Globalization of Financial Markets

The market is again taking a cue from the currency markets today. We sold off after the open once the dollar started gaining strength. It gets a little hard to trade when the stock market just follows the currency market. Following is an excerpt from an article by Jim Cramer on I think it illustrates very well that more and more domestic markets follow what is happening around the globe and as a trader you need to follow a lot more stuff these days.

Rather than give you the whole evolution, let me cut to the chase: These days, as soon as I get up I check the CurrencyShares Euro(FXE),  which will pretty much determine how the day will be. If the FXE is down, I know my longs will fail; if it is up, my longs will work. I then check why the FXE is the way it is. I check Greek bonds. I check Portuguese bills. I check statements by ECB President Jean-Claude Trichet. I check statements from the Germans and the French. Then I check the oil futures to be sure the linkage with the FXE is still on — it almost always is. Then I check copper, because copper is China and I want to be sure the Chinese aren’t saying anything too negative. I then check any pronouncements about inflation in any of the euro nations or China.

Only then, after all of that ridiculousness, do I check anything having to do with the United States. Because as important as we think we are, everything I just wrote about above is more important, or I wouldn’t bother with it.

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