Fundamental Analysis

//Fundamental Analysis
Fundamental Analysis 2017-06-25T15:03:17+00:00

Fundamental analysis is the analysis of economic, social and political data reflecting and quantifying economic situation for the purpose of determining movements in the future. Analysts are divided into two, technical and basis analysts.

Technical analysts can not ignore the effects and timing of explanations related to economy. Basis analysts can not also ignore various signals obtained form volatility and price levels in the past.

While making analysis, taking account of all explanations, data and news relevant to economic, social and social situations of countries are really difficult especially in today’s global market. However, as various basic indicators of economies are understood and these indicators are examined deeply, analysis of financial markets develops substantially.

Indefinite explanation is made about economy. Meeting economic calendar more closely, trying to understand the nature and possible impacts of data are important. But, on the other hand, failing to perform an efficient analysis by coming to a deadlock due to excessive information is also very easy.

As great numbers of economic data is available, setting sight on basic data mobilizing prices is more important rather than obtaining little information about a great deal of data.

ECONOMIC INDICATORS

Economic indicators are quantitative notices reflecting financial, economic and social atmosphere of economy, disclosed as data. These indicators are published by different agencies dependent to governments or in private sector. These statistics are predicted by public and published in times determined before according to calendar. They are used a screen showing the health and power of an economy by many persons. As a great number of players making predictions with regard to data explained are present, sometimes data itself increase the volume in market substantially and frequently mobilize the prices of various financial instruments in very short time.

Keeping our information about many economic data published daily but monitoring only a few basic indicators among them closely is more important.

Basic guide for economic announcements:

Know which indicator is to be laid open when completely. Keep a calendar displaying the name, date, hour and expected data of indicator to be expressed on your desktop or platform. Frequently data expected direct market rather than an indicator itself.

Try to understand the data to be expounded shows especially which aspect of economy. Economy has many different aspects. For example, growth rate- GDP, inflation, CPI or PPI, unemployment rate- non-agricultural wages or employment, confidence to economy- consumer confidence or expenditures is measured with their data. Following monitoring these data in time, you will be acquainted much which data gives information about which direction of economy.

As we mentioned before, a great deal of indicators published daily are found. Monitoring all of these continuously is almost impossible and in addition this becomes time wasting too. Some creates mobility in market but some does not. You concentrate on those mobilizing. However the effect of data on markets may not be the same every time. While some gains more importance in time, some becomes less important. On this matter, keep your information updated.

A data itself may not be important as much as the difference between data realized and data expected. As mentioned before, knowing the expectation of market is significant. Expectations are built on the price of investment instrument. Those not built in price, mobilizing price are unexpected data or event. Sometimes although elucidated data itself comes as expected, a word used with that data creates mobility in market. For instance, interest rate is explained 0.25 as expected, it may not create much mobility but a news such as “more interest increase will not happen”, added after notice mobilize price.

Explanations unexpected and sounding like different from all expectations do not create mobility in market. Each economic indicator explicated to public is corrected states of formerly explained data. Sometimes these can be uncertain. For instance, in spite of expecting downing, data about orders of durable goods has become 0.4%. In fact this unexpected increase is arisen from the correction downward of data of previous month together with new data explanation. Compare the corrections made in old data. Because in the example we have given, when data of durable goods of previous month are rectified downward, the increase stated in 0.4% has become 0.1% in fact. Therefore, sometimes, the increase of current month can be stemmed from the correction of previous month.

Investment instruments are traded by the value of one foreign currency against another one. Thus, knowing only some part of game can not be enough. When value of a currency unit goes down, if you enter sell trading, you can loss as increase will be in parity in case value of other currency unit goes down more.

TYPES OF INDICATORS

Economic indicators are divided into two in general, leading and lagging indicators. Leading indicators change before economy starts to follow some way or trend and are used for having a prediction about changes in economy. Lagging indicators also amend after economy starts to follow some way or trend.

