Posts
MCFX as a blog is over. This much may have been guessed by the lack of posts. While the experiment was not successful on returns - finishing down around the 20% mark, we are pleased with the experience. Our currency calls have largely been very good - our foolishness has been nearly entirely focussed on equities where we have lost vast sums through mis-sized, mis-timed, and mis-scaled punts. We not only lost money nearly every time we invested in equities (whether long or short) - we lost way too much each time.
Oh well, lesson learned. Our macro views on currencies that we have reiterated throughout remain the same.
However, more important than the losses, MCFX started a new job a few weeks ago and a very exciting one at that. This will unfortunately consume all his time for the foreseeable future and so blogging (that was not happening anyway) must end. Thanks for the support from those few who read and followed the blog.
Good luck and goodbye!
Sunday, 10 May 2009
Friday, 20 March 2009
Very Frustrating Week
MCFX has failed to blog this week. Not due to lack of time; but due to intense frustration. Mainly with his liquidity provider who used the high volatility on Wednesday evening to completely fail in their service provision and hence cost MCFX a lot of money (I won't go into details now as have spent half the week fighting with them). It's not been THE most expensive week - but it's been an expensive one and we are upset to have given back such a large percentage of last week's gains - particularly so when we feel are market calls have been largely correct.
So yet again we finish the week flat risk. Short EURGBP was clearly wrong. But we sold EURAUD at great levels only for our provider to tenuously claim that we should have been stopped out above the highs in the midst of last Wednesday's mentalness - but they only told me an hour after the event when EURAUD was much lower.
We sold EURUSD around 1.3700 which was clearly great. But don't still have the position. Annoying and poor position management.
We got stopped out of GBPCHF right at lows - before it promptly rallied.
And most frustratingly, we got stopped out of our cable long near enough to lows before it promptly went 7 big figures higher! Ouch.
Hmmm....
Obviously the market has yet to make up its mind about what the Fed's plan to buy Treasuries really means. Apart from being inflationary and USD negative. But will stocks continue to rally next week? Today's price action is not very supportive of that idea. We dipped our baby toe into stocks over last 48 hours but are not convinced and so have taken the position off. We'll try to reassess over weekend.
Underlying all our thinking though is that we remain GBP bulls at these levels. And longer-term EUR bears. How best to trade this view is not always clear as EURGBP, while obvious, does not move in an easily trending / tradeable fashion. And overall we like trading from a risk-recovery point of view. Only ever long equities, short CHF, short JPY, long AUD, long CAD.
Good luck!
So yet again we finish the week flat risk. Short EURGBP was clearly wrong. But we sold EURAUD at great levels only for our provider to tenuously claim that we should have been stopped out above the highs in the midst of last Wednesday's mentalness - but they only told me an hour after the event when EURAUD was much lower.
We sold EURUSD around 1.3700 which was clearly great. But don't still have the position. Annoying and poor position management.
We got stopped out of GBPCHF right at lows - before it promptly rallied.
And most frustratingly, we got stopped out of our cable long near enough to lows before it promptly went 7 big figures higher! Ouch.
Hmmm....
Obviously the market has yet to make up its mind about what the Fed's plan to buy Treasuries really means. Apart from being inflationary and USD negative. But will stocks continue to rally next week? Today's price action is not very supportive of that idea. We dipped our baby toe into stocks over last 48 hours but are not convinced and so have taken the position off. We'll try to reassess over weekend.
Underlying all our thinking though is that we remain GBP bulls at these levels. And longer-term EUR bears. How best to trade this view is not always clear as EURGBP, while obvious, does not move in an easily trending / tradeable fashion. And overall we like trading from a risk-recovery point of view. Only ever long equities, short CHF, short JPY, long AUD, long CAD.
Good luck!
Tuesday, 17 March 2009
Sell EURGBP
This is just a quick post to tell you to sell EURGBP while it's still above 0.9265 (it's bouncing around 0.9270 as I write) - these are the highs. We've repeatedly tried dipping our toes into shorting this pair over the last week - not to too much success but overall not too much lost either. But now is the time. We've upped our size and are piling in. Cable won't go much below 1.39 on this run down whereas EURUSD has the guts of 2% to do.
Get involved and good luck!
Get involved and good luck!
Monday, 16 March 2009
It's all about timing
Well we returned with a bang. We said buy GBP and GBP promptly roared. We made 5 big figures on GBPCHF and 3 on GBPJPY within 48 hours. We were tightening our stops aggressively and so were out of everything by Friday afternoon including EURAUD which we made nearly 2 big figs on as well. Cable is obviously 4 big figs higher than where we bought it but we must admit we stopped out at flat Thursday afternoon. And EURGBP was also a flat exercise.
However it was a great 48 hours and we went in to the weekend out of all positions looking for any retracement to get back in. This was not so good timing. GBP has continued to roar today and we've missed out on several big figs more across the board.
Still it was a very hefty profit which went some way towards repairing MCFX's decimated balance sheet. About 10% of profit. Yep. Much needed.
Ideally now we should wait til the next obvious opportunity. But bear in mind that MCFX is now unemployed and so trading (when in London) is practically his full-time occupation. And while patience is a virtue, we feel we should be trying to maximise the time we have while we have it.
So we will continue to push. But today it did not work. We dipped our toe in to short EURGBP and promptly got stopped out near the highs so we stand aside til tomorrow. It was a loss of less than 1% but it hurts.
Good luck!
However it was a great 48 hours and we went in to the weekend out of all positions looking for any retracement to get back in. This was not so good timing. GBP has continued to roar today and we've missed out on several big figs more across the board.
Still it was a very hefty profit which went some way towards repairing MCFX's decimated balance sheet. About 10% of profit. Yep. Much needed.
Ideally now we should wait til the next obvious opportunity. But bear in mind that MCFX is now unemployed and so trading (when in London) is practically his full-time occupation. And while patience is a virtue, we feel we should be trying to maximise the time we have while we have it.
So we will continue to push. But today it did not work. We dipped our toe in to short EURGBP and promptly got stopped out near the highs so we stand aside til tomorrow. It was a loss of less than 1% but it hurts.
Good luck!
Thursday, 12 March 2009
We return
MCFX is back. Back in London and back in business. It's time to start repairing our horrendous balance sheet. And we're starting the recovery by buying GBP. Over the last 24 hours, we've bought a lot of GBP against CHF, JPY, USD and EUR. We actually think that GBP could become a safe-haven currency farther down the line. I know. Bizarre. But GBP is way ahead of the game in taking the pain and definitely in pricing in the pain. It's had an awful smack again this week amidst the backdrop the details of the Lloyds deal and the distressing terrorist killings in Northern Ireland. The latter has depressed us as we see the situation escalating again as recession dampens the economic incentives for peace.
However, in currency terms, GBP has had a healthy cleanout. It cleaned us out of our last remaining chunky position in GBPCHF - we stopped out of the June IMM date at 1.6480 but have recently bought back at a 1.6050 average and are happy that we'll fill that gap soon enough.
We've also sold EURAUD. The world is too bearish EUR and it's probably set for a very decent rally at some point - sure it's already had one over last few days. But that will probably continue. We are part of that bearish EUR brigade but stand aside as positioning dominates. That said, we've dipped our toes into short EURGBP but that's mainly a GBP view. And we've sold EURAUD - this is partly to ensure that we have some short EUR on just in case but also because we believe that the EURUSD bounce will coincide with an equity and risk bounce and so AUD might well outperform. Longer-term we love short EURAUD.
Our mention of equities brings us back to something we mentioned in our last post. We said we think the cult of equities is dead. That may be true. But we went too far - we said we don't believe equities will necessarily be higher in 5 years time in real terms. That was probably a bit crazy. Equities are now looking cheap. We may go a lot lower but over longer-term, there are buying opportunities at these levels.
Something else we mentioned in our last post was an imminent collapse in gold (as prompted by MCFX's brother), which duly happened. It's down a tasty 7% or so since our last post. And may have more to run. But we have not played it due to lack of faith in the timing.
