US Trade Balance and the $

by :
FFAN Analyst

Wall St. is definately in a bit of a tizzy over the likely course of Fed interest rates. A cut's been taken off the table and like a child with many toys who loses one, they're throwing a tantrum.As i've discussed many times, losses in equities relate to losses in carry trades. Have a look at the daily charts and you'll see the pound has plunged while USD/JPY has come way off the highs. That's a sure sign that carry trades unwound in the 200 point DOW sell-off today.On to the trade balance-and i'm going to suggest you look at it in a different way. Don't look so much at the overall gain or loss in the deficit, look at it in terms of overall activity. In other words, watch whether imports and exports both rose.If they did that will indicate an increasing pace of overall economic activity-a growth indicator. With Wall Street so upset now an indication that growth is picking up will absolutely send them to the nearest ledge, because it will only indicate even less chance of a Fed rate cut to them. How likely is it that overall activeity picked up? Very likely because a lot of activity was lost due to Chinese holidays in March.It's more then just the drop in the indexes that indicate unease-the "fear" index has risen as well. If you don't know, the fear index aka the VIX is actually something that can be traded on the CBOE. You can actually bet on how wet trader's undergarments are likely to get!The VIX index closed at 17.06 Thursday, compared to last week when the index traded well below 14.0. In 2007, the VIX has seen a low of 9.70, seen Feb 14 (before the Feb 27 one-day China stock tumble) and a high of 21.25, seen in early March.