USA ECONOMIC INDICATORS

  • Published on first Friday of every month at 8.30 (NY Local Time).
  • Importance: shapes market.
  • Balance of trade is obtained by calculation of the difference between total export of goods and services and their total import. USA has a foreign trade deficit since 1970.
  • Published on 10th day of every month at 8.30 (NY Local Time).
  • Importance: shapes market.
  • CPI calculates the change in prices of a basket composed of some goods and services used by urban consumers according to economic environment conditions they are affected. Core CPI excludes goods (food and energy, etc.) which are influenced most while calculating price change.
  • Published on 15th day of every month at 8.30 (NY Local Time).
  • Importance: shapes market.
  • Data published by Institute of supply given an opinion about the activities in manufacturing sector.
  • Published on first working day of every month at 8.30 (NY Local Time).
  • Importance: shapes market.
  • Monthly difference between total retail sales is calculated.
  • Indicator representing the style of consumer expenditures whose explanation time is the most indefinite. It is adjusted according to seasonal variables, holiday times and trading days.
  • Importance: shapes market.
  • Reflects the confidence of consumers to USA economy. Data is calculated based on the results of survey carried out for 5000 households in USA.
  • Report draft is published on 15th day of every month, the last report is published on last Tuesday of every month.
  • Importance: shapes market.
  • Sum of all goods and services produced in a country, reached to end consumer.
  • GDP provides information about whether or not economy of a country grows or in recession. Considered as indicator giving most detailed information on production and growth rate.
  • Calculated with data obtained monthly, published as quarter period data, around 5 weeks after end of a month.
  • Importance: shapes market.
  • ISM is based on the combined index generated from seasonal arrangement of distribution indices of five indicators being new orders, production, supplier distributions, inventories and employment.
  • Importance: High.
  • Personal savings; some percentage of disposable (remaining after taxes) personal incomes.
  • Saving ratios have direct influence on economy. Saving at high rate shows very little money is involved in economy. Saving at low rate represents consumers spend more, so makes positive contribution to recovery. Negative saving ratio means consumers become indebted themselves. This can also set off growth rate in short term but can not be a sustainable growth.
  • Importance: High.
  • Weekly leading index is a combined index calculated by using seven indicators. These indicators are JOC-ECRI material prices index, mortgage activity, bond quality spreads, stock prices, bond interest and unemployment applications.
  • WLI shows economic trends in short time with the indicators it measures. And as it utilizes the indicators determining business world conjuncture, it gives reliable results. Shows deep and top data of 3 months and 10 and a half months.
  • Importance: Medium.
  • Arranged seasonally.
  • Orders of durable goods shows the orders of durable goods that domestic manufacturers have taken to deliver immediately or in the future.
  • The goods used for three years or above are called durable goods.
  • Data on orders of durable goods are temporary but used as indicator of economic activities in the future. Orders should soar before manufacturers increase production and decrease as a result of decline in production amount by manufacturers.
  • Importance: Medium.
  • Producer price index of finished goods can not be arranged seasonally.
  • Calculates inflation towards producers and does not place services on account. Typically a sudden increase in PPI induces the fall in stock and bond markets.
  • Use of PPI in economic analysis is mostly for product, intermediate and raw goods.
  • Importance: Medium.
  • Rate of number of unemployed person to total labour market, arranged seasonally.
  • Unemployment rate is the indicator of general economy’s health. While low rate emphasizes a powerful economy, high rate represents a weaker economic appearance. On the other hand, employers find staff faster in periods where unemployment rate is high.
  • Importance: Medium.
  • New household units with special ownership subject to building permits. Can not be arranged seasonally. Data externalize the number of building permits including single and multiple units.
  • Household market is assumed one of leading indicators of economic activity. Except for seasonal fluctuations, sudden increases (or drops) in building sales or constructions represents boom (or recession) in economy. Because household expenditures form one third or quarter of total investment, 5% of national economy. Drop in building permits indicates the recession in construction sector.
  • Importance: Medium.
  • A measure with some kind chain weighted which measures the total production quantity made within the scope of infrastructure services and in mining pits and factories in a country and additionally what amount of existing resources can be used for production.
  • Manufacturing sector makes one third of economy of a country.
  • Rate of capacity utilisation gives an opinion how what amount of factory capacities is used.
  • Importance: Medium.
  • National Association of Purchasing Managers ( NAPM ) or with its new title, Institute for Supply Management publishes a monthly combined index about manufacturing sector of country.
  • Obtained form data of new orders, production, supplier distribution times, accumulated orders, inventory prices, employment, export and import orders.
  • Divided into two as manufacturing and non-manufacturing sub-indices.
  • Importance: Medium.
  • Housing starts report states the number of newly started housing or building construction each month.
  • Constructions of housing or building whose foundations are started to lay are defined as housing starts.
  • Data on housing starts are highly sensitive to changes in interest rates and one of indicators giving reaction first to a change in interests.
  • When starts or permits of housing have important influence on changing interest rates, this gives the signal of interest rates close top or bottom. In order to analyse that, stay focused on percentage changes in levels of previous months.
  • The report is published mid-month.
  • Importance: Medium
  • This index shows the number of those working in workplaces in operation in all sectors found in each place of a country.
  • Index is calculated according to the number of person working in full time or part time, wage or salary payment is made, especially in big workplaces displaying activity in private sector or public sector.
  • Importance: Medium-Low.

Economic indicators for Germany

  • Business confidence.
  • Importance: Medium.

Economic indicators for Japan

  • Climate overview or Business confidence.
  • Economic overview of Japanese business, published bythe Central Bank of Japan, which is used for the formulation of monetary policy.
  • Izveštaj se izdaje četiri puta godišnje, u aprilu, julu, oktobru i sredinom decembra
  • Importance: Medium.
  • Importance: Medium.