But basically, load up on GBP - we'll probably manage it reasonably actively. As said above, we've bought a lot. 1.3760 (spot) just seemed too tempting a level to buy cable - especially with the expected EURUSD rally. EURGBP we've dipped our toes in a few times over last couple of weeks but most recently around 0.9265 for the June IMM date. GBPJPY after missing buying way lower due to some charting idiocy (was very very very frustrating), we've bought at around 133.50ish levels for the June IMM - that was probably a bit hasty considering how much lower it subsequently went. But we'll hopefully be above 140.00 within a few trading days. And the EURAUD we sold at 1.9920 also for June IMM date. The cable position is the main one we'll be jobbing as we hold that spot.
Good luck!
However, in currency terms, GBP has had a healthy cleanout. It cleaned us out of our last remaining chunky position in GBPCHF - we stopped out of the June IMM date at 1.6480 but have recently bought back at a 1.6050 average and are happy that we'll fill that gap soon enough.
We've also sold EURAUD. The world is too bearish EUR and it's probably set for a very decent rally at some point - sure it's already had one over last few days. But that will probably continue. We are part of that bearish EUR brigade but stand aside as positioning dominates. That said, we've dipped our toes into short EURGBP but that's mainly a GBP view. And we've sold EURAUD - this is partly to ensure that we have some short EUR on just in case but also because we believe that the EURUSD bounce will coincide with an equity and risk bounce and so AUD might well outperform. Longer-term we love short EURAUD.
Our mention of equities brings us back to something we mentioned in our last post. We said we think the cult of equities is dead. That may be true. But we went too far - we said we don't believe equities will necessarily be higher in 5 years time in real terms. That was probably a bit crazy. Equities are now looking cheap. We may go a lot lower but over longer-term, there are buying opportunities at these levels.
Something else we mentioned in our last post was an imminent collapse in gold (as prompted by MCFX's brother), which duly happened. It's down a tasty 7% or so since our last post. And may have more to run. But we have not played it due to lack of faith in the timing.
But basically, load up on GBP - we'll probably manage it reasonably actively. As said above, we've bought a lot. 1.3760 (spot) just seemed too tempting a level to buy cable - especially with the expected EURUSD rally. EURGBP we've dipped our toes in a few times over last couple of weeks but most recently around 0.9265 for the June IMM date. GBPJPY after missing buying way lower due to some charting idiocy (was very very very frustrating), we've bought at around 133.50ish levels for the June IMM - that was probably a bit hasty considering how much lower it subsequently went. But we'll hopefully be above 140.00 within a few trading days. And the EURAUD we sold at 1.9920 also for June IMM date. The cable position is the main one we'll be jobbing as we hold that spot.
Good luck!
Friday, 27 February 2009
Self-imposed exile
Apologies for the long delay from MCFX. We passed our own 20% down take-a-break marker. The catalyst being obvious from the first line of our last post. Long equities. Okay, so the bear-market rally we were harping on about. Yep. That one that didn't happen. Well exactly. Pretty harsh.
We disappeared to France to take some time abroad to ponder things. We came back more bearish EUR longer-term though wary that Ireland may be bailed out by Europe at any moment which may cause some painful volatility.
We've been jobbing bits and pieces in smalls - none of it successfully. Only trade we still believe in is long GBPCHF which we've jobbed quite successfully and still hold.
Other macro thoughts include that we are giving up on equities. We still believe at some point they could have a massive rally but longer-term we are coming around to the theory that the cult of equity is over. I think the pain this time will be too long. There will remain tradeable opportunities over the coming years but I'm no longer convinced that equities will necessarily be higher in 5 years time than they are now. At least not in real terms. In nominal terms they probably will but surely there is a better way of playing that reflationary trade?
However, relative value we can't help but feel that long German equities against short Spanish equities will be a great trade (thank you MPPI for this idea). Amazingly, they've performed roughly similiarly over the last few years. We can't help but feel that Spanish equities are horribly screwed to put it nicely. They are stuck in a deflationary environment with increasing unemployment. I don't like having outright equity exposure so hedging with German equities makes sense. They are quite highly correlated being in the same investment bracket for most funds but the divergence should grow.
Another idea which MCFX's brother has been talking about is long oil vs short gold. I like long oil over a longer-term period. It will rocket again at some point: the thing about oil is the supply side is much stickier than the demand side. Falling demand has been the story of this collapse in oil prices but supply is also falling, albeit slowly, but eventually just as viciously, and when demand starts picking up that supply won't be able to come online again so quickly. It's also a way of playing the reflation trade. So longer-term we really like long oil.
Gold we also think will do well in the impending world inflationary environment. The problem is that anecdotally every Tom, Dick, Harry and Mary are in this trade. There is not enough gold around to make the gold ingots demanded by the private sector. This worries me. I think gold can take a horrendous whack short-term.
So in conclusion, while we like the thinking behind this trade as a relative way to play the commodity reflation story, we just think that the timing of both parts of the trade is very very difficult.
That's all for now. MCFX is returning to France next week - this time to formally improve his French. I may update from abroad but only if I'm inspired - and these markets are seldomly inspiring me nowadays!
Good luck!
We disappeared to France to take some time abroad to ponder things. We came back more bearish EUR longer-term though wary that Ireland may be bailed out by Europe at any moment which may cause some painful volatility.
We've been jobbing bits and pieces in smalls - none of it successfully. Only trade we still believe in is long GBPCHF which we've jobbed quite successfully and still hold.
Other macro thoughts include that we are giving up on equities. We still believe at some point they could have a massive rally but longer-term we are coming around to the theory that the cult of equity is over. I think the pain this time will be too long. There will remain tradeable opportunities over the coming years but I'm no longer convinced that equities will necessarily be higher in 5 years time than they are now. At least not in real terms. In nominal terms they probably will but surely there is a better way of playing that reflationary trade?
However, relative value we can't help but feel that long German equities against short Spanish equities will be a great trade (thank you MPPI for this idea). Amazingly, they've performed roughly similiarly over the last few years. We can't help but feel that Spanish equities are horribly screwed to put it nicely. They are stuck in a deflationary environment with increasing unemployment. I don't like having outright equity exposure so hedging with German equities makes sense. They are quite highly correlated being in the same investment bracket for most funds but the divergence should grow.
Another idea which MCFX's brother has been talking about is long oil vs short gold. I like long oil over a longer-term period. It will rocket again at some point: the thing about oil is the supply side is much stickier than the demand side. Falling demand has been the story of this collapse in oil prices but supply is also falling, albeit slowly, but eventually just as viciously, and when demand starts picking up that supply won't be able to come online again so quickly. It's also a way of playing the reflation trade. So longer-term we really like long oil.
Gold we also think will do well in the impending world inflationary environment. The problem is that anecdotally every Tom, Dick, Harry and Mary are in this trade. There is not enough gold around to make the gold ingots demanded by the private sector. This worries me. I think gold can take a horrendous whack short-term.
So in conclusion, while we like the thinking behind this trade as a relative way to play the commodity reflation story, we just think that the timing of both parts of the trade is very very difficult.
That's all for now. MCFX is returning to France next week - this time to formally improve his French. I may update from abroad but only if I'm inspired - and these markets are seldomly inspiring me nowadays!
Good luck!
Wednesday, 11 February 2009
Equity madness
Ok MCFX is getting carried away again. I am buying equities like there is no tomorrow. SPX March future to be precise. Since last night, I've been adding little chips to the core position mentioned yesterday. We are very leveraged... but stops are staggered and some very close. A 1% move in stocks causes a move in excess of 4% in our fund. Madness.
But we plan to keep on adding if it rallies from here. Against that, we'll keep on tightening up our stops. Between all our current positions, including our initial entry at 843.5, we've entered at an average of around 832 in the March future. And we're risking a total of about 7% of our fund at the moment.
We also now have short EURAUD again having sold at 1.9838 for the March IMM date. We picked our entry level nicely on this one with the rally overnight not going much higher.
