, either the trader will have to increase their stops or monitor numerous twitter feeds for any potential tweets that could wipe out their profits in a matter of minutes.
Another alternative is to start trading the Nadex Touch Brackets so at least traders have some protection against these massive moves. The video below shows you how the touch brackets can limit risk especially during this period of new market manipulation.