Economic and corporate calendars are powerful and indispensable trading tools, helping investors follow key economic and non-economic indicators that can provide clues to subsequent market direction. This is because, rather than the release of actual economic or corporate indicators, it is the anticipation of the data that drives market sentiment. The figure itself might not be as critical as whether it met market expectations or not.
This collective anticipation can be termed market sentiment. A variety of news articles, analyst reports, earnings expectations and more contribute to shaping this sentiment, making it an incredibly rich and varied data set.
The Dual Power of Calendar and Sentiment Data
So, news volume data is a leading indicator of market volatility. The more data releases scheduled for an asset on the calendar, the greater the probability of a rise in news volume and, ultimately, shifts in market momentum.
A scheduled event, unlike a shock event such as an earthquake, means the market will try to factor in the ‘expected’ data before the event has happened. This in turn causes volatility prior to the announcement and depending on whether the data has met expectations or not, can continue for many days afterwards.
For example, if analysts’ estimates for apple earnings are set at 25c per share, investors will focus on the number and to whether they think it will come in at above or below. This in turn will drive news volume and sentiment. The estimates are therefore a yardstick by which the sentiment is judged.
By combining calendar data with sentiment data, traders can better understand and monitor market activity so they can formulate trade ideas accordingly. After all, in this era of globalisation, economic data of one country impacts global assets across the board.
For example, on August 26, 2020, the Shanghai Composite fell by 1.3% to 3329.74, as investor sentiment turned negative, following a drastic drop in US Consumer Confidence. The US consumer confidence index dropped to 84.8 in August, the lowest level since May 2014. This was significantly lower than the market consensus of 93 You can see how the data has compared with analysts expectations over the past 12 months in Acuity’s economic calendar.
This signifies growing worry in households over the labour market and incomes, as well as lack of confidence in the US economy to recover from the COVID-19 induced downturn quickly. The worry is compounded by millions being unable to pay rent and the resurgence of coronavirus cases in the country.