And finally we have long GBPCHF on again entering at 1.6658 for the June IMM date.
MCFX is using some of his spare time to research more and more the press around previous bubbles / crashes. It's easiest to find articles on the Asia crisis, Russian crisis, LTCM, and the Internet boom so this is where I am focussing. I'm hoping it will give me a greater insight to market psychology around bear-markets - but bizarrely all this doom-and-gloom reading is only making me more bullish. I have become entrenched in my view that a decent rally is on the horizon; whether bear-market rally or genuine start to the new bull-market I am less convinced, though still definitely err towards the former option. Having already expended so much capital on all the previous false dawns, I'm keen to catch it when it happens. This kind of attitude is what kills traders / funds. Being too aggressive too early. Though I do the current market sentiment is ripe for the move. And I will tighten up my stops aggressively as, and if, the market runs.
The fund is currently down 13.7508% ytd. Upsetting. Though given current position size in equities, this will probably change significantly in one direction very soon. We must remember that this fund is targetting 100% returns on the year. Which means that we are looking to make nearly 9% average per month. Average. Including down months. So -13.7508% is in no way denting our plans - only our ego.
Good luck!
But we plan to keep on adding if it rallies from here. Against that, we'll keep on tightening up our stops. Between all our current positions, including our initial entry at 843.5, we've entered at an average of around 832 in the March future. And we're risking a total of about 7% of our fund at the moment.
We also now have short EURAUD again having sold at 1.9838 for the March IMM date. We picked our entry level nicely on this one with the rally overnight not going much higher.
And finally we have long GBPCHF on again entering at 1.6658 for the June IMM date.
MCFX is using some of his spare time to research more and more the press around previous bubbles / crashes. It's easiest to find articles on the Asia crisis, Russian crisis, LTCM, and the Internet boom so this is where I am focussing. I'm hoping it will give me a greater insight to market psychology around bear-markets - but bizarrely all this doom-and-gloom reading is only making me more bullish. I have become entrenched in my view that a decent rally is on the horizon; whether bear-market rally or genuine start to the new bull-market I am less convinced, though still definitely err towards the former option. Having already expended so much capital on all the previous false dawns, I'm keen to catch it when it happens. This kind of attitude is what kills traders / funds. Being too aggressive too early. Though I do the current market sentiment is ripe for the move. And I will tighten up my stops aggressively as, and if, the market runs.
The fund is currently down 13.7508% ytd. Upsetting. Though given current position size in equities, this will probably change significantly in one direction very soon. We must remember that this fund is targetting 100% returns on the year. Which means that we are looking to make nearly 9% average per month. Average. Including down months. So -13.7508% is in no way denting our plans - only our ego.
Good luck!
Tuesday, 10 February 2009
What happened to MCFX?
This is the frequent question I've been hearing recently...from the multitudes (5 people) who follow this blog.
MCFX has no real excuse. Though since I live in London, I feel I can unashamedly blame the weather and once in a millenium (something like that) snowstorms. Everything else seems to have died in this country once the snow hit the 2cm mark. It's quite worrying how the whole country came to a halt for weather that is relatively common place throughout much of Europe.
On top of that, MCFX has been distracted by the enjoyments of unemployment. Bloomberg connection has been cancelled and we have largely tuned out from the markets. This tuning out was aided by the fact that we got cleaned out on the equity dip at the start of the month. We bought in too aggressively and got punished. We followed up that idiocy by not cancelling our stop-entries on the topside and then getting hurt on some of those as well as the bounce was volatile. Frustration abounded.
Overall we lost over 8% through equity idiocy since our last post - a tremendous chunk of our capital. Fortunately we made good money on our currency positions (apart from AUDJPY which we got stopped out with at the start of last week) - in the last 24 hours, we have stopped out of the rest of our positions with decent profit. EURGBP around 0.8800, GBPCHF around 1.7000 and EURAUD around 1.9500 for our respective dates. We have orders to re-enter these positions for the same dates around 0.9120, 1.6650 and 1.9850 respectively.
We have also charged back into equities today on this afternoon's dip. Way too enthusiastically again. We are chasing it seems. We are risking about 5% of our portolio having entered around 838 level for the March SPX future. Stops vary from 815ish level down to 805ish level.
Will try to get back into the swing of things soon. And update on some developments. And our different perspective on the markets now that we have taken a step back and do not have the daily swathe of bad data.
Good luck!
MCFX has no real excuse. Though since I live in London, I feel I can unashamedly blame the weather and once in a millenium (something like that) snowstorms. Everything else seems to have died in this country once the snow hit the 2cm mark. It's quite worrying how the whole country came to a halt for weather that is relatively common place throughout much of Europe.
On top of that, MCFX has been distracted by the enjoyments of unemployment. Bloomberg connection has been cancelled and we have largely tuned out from the markets. This tuning out was aided by the fact that we got cleaned out on the equity dip at the start of the month. We bought in too aggressively and got punished. We followed up that idiocy by not cancelling our stop-entries on the topside and then getting hurt on some of those as well as the bounce was volatile. Frustration abounded.
Overall we lost over 8% through equity idiocy since our last post - a tremendous chunk of our capital. Fortunately we made good money on our currency positions (apart from AUDJPY which we got stopped out with at the start of last week) - in the last 24 hours, we have stopped out of the rest of our positions with decent profit. EURGBP around 0.8800, GBPCHF around 1.7000 and EURAUD around 1.9500 for our respective dates. We have orders to re-enter these positions for the same dates around 0.9120, 1.6650 and 1.9850 respectively.
We have also charged back into equities today on this afternoon's dip. Way too enthusiastically again. We are chasing it seems. We are risking about 5% of our portolio having entered around 838 level for the March SPX future. Stops vary from 815ish level down to 805ish level.
Will try to get back into the swing of things soon. And update on some developments. And our different perspective on the markets now that we have taken a step back and do not have the daily swathe of bad data.
Good luck!
Friday, 30 January 2009
Okay - we're boring ourselves here
But in the spirit of keeping this blog constantly updated, we have just put in an order to buy some AUDJPY for the March IMM date at 0.5720 with a stop around 0.5600 area (risking 2% of our portfolio) - we actually went to buy it at 0.5710 but it kept running away from us. Now at 0.5740 so we won't chase. Another risk-postive play for a very bullish MCFX - losing your job must give you this confidence! If it runs away from us, we'll be very happy due to our long equity position.
MCFX is going out to be cultural and watch a string quartet.
Good luck!
MCFX is going out to be cultural and watch a string quartet.
Good luck!
End of jan summary...
...will come on the weekend.
Last update for this Friday. We've got stopped out of part of our SPX long - locking in just under 1% loss on our portfolio. The rest of our stops now are down towards 810 level. We have stop-entries on the topside every 5 points to keep adding to our current longs with stops at various trailing levels. A bit bullish we know...
On the other hand, we have significantly tightened up our stops in GBP - only because they are enough onside that we would be gutted to lose money on them now. For the June IMM date, our stops are now around 0.9100 in EURGBP and 1.6170 in GBPCHF.
Good luck!
Last update for this Friday. We've got stopped out of part of our SPX long - locking in just under 1% loss on our portfolio. The rest of our stops now are down towards 810 level. We have stop-entries on the topside every 5 points to keep adding to our current longs with stops at various trailing levels. A bit bullish we know...
On the other hand, we have significantly tightened up our stops in GBP - only because they are enough onside that we would be gutted to lose money on them now. For the June IMM date, our stops are now around 0.9100 in EURGBP and 1.6170 in GBPCHF.
Good luck!
Risking 7% total on equities...not 8% as said in last post
Luckily our GBP positions are doing very well today which give us more confidence. Equities admittedly now looking very heavy. Hmmm...
If they stabilise and bounce without making new lows for the day, then we will add on the way back up.
Good luck!
If they stabilise and bounce without making new lows for the day, then we will add on the way back up.
Good luck!
