AWARDS

Japanese markets are closed till Thursday due to public holidays, however, a number of Asian stocks traded lower over fears of a slowdown of growth in China. The China HSBC Manufacturing PMI for April showed a reading of 48.9, this figure indicates that the manufacturing economy is declining, and has continued to decline for a second consecutive month. Furthermore, the Reserve Bank of Australia cut its interest rates for the second time in 4 months as the country struggles with the slowing Chinese demand. The Hang Seng Index was down 1.31%, closing at 27,755 and the Shanghai Composite dropped 2.81%.

During the European session, the British pound traded higher against the weaker Dollar despite negative data from the UK. The Construction PMI for the month of April showed a reading of 54.2 which indicated expansion, however, lower than the expected figure of 57.5. The Euro also traded Bullish following the European Commission’s quarterly forecast, the board raised its expectations for the growth of the economy from 1.3% to 1.5%.

The Dollar dropped against a basket of major currencies following a number of economic reports from the U.S., The ISM Non-Manufacturing PMI for April showed a higher than forecast reading of 57.8, however, the Trade Balance and the Service PMI both showed worse than expected figures.

Later today, New Zealand will release the first quarterly Employment Change, if the actual figure is lower than the forecast figure of 0.8% then the NZD could decline for the short term. Currency traders are also awaiting a number of economic reports taking place tomorrow from Australia, the United Kingdom and the United States.

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Charts vs. Financial Statements

At the most basic level, a technical analyst approaches a security from the charts, while a fundamental analyst starts with the financial statements.

By looking at the balance sheet, cash flow statement and income statement, a fundamental analyst tries to determine a company's value. In financial terms, an analyst attempts to measure a company's intrinsic value. In this approach, investment decisions are fairly easy to make - if the price of a stock trades below its intrinsic value, it's a good investment. Although this is an oversimplification (fundamental analysis goes beyond just the financial statements) for the purposes of this tutorial, this simple tenet holds true.

Technical traders, on the other hand, believe there is no reason to analyze a company's fundamentals because these are all accounted for in the stock's price. Technicians believe that all the information they need about a stock can be found in its charts.

Time Horizon

Fundamental analysis takes a relatively long-term approach to analyzing the market compared to technical analysis. While technical analysis can be used on a timeframe of weeks, days or even minutes, fundamental analysis often looks at data over a number of years.

Trading Versus Investing

Not only is technical analysis more short term in nature than fundamental analysis, but the goals of a purchase (or sale) of a stock are usually different for each approach. In general, technical analysis is used for a trade, whereas fundamental analysis is used to make an investment. Investors buy assets they believe can increase in value, while traders buy assets they believe they can sell to somebody else at a greater price. The line between a trade and an investment can be blurry, but it does characterize a difference between the two schools.

Can They Co-Exist?

Although technical analysis and fundamental analysis are seen by many as polar opposites - the oil and water of investing - many market participants have experienced great success by combining the two. For example, some fundamental analysts use technical analysis techniques to figure out the best time to enter into an undervalued security. Oftentimes, this situation occurs when the security is severely oversold. By timing entry into a security, the gains on the investment can be greatly improved. 

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What is it? It checks the change in the total value of sales at the retail level.

It's the primary gauge of consumer spending, which accounts for the majority of overall economic activity.

When? May 5^th at 9:30pm Eastern Time.

Trading Tip: If the actual number is higher than the forecast, you can expect the AUD to rise.

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