Strap it on and strap in
We have just gone very long SPX March futures. We had computer problems earlier and were cursing the world as we failed to get our position on before the GDP numbers. But we raised our bid and have now gone very very long SPX with average around 838 level. Stops at varied levels. Some around 830ish. Others at 810ish. We're risking a total of 8% of our portfolio! Could be madness I know.
But this is a leveraged fund looking for massive outsized returns. Not a pansy long-term investment vehicle. When you believe in something, you need to put it on.
Good luck!
But this is a leveraged fund looking for massive outsized returns. Not a pansy long-term investment vehicle. When you believe in something, you need to put it on.
Good luck!
Quick post
Only a few minutes hear as MCFX is out to be savaged by a dentist very soon.
This is the level to get back into equities. Yep, we're catching a falling knife. We had picked out 835 as our rough rebuy level and it's got all the way back there very quickly. Our only concern is where to put our stop - we've gone for roughly the 810 level though are worried this is not the correct level. If we stabilise around this 835ish level and bounce we will add on the way back up. We're risking 3% this time as we have increasing confidence since market has played out exactly as expected over last 5 days.
And we're still bitter about not getting into GBPNZD when we planned earlier this week. This bitterness is a poor trait. Move on from the past - always must have a clean slate each day otherwise you chase trades.
Good luck!
This is the level to get back into equities. Yep, we're catching a falling knife. We had picked out 835 as our rough rebuy level and it's got all the way back there very quickly. Our only concern is where to put our stop - we've gone for roughly the 810 level though are worried this is not the correct level. If we stabilise around this 835ish level and bounce we will add on the way back up. We're risking 3% this time as we have increasing confidence since market has played out exactly as expected over last 5 days.
And we're still bitter about not getting into GBPNZD when we planned earlier this week. This bitterness is a poor trait. Move on from the past - always must have a clean slate each day otherwise you chase trades.
Good luck!
Thursday, 29 January 2009
Thank god for flexibility
Fund performance: -5.146%
Open positions still the same: Short EURAUD, short EURGBP and long GBPCHF. MtM +1.5%
They say flexibility in your opinion is important in a trader. Well this time it certainly served us well. With SPX 2.5% lower than where we cut out last night (and still looking heavy), we saved ourselves over 3% by quickly changing our mind.
We will look to re-instate longs in the equity market in the near future but there is no rush. We are out tonight and will reassess in the morning. All our currency positions still working and it will soon be time to both add to our GBP positions while tightening up the original stops.
Good luck!
Open positions still the same: Short EURAUD, short EURGBP and long GBPCHF. MtM +1.5%
They say flexibility in your opinion is important in a trader. Well this time it certainly served us well. With SPX 2.5% lower than where we cut out last night (and still looking heavy), we saved ourselves over 3% by quickly changing our mind.
We will look to re-instate longs in the equity market in the near future but there is no rush. We are out tonight and will reassess in the morning. All our currency positions still working and it will soon be time to both add to our GBP positions while tightening up the original stops.
Good luck!
Wednesday, 28 January 2009
Quick about turn
You may have noticed how we have a tendency to talk up our positions so much that we start believing in them even more.
Tonight, we have done the opposite. That GBPJPY chart worried us. And we were looking at what levels we would look to get back in. And then we were thinking that EURGBP still looked heavy so maybe EURJPY is going to pullback. But that's not good for equities. We had a look at EURJPY chart and there was nothing too interesting right at these levels. So then we had another look at our SPX chart. And then we noticed it.
We originally had vague thoughts of pencilling in 875 as our initial target when we put the trade on. But then we were feeling good with our position and the sentiment in the market. So we thought we would leave it run. But then we noticed it.
What we noticed when we looked at that chart is that we are right at the long-term downtrendline from the post-Lehman highs at 1281 (!! - seems so far away now!). As long as we don't drift too much higher tonight, we are making a perfect touch on that trendline. Lets not be greedy - we don't have the ammo overall to risk ruining what's been a good trade unless we have much higher conviction.
We've had a good run over the last few days, and given the technicals, we have taken off our position in equities in entirety. And removed our bid below.
We will reassess tomorrow and hope that we get a chance to rebuy lower down, but if we break cleanly through that trendline in the days ahead, we will feel happy reinstating higher up as well.
So we have closed out our March future position just above 870 locking in a decent profit on the trade; 6.49% since Monday to be precise! So up-to-date fund performance is -5.146%. With our MtM about +1% now.
Good luck!
Tonight, we have done the opposite. That GBPJPY chart worried us. And we were looking at what levels we would look to get back in. And then we were thinking that EURGBP still looked heavy so maybe EURJPY is going to pullback. But that's not good for equities. We had a look at EURJPY chart and there was nothing too interesting right at these levels. So then we had another look at our SPX chart. And then we noticed it.
We originally had vague thoughts of pencilling in 875 as our initial target when we put the trade on. But then we were feeling good with our position and the sentiment in the market. So we thought we would leave it run. But then we noticed it.
What we noticed when we looked at that chart is that we are right at the long-term downtrendline from the post-Lehman highs at 1281 (!! - seems so far away now!). As long as we don't drift too much higher tonight, we are making a perfect touch on that trendline. Lets not be greedy - we don't have the ammo overall to risk ruining what's been a good trade unless we have much higher conviction.
We've had a good run over the last few days, and given the technicals, we have taken off our position in equities in entirety. And removed our bid below.
We will reassess tomorrow and hope that we get a chance to rebuy lower down, but if we break cleanly through that trendline in the days ahead, we will feel happy reinstating higher up as well.
So we have closed out our March future position just above 870 locking in a decent profit on the trade; 6.49% since Monday to be precise! So up-to-date fund performance is -5.146%. With our MtM about +1% now.
Good luck!
Gut feel worked...
Fund performance: -11.636% (still).
Open positions are still short EURAUD, short EURGBP, long GBPCHF and long SPX March futures. MtM of these positions is about +7.5%.
We are happy but gutted. Happy that gut feel led us to increase our SPX long on Monday night. Gutted that we missed out adding again last night by 0.5 of an SPX point! If we'd been filled, our MtM would be up a further 2%+! D'oh. Oh well. We are in a position of strength and the markets have treated MCFX kindly this week (even if our late-employer did not). Our GBP trades are also gaining strength and we are in fact on side on every single one of our open positions.
We are looking to push these trends. We like adding from a position of strength. And the general suspicion towards this equity rally encourages us. We will look to add to our SPX position on a pullback to around the 865 level with stop around 850ish. We increase our stops on our present positions to around a similiar level to ensure we lock in a profit overall.
We are also looking to add to our long GBP positions at some point in the future. Looking at a GBPJPY chart we notice a very nice uptrendline from the recent lows - something that we would trade if we were a day trader. However being that close to that good a short-term trendline scares us - we would prefer to wait til it breaks and buy on the ensuing dip. Either that or until we move cleanly away from the trendline. Either way, we've been made wary of tightening up the stops on our GBP positions or adding to them... at least for the moment.
But we are frustrated that our recent job distractions meant we missed instigating a long GBPNZD position on the dip on Monday as we had said we would.
We have temporarily removed our USD bids, against both CHF and EUR but think the next few days will provide a good opportunity to institute both these positions.
Open positions are still short EURAUD, short EURGBP, long GBPCHF and long SPX March futures. MtM of these positions is about +7.5%.
We are happy but gutted. Happy that gut feel led us to increase our SPX long on Monday night. Gutted that we missed out adding again last night by 0.5 of an SPX point! If we'd been filled, our MtM would be up a further 2%+! D'oh. Oh well. We are in a position of strength and the markets have treated MCFX kindly this week (even if our late-employer did not). Our GBP trades are also gaining strength and we are in fact on side on every single one of our open positions.
We are looking to push these trends. We like adding from a position of strength. And the general suspicion towards this equity rally encourages us. We will look to add to our SPX position on a pullback to around the 865 level with stop around 850ish. We increase our stops on our present positions to around a similiar level to ensure we lock in a profit overall.
We are also looking to add to our long GBP positions at some point in the future. Looking at a GBPJPY chart we notice a very nice uptrendline from the recent lows - something that we would trade if we were a day trader. However being that close to that good a short-term trendline scares us - we would prefer to wait til it breaks and buy on the ensuing dip. Either that or until we move cleanly away from the trendline. Either way, we've been made wary of tightening up the stops on our GBP positions or adding to them... at least for the moment.
But we are frustrated that our recent job distractions meant we missed instigating a long GBPNZD position on the dip on Monday as we had said we would.
We have temporarily removed our USD bids, against both CHF and EUR but think the next few days will provide a good opportunity to institute both these positions.
Tuesday, 27 January 2009
MCFX
It's late, and I'm tired. I had no real excuse for not blogging properly today. Except...
You see...MCFX lost his job today. It was coming. It was the "personal issues" we referred to on the weekend - nothing more traumatic than that. We'll move on - something to possibly delve into in a future blog.
Anyways, we'll get back into our discipline tomorrow. We've no closed trades since our last proper update so the fund is still down 11.636%. But at least our open positions are all looking okay and MtM we're up about 3% from them.
The big one is the SPX futures we piled into yesterday evening. We're going to ride this trend (if it comes - now that we've bagged a winner, lets try maximising it). We've tightened up our stop to around the 830 level (so above entry) but we're looking to add again risking 2% in our additional position which we're looking to add at the 848.50 level with stop also around the 830 level.
Good luck!
You see...MCFX lost his job today. It was coming. It was the "personal issues" we referred to on the weekend - nothing more traumatic than that. We'll move on - something to possibly delve into in a future blog.
Anyways, we'll get back into our discipline tomorrow. We've no closed trades since our last proper update so the fund is still down 11.636%. But at least our open positions are all looking okay and MtM we're up about 3% from them.
The big one is the SPX futures we piled into yesterday evening. We're going to ride this trend (if it comes - now that we've bagged a winner, lets try maximising it). We've tightened up our stop to around the 830 level (so above entry) but we're looking to add again risking 2% in our additional position which we're looking to add at the 848.50 level with stop also around the 830 level.
Good luck!
Monday, 26 January 2009
Gut feel that this is the one...
Foolish perhaps. But we just risked another 1% of our portfolio to buy another chunk of the SPX future at 827 this time. Stop around the same level at roughly 810ish.
Good luck!
Good luck!
Quick!
Just a quick note that we have dipped into the equity market again. We have bought a decent-sized position in SPX March futures at 829 level with stop around 810 (risking 2% again). Yet another try at the bear-market rally though our ammo is reduced from recent failed attempts. Not to despair though. We will make it back fairly quickly once the rally comes due to disciplined risk-reward.
Good luck!
Good luck!
Sunday, 25 January 2009
Blogging down due to personal issues
Fund performance: -11.636%
Active trades: Still short EURAUD, short EURGBP and long GBPCHF.
Personal issues and the market volatility have taken their toll on MCFX. It's been nearly a week since our last update and we fear the week ahead will also provide only limited time for blogging. The fund is doing fairly poorly so far. We have tried to play several overall themes:
1. Looking for a bear-market rally; a significant one. We still believe in this theme and in fact, in our full-time capacity, were vocally calling for the turn on Friday afternoon. We await for Monday's price-action to confirm this bounce as all previous attempts have fizzled out very quickly. But we are enthusiastic about jumping on this trend when it comes. However, so far, this idea has been the source of most of our pain. Wall Street is littered with the bodies of those who have been too early in their thinking. We have tried to be too clever.
2. GBP has sold off too much. We have got this on through short EURGBP and long GBPCHF and still like these trades. We got stopped out of our long GBPJPY trade twice! Frustrating. Our mistake here was pre-empting the end to the JPY strengthening trend as opposed to any problems with our GBP view.
3. As mentioned above, we think JPY strengthening is coming to an end. We are aware that deleveraging periods will continue to support it but between Japan's enduring economic struggles and the risk of MoF intervention, we think it will not go significantly further from here.
4. USD should strengthen. This view was correct but we never got it on. We now fear that if the USD backs up enough to put on the trade, then something may have changed - but for now, we still believe that the USD will strengthen significantly this year.
4. EUR will collapse at some point this year. We have this on through short EURAUD (possibly a hasty trade) and short EURGBP.
Sorry for the lack of originality / humour / anecdotes in the last few posts - due to external issues, we have been emotionally drained. The enthusiasm shall soon return!
Good luck!
Active trades: Still short EURAUD, short EURGBP and long GBPCHF.
Personal issues and the market volatility have taken their toll on MCFX. It's been nearly a week since our last update and we fear the week ahead will also provide only limited time for blogging. The fund is doing fairly poorly so far. We have tried to play several overall themes:
1. Looking for a bear-market rally; a significant one. We still believe in this theme and in fact, in our full-time capacity, were vocally calling for the turn on Friday afternoon. We await for Monday's price-action to confirm this bounce as all previous attempts have fizzled out very quickly. But we are enthusiastic about jumping on this trend when it comes. However, so far, this idea has been the source of most of our pain. Wall Street is littered with the bodies of those who have been too early in their thinking. We have tried to be too clever.
2. GBP has sold off too much. We have got this on through short EURGBP and long GBPCHF and still like these trades. We got stopped out of our long GBPJPY trade twice! Frustrating. Our mistake here was pre-empting the end to the JPY strengthening trend as opposed to any problems with our GBP view.
3. As mentioned above, we think JPY strengthening is coming to an end. We are aware that deleveraging periods will continue to support it but between Japan's enduring economic struggles and the risk of MoF intervention, we think it will not go significantly further from here.
4. USD should strengthen. This view was correct but we never got it on. We now fear that if the USD backs up enough to put on the trade, then something may have changed - but for now, we still believe that the USD will strengthen significantly this year.
4. EUR will collapse at some point this year. We have this on through short EURAUD (possibly a hasty trade) and short EURGBP.
Sorry for the lack of originality / humour / anecdotes in the last few posts - due to external issues, we have been emotionally drained. The enthusiasm shall soon return!
Good luck!
Monday, 19 January 2009
Bye-bye British banks
Fund performance: -7.316% still.
Active trades: Short EURAUD to March IMM; MtM +0.465%. Long FTSE March future; MtM -0.37%. Long SPX March future; MtM -0.036%. Long GBPJPY to June IMM; MtM -1.12%.
Short post today for Martin Luther King day. Thoughts still the same. Still looking for the Obamarama-fuelled risk-rally. Still not convinced it's going to happen! To clarify, I believe it will happen at some point but worry that I'm too early...possibly way too early.
Big news today was the continuing collapse of British banks, and particularly RBS. It is surely only a matter of time til it is fully nationalised. And probably the rest of them to follow over the ensuing months.
Unfortunately, this understandable pressure on British banks has brought similiarly understandable focus on the Swiss banks and similiarly the CHF. Unfortunately, we never got on our long USDCHF position - we raise up our bid marginally to around the 1.0800 level awaiting for a bout of USD weakness to get the position on.
Good luck and enjoy Obamarama!
Active trades: Short EURAUD to March IMM; MtM +0.465%. Long FTSE March future; MtM -0.37%. Long SPX March future; MtM -0.036%. Long GBPJPY to June IMM; MtM -1.12%.
Short post today for Martin Luther King day. Thoughts still the same. Still looking for the Obamarama-fuelled risk-rally. Still not convinced it's going to happen! To clarify, I believe it will happen at some point but worry that I'm too early...possibly way too early.
Big news today was the continuing collapse of British banks, and particularly RBS. It is surely only a matter of time til it is fully nationalised. And probably the rest of them to follow over the ensuing months.
Unfortunately, this understandable pressure on British banks has brought similiarly understandable focus on the Swiss banks and similiarly the CHF. Unfortunately, we never got on our long USDCHF position - we raise up our bid marginally to around the 1.0800 level awaiting for a bout of USD weakness to get the position on.
Good luck and enjoy Obamarama!
Saturday, 17 January 2009
All the news is so bad
Fund performance: -7.316%
Closed trades: Kospi March future at 148.95. This was a blow - our stop was at 153.00 and we were not expecting over 2.5% slippage but I guess this is always the risk with emerging markets. We're glad we tightened our stop though as it continued much lower.
Dow March future closed at 7979. This was another horrible blow as this was pretty much the exact low - and it was our largest equity position. It's now trading at 8244 and this would have equated to a fund difference of over 3%.
Active trades: Short EURAUD to March IMM; MtM +0.186%. Long FTSE March future; MtM +0.056%. Long SPX March future; MtM +0.276%
Another week of high volatility and terrible news. Banks were getting attacked in every country towards the end of the week. Anglo Irish Bank was nationalised in Ireland. The head of Deutsche collapsed after they announced worse than expected results. Citibank and Bank of America announced worse than expected results as well. There were rumours that Citibank (once the world's largest bank) was to be nationalised this weekend. Trading in Barclay's bank was suspended twice on Friday due to vol breaks as it collapsed so fast. Ending the day down around 30%.
ECB did as expected on Thursday with a 50bps cut. And we did end the day much higher in equities as we expected. But then we dipped right back down, and then higher again, and then right back down and then much higher again (around 6%) before dipping again, before ending Friday evening strongly enough! Crazy volatility for small enough net moves - impossible to hold a position and risk-reward to trading remains low. That said, despite all the horrible news, we take hope from Friday's strong close and are happy to be long equities even if we are gutted at not being longer after being taken out at the lows of the Dow index. In contrast, our stop in the SPX was perfect. We will point to the long-legged doji (a technical candlestick chart formation) formed on Thursday in US equity futures. This is a very bullish signal if confirmed over subsequent days trading. It was not de-confirmed on Friday but we are not yet confident enough to add to our equity positions considering the fund is down money and we are only marginally onside on our current positions. We prefer to add from a position of strength if possible.
What was very interesting is how JPY strength ended on Thursday exactly as expected. We should have listened to ourselves and waited to buy crossJPY on Thursday rather than getting stopped out of our positions from entering too early. However, we will look to re-enter GBPJPY longs on the open on Sunday evening with stops below the all-time lows (now at 128.85).
Monday is a US holiday so there will be reduced liquidity but we are expecting that by Tuesday evening our bullish equity stance will be confirmed and we will probably add to our longs by then - preferablly from a position of greater strength than we are now in. We are becoming more certain that the US will succeed in saving the financial world; the markets will soon start thinking this and becoming more risk-positive; and it will be several months before we start focussing on the much longer-term negative economic consequences for the world and the US in particular. At the moment, US equities are still probably the best bet, but we think in six months time, they may not be a good buy in real terms for many years to come. Can we reiterate that despite our current opportunistic attempt to be bullish, there is no way that the US can come out of this strongly over a longer-term horizon. This current crisis is the beginning of the end for American domination of the world economy and fifty years hence - that will be obvious to Harry Hindsight.
Good luck!
Closed trades: Kospi March future at 148.95. This was a blow - our stop was at 153.00 and we were not expecting over 2.5% slippage but I guess this is always the risk with emerging markets. We're glad we tightened our stop though as it continued much lower.
Dow March future closed at 7979. This was another horrible blow as this was pretty much the exact low - and it was our largest equity position. It's now trading at 8244 and this would have equated to a fund difference of over 3%.
Active trades: Short EURAUD to March IMM; MtM +0.186%. Long FTSE March future; MtM +0.056%. Long SPX March future; MtM +0.276%
Another week of high volatility and terrible news. Banks were getting attacked in every country towards the end of the week. Anglo Irish Bank was nationalised in Ireland. The head of Deutsche collapsed after they announced worse than expected results. Citibank and Bank of America announced worse than expected results as well. There were rumours that Citibank (once the world's largest bank) was to be nationalised this weekend. Trading in Barclay's bank was suspended twice on Friday due to vol breaks as it collapsed so fast. Ending the day down around 30%.
ECB did as expected on Thursday with a 50bps cut. And we did end the day much higher in equities as we expected. But then we dipped right back down, and then higher again, and then right back down and then much higher again (around 6%) before dipping again, before ending Friday evening strongly enough! Crazy volatility for small enough net moves - impossible to hold a position and risk-reward to trading remains low. That said, despite all the horrible news, we take hope from Friday's strong close and are happy to be long equities even if we are gutted at not being longer after being taken out at the lows of the Dow index. In contrast, our stop in the SPX was perfect. We will point to the long-legged doji (a technical candlestick chart formation) formed on Thursday in US equity futures. This is a very bullish signal if confirmed over subsequent days trading. It was not de-confirmed on Friday but we are not yet confident enough to add to our equity positions considering the fund is down money and we are only marginally onside on our current positions. We prefer to add from a position of strength if possible.
What was very interesting is how JPY strength ended on Thursday exactly as expected. We should have listened to ourselves and waited to buy crossJPY on Thursday rather than getting stopped out of our positions from entering too early. However, we will look to re-enter GBPJPY longs on the open on Sunday evening with stops below the all-time lows (now at 128.85).
Monday is a US holiday so there will be reduced liquidity but we are expecting that by Tuesday evening our bullish equity stance will be confirmed and we will probably add to our longs by then - preferablly from a position of greater strength than we are now in. We are becoming more certain that the US will succeed in saving the financial world; the markets will soon start thinking this and becoming more risk-positive; and it will be several months before we start focussing on the much longer-term negative economic consequences for the world and the US in particular. At the moment, US equities are still probably the best bet, but we think in six months time, they may not be a good buy in real terms for many years to come. Can we reiterate that despite our current opportunistic attempt to be bullish, there is no way that the US can come out of this strongly over a longer-term horizon. This current crisis is the beginning of the end for American domination of the world economy and fifty years hence - that will be obvious to Harry Hindsight.
Good luck!
Wednesday, 14 January 2009
US close not promising
As a result, we've tightened up our Kospi stop to above our entry level. We still have about 4% downside risked on our other equity positions which is more than enough given the continued sogginess of risky assets. I'm beginning to think that maybe too many people are thinking like me?
How the mighty have fallen
Fund performance: -4.848%
Closed trades: Stopped out of both my AUDJPY at 58.76 for the March IMM and GBPJPY at 128.88 for the June IMM - frustratingly near the lows in both.
Active trades: Long Kospi March future from 152.00; MtM +0.54%. And short EURAUD for March IMM at 1.9858; MtM -0.25%.
New trades: Long FTSE March future at 4143 - stop approx 2 big figs away risking about 1.5% of our portfolio. Long SPX March future at 840.5 - stop around 810; risking only 1% of our portfolio. Long Dow March future at 8159 with stop a bit less than 2 big figs away - risking nearly 2% of our portfolio.
MCFX had no time to blog yesterday due to an impromptu social engagement. The fund has had a poor week. I have been optimistically awaiting the bear-market rally and to no avail. But I have a confession; I have still not given up that it will happen. Despite being proven wrong for about a week now, our good discipline and close stops have ensured we have not lost too much (considering how leveraged we are!) capital. And interestingly enough, the SPX, Dow and FTSE all traded down towards our target levels after the breakdown on Monday, and yet little further. This gives us confidence that there is still a proper rally in sight - especially given the extremely bearish sentiment in the market. The amount of bad data and Eurozone negative news over last few days has been unbelievable and I think short-term bearish positioning must now be stretched; hence good news will blast us much further to the topside than bad news to the downside. Will there be good news though? My gut feeling is that the ECB will somehow provide it tomorrow when the muppets make their decision. Unfortunately, the same argument works for EUR rallying as well. We can't get much more negativity than we've had over last few days. However, we hope the EUR rally we envision will just give us good selling opportunities rather than following through to our stops as well!
So I'm rebuying stocks here. March futures: see details above. As they say in the market: Strap it on and strap in. We are fighting the trend with a big risk even tomorrow and a highly concentrated and leveraged position. As long as we don't close on the lows tonight, we like the risk-reward.
We must note that unless US equities finish strongly tonight, we suspect our Kospi stop may be vulnerable overnight but we leave the position unchanged.
I'm cancelling my EURNOK bid - will reassess that market when we get closer.
I was gutted by JPY strength - and feel stupid as I knew it would stay strong til Thursday and foolishly fought it. Been burned; lesson learned. I stand aside. However I do note that looking at FX positions traded through the US CFTC (Commodities Futures Trading Commission) that only two speculative positions are very large at the moment: Long JPY and short GBP. Hmmm. We will look to re-enter GBPJPY but have been admonished by our poor timing and wait.
What are my other thoughts?
We are still determined to get some EURUSD and will sell into the rally we expect ahead. Offer now closer to 1.38ish with stop still around 1.44.
At some point, NZD must surely collapse; collapse even further than it did in the latter half of last year. It has a massive current account deficit and the data is just getting worse and worse. We will look to buy GBPNZD at some point.
As for US data over the last two days. Retail sales today was horrible. End of chat. Yesterday's trade balance was much more interesting. The deficit was much less than expected. But exports fell quite a chunk - it was just that imports absolutely and utterly disappeared off the proverbial cliff. So while the US CA deficit may be better and the trade data may also cause GDP to be revised higher, it's being revised higher at the expense of the rest of the world. Imports just get subtracted from GDP numbers to avoid double-counting problems - it's not that less imports is actually a good thing. So this is good for the USD I guess, but very bad for risky assets globally. And particularly the US' trade partners. Canada for example. And funnily enough, Canada's trade surplus came out much much lower than expected at the same time confirming the picture. We will look to buy USDCAD soon.
Finally, how the mighty have fallen. Nortel filed for bankruptcy today. This company is over 120 years old and at one point made up nearly a third of the Canadian equity index. Yesterday it was valued at approx 192 mio CAD. At its peak valuation in 2000, it was valued at...366 bio CAD! Yes...those b's and m's were not typos.
Closed trades: Stopped out of both my AUDJPY at 58.76 for the March IMM and GBPJPY at 128.88 for the June IMM - frustratingly near the lows in both.
Active trades: Long Kospi March future from 152.00; MtM +0.54%. And short EURAUD for March IMM at 1.9858; MtM -0.25%.
New trades: Long FTSE March future at 4143 - stop approx 2 big figs away risking about 1.5% of our portfolio. Long SPX March future at 840.5 - stop around 810; risking only 1% of our portfolio. Long Dow March future at 8159 with stop a bit less than 2 big figs away - risking nearly 2% of our portfolio.
MCFX had no time to blog yesterday due to an impromptu social engagement. The fund has had a poor week. I have been optimistically awaiting the bear-market rally and to no avail. But I have a confession; I have still not given up that it will happen. Despite being proven wrong for about a week now, our good discipline and close stops have ensured we have not lost too much (considering how leveraged we are!) capital. And interestingly enough, the SPX, Dow and FTSE all traded down towards our target levels after the breakdown on Monday, and yet little further. This gives us confidence that there is still a proper rally in sight - especially given the extremely bearish sentiment in the market. The amount of bad data and Eurozone negative news over last few days has been unbelievable and I think short-term bearish positioning must now be stretched; hence good news will blast us much further to the topside than bad news to the downside. Will there be good news though? My gut feeling is that the ECB will somehow provide it tomorrow when the muppets make their decision. Unfortunately, the same argument works for EUR rallying as well. We can't get much more negativity than we've had over last few days. However, we hope the EUR rally we envision will just give us good selling opportunities rather than following through to our stops as well!
So I'm rebuying stocks here. March futures: see details above. As they say in the market: Strap it on and strap in. We are fighting the trend with a big risk even tomorrow and a highly concentrated and leveraged position. As long as we don't close on the lows tonight, we like the risk-reward.
We must note that unless US equities finish strongly tonight, we suspect our Kospi stop may be vulnerable overnight but we leave the position unchanged.
I'm cancelling my EURNOK bid - will reassess that market when we get closer.
I was gutted by JPY strength - and feel stupid as I knew it would stay strong til Thursday and foolishly fought it. Been burned; lesson learned. I stand aside. However I do note that looking at FX positions traded through the US CFTC (Commodities Futures Trading Commission) that only two speculative positions are very large at the moment: Long JPY and short GBP. Hmmm. We will look to re-enter GBPJPY but have been admonished by our poor timing and wait.
What are my other thoughts?
We are still determined to get some EURUSD and will sell into the rally we expect ahead. Offer now closer to 1.38ish with stop still around 1.44.
At some point, NZD must surely collapse; collapse even further than it did in the latter half of last year. It has a massive current account deficit and the data is just getting worse and worse. We will look to buy GBPNZD at some point.
As for US data over the last two days. Retail sales today was horrible. End of chat. Yesterday's trade balance was much more interesting. The deficit was much less than expected. But exports fell quite a chunk - it was just that imports absolutely and utterly disappeared off the proverbial cliff. So while the US CA deficit may be better and the trade data may also cause GDP to be revised higher, it's being revised higher at the expense of the rest of the world. Imports just get subtracted from GDP numbers to avoid double-counting problems - it's not that less imports is actually a good thing. So this is good for the USD I guess, but very bad for risky assets globally. And particularly the US' trade partners. Canada for example. And funnily enough, Canada's trade surplus came out much much lower than expected at the same time confirming the picture. We will look to buy USDCAD soon.
Finally, how the mighty have fallen. Nortel filed for bankruptcy today. This company is over 120 years old and at one point made up nearly a third of the Canadian equity index. Yesterday it was valued at approx 192 mio CAD. At its peak valuation in 2000, it was valued at...366 bio CAD! Yes...those b's and m's were not typos.
Monday, 12 January 2009
Fund performance: -1.58%
Closed trades: Sold Dow March future at 8502 (entered at 8652).
Active trades: Long GBPJPY at 135.68 for val June IMM. Stop around 129.00. MtM: -0.8%
Also long Kospi March future at 152.00 with stop tightened up to 146.00. MtM: -0.12%
And long AUDJPY at 60.86 for val March IMM with stop 2 big figs below (see following post).
Happy Monday!
It has not been so happy a Monday for MCFX. As expected, our Dow position did not survive the open and we note that stocks continue to look soggy. MCFX has low conviction on the market at moment, still believing that most of the short-term bad news has been priced in and also that with liquidity returning to the market, we should soon see the re-emergence of some real money into risky assets. Maybe very slowly and over time, but it will still be a positive force. On the other hand, risk continues to look very soggy. Equities remain offered, emerging markets took a whack today, and the JPY crosses steadily sold off. On the latter, there is apparently 34 bio Euros of bond redemptions and coupon payments due between the 12th and 15th of Jan. Normally, this would not be an issue as most of it just gets rolled down the curve. However, in this environment, investors want their cash back, and since much of that cash comes from Japan, there will continue to be EURJPY offering interest for the rest of this week.
Despite that, MCFX is determined to remain positive and is looking to buy into this risk-dip. I am aware of the potential folly of such a plan but this is a leveraged project targetting incredible returns - not my long-term investment portfolio.
We managed to buy the Kospi March future near the lows last night and tighten up our stop based on the trendline shown below to around 146.00 level - so we are now risking less than 1% on this trade.
So, on the note of optimism, we are going to fight this JPY flow and buy some AUDJPY here at market. Rolling forward to the March IMM date we buy at 60.86 with a stop around 2 big figures lower - risking around 2% of our portfolio on this trade. We would consider going the whole hog and selling some USDZAR here at 10.1100 with stop far away looking for one of those ridiculous ZAR moves that happen more often than they should - but our provider is not providing the liquidity so we move on.
I'd be keen to buy equities in the US and UK again if they fall another 4% - 8% from here but we will reassess the price action as we get closer. At the moment, this period of risk-aversion is very orderly which we like but we will run to the sidelines if that changes.
On our EUR bearishness, and AUD (risk) bullishness, we will look to sell some EURAUD around the 1.9950ish level with a stop around 2.0750.
But we need something on the other side, and NOK seems to be the only thing still appreciating in this world. I agree fundamentals are great in Norway on a longer-term basis but with oil prices heavy, the government selling NOK and association with other scandi lightweights, it might be one to sell against are other risk-positive positions if it continues to stay ahead of the game. On that note, we look to buy EURNOK around 9.2100 level with a stop around 9.0800.
We highlight our low conviction in any trade at this point with fundamentals and technicals often contradicting each other.
Good luck!
Closed trades: Sold Dow March future at 8502 (entered at 8652).
Active trades: Long GBPJPY at 135.68 for val June IMM. Stop around 129.00. MtM: -0.8%
Also long Kospi March future at 152.00 with stop tightened up to 146.00. MtM: -0.12%
And long AUDJPY at 60.86 for val March IMM with stop 2 big figs below (see following post).
Happy Monday!
It has not been so happy a Monday for MCFX. As expected, our Dow position did not survive the open and we note that stocks continue to look soggy. MCFX has low conviction on the market at moment, still believing that most of the short-term bad news has been priced in and also that with liquidity returning to the market, we should soon see the re-emergence of some real money into risky assets. Maybe very slowly and over time, but it will still be a positive force. On the other hand, risk continues to look very soggy. Equities remain offered, emerging markets took a whack today, and the JPY crosses steadily sold off. On the latter, there is apparently 34 bio Euros of bond redemptions and coupon payments due between the 12th and 15th of Jan. Normally, this would not be an issue as most of it just gets rolled down the curve. However, in this environment, investors want their cash back, and since much of that cash comes from Japan, there will continue to be EURJPY offering interest for the rest of this week.
Despite that, MCFX is determined to remain positive and is looking to buy into this risk-dip. I am aware of the potential folly of such a plan but this is a leveraged project targetting incredible returns - not my long-term investment portfolio.
We managed to buy the Kospi March future near the lows last night and tighten up our stop based on the trendline shown below to around 146.00 level - so we are now risking less than 1% on this trade.
So, on the note of optimism, we are going to fight this JPY flow and buy some AUDJPY here at market. Rolling forward to the March IMM date we buy at 60.86 with a stop around 2 big figures lower - risking around 2% of our portfolio on this trade. We would consider going the whole hog and selling some USDZAR here at 10.1100 with stop far away looking for one of those ridiculous ZAR moves that happen more often than they should - but our provider is not providing the liquidity so we move on.
I'd be keen to buy equities in the US and UK again if they fall another 4% - 8% from here but we will reassess the price action as we get closer. At the moment, this period of risk-aversion is very orderly which we like but we will run to the sidelines if that changes.
On our EUR bearishness, and AUD (risk) bullishness, we will look to sell some EURAUD around the 1.9950ish level with a stop around 2.0750.
But we need something on the other side, and NOK seems to be the only thing still appreciating in this world. I agree fundamentals are great in Norway on a longer-term basis but with oil prices heavy, the government selling NOK and association with other scandi lightweights, it might be one to sell against are other risk-positive positions if it continues to stay ahead of the game. On that note, we look to buy EURNOK around 9.2100 level with a stop around 9.0800.
We highlight our low conviction in any trade at this point with fundamentals and technicals often contradicting each other.
Good luck!
Friday, 9 January 2009
Graphs!
Fund performance: +0.052%
Closed trades: Ftse March contract at 4390 - opened at 4388 - those two Ftse points make up the entire contribution to our P/L so far.
Active trades: Just the Dow March contract opened at 8652. Now at 8531 with stop around 8500. MtM, we're down about 1.5% on this trade.
Happy weekend all! So NFP has come and gone. Headline not half as bad as the whisper number which caused risk to rally initially. But as focus narrowed down to the details, the number really wasn't good. More jobs have been lost in the US in the last two months than any other period since September 1945 when the army was largely disbanded after WWII. Unemployment at 7.2% is high, but even higher when you notice the numbers leaving the labour force entirely.
Also hitting stocks was the fact that the home builder Lennar was being accused of off-balance sheet debt and whispers of yet another Ponzi scheme.
Either way, we got stopped out of our Ftse position near the lows - but at least we had no loss on the trade with our stop around our entry level. Not so good is our position in the Dow Jones Index. I'm still optimistic on the arguments to have a major bear-market rally over the next few weeks but the close on Friday is ominous. Technically, we need a good open after the weekend for me to regain any conviction and we do envision our Dow position being stopped out with a loss on Monday.
We have been correct on direction on both the USD and especially the GBP - however still have not got the trade on. We raise up our GBPCHF bid yet again to around the 1.6050 are. We are becoming even more bearish on the EUR than previously as well and are reasonably determined to get some short exposure to it before the ECB meets this week.
Something else on the rader is DKK - Denmark is still ridiculously expensive and uncompetitive while the economy is crashing after having one of the worst housing bubbles in the world. Sounds like Ireland I know, but there is a fundamental difference; Denmark officially has its own currency and control over its own monetary policy - even if both our tied to the Euro. I really think the pressure to de-peg from the Euro will become too much at some point and look for the DKK to devalue by at least 10%, and probably much more. I'm looking to buy some long-dated forward exposure to EURDKK. You also win on this trade if DKK hikes rates aggressively to defend its currency. While I think this is likely to happen at some point, timing is very hard; when its obvious something will happen soon, it will be too expensive to enter the trade. I will wait for a lull and some complacency to get cheaper rates to put this trade on - probably risking a 1% move, looking for a minimum 10% deval.
The long-awaited (and hence very disappointing graphs):
EURGBP has gone too far:
GBP TWI bottoming:
JPY stupid up here:
All-time low in GBPJPY holds:
GBPCHF at all-time lows:
Finally, a legend quote from a great lad:
"Owners of capital will stimulate working class to buy more and
more of expensive goods, houses and technology, pushing them to
take more and more expensive credits, until their debt becomes
unbearable. The unpaid debt will lead to bankruptcy of banks,
which will have to be nationalized, and State will have to take
the road which will eventually lead to communism."
Good luck!
Closed trades: Ftse March contract at 4390 - opened at 4388 - those two Ftse points make up the entire contribution to our P/L so far.
Active trades: Just the Dow March contract opened at 8652. Now at 8531 with stop around 8500. MtM, we're down about 1.5% on this trade.
Happy weekend all! So NFP has come and gone. Headline not half as bad as the whisper number which caused risk to rally initially. But as focus narrowed down to the details, the number really wasn't good. More jobs have been lost in the US in the last two months than any other period since September 1945 when the army was largely disbanded after WWII. Unemployment at 7.2% is high, but even higher when you notice the numbers leaving the labour force entirely.
Also hitting stocks was the fact that the home builder Lennar was being accused of off-balance sheet debt and whispers of yet another Ponzi scheme.
Either way, we got stopped out of our Ftse position near the lows - but at least we had no loss on the trade with our stop around our entry level. Not so good is our position in the Dow Jones Index. I'm still optimistic on the arguments to have a major bear-market rally over the next few weeks but the close on Friday is ominous. Technically, we need a good open after the weekend for me to regain any conviction and we do envision our Dow position being stopped out with a loss on Monday.
We have been correct on direction on both the USD and especially the GBP - however still have not got the trade on. We raise up our GBPCHF bid yet again to around the 1.6050 are. We are becoming even more bearish on the EUR than previously as well and are reasonably determined to get some short exposure to it before the ECB meets this week.
Something else on the rader is DKK - Denmark is still ridiculously expensive and uncompetitive while the economy is crashing after having one of the worst housing bubbles in the world. Sounds like Ireland I know, but there is a fundamental difference; Denmark officially has its own currency and control over its own monetary policy - even if both our tied to the Euro. I really think the pressure to de-peg from the Euro will become too much at some point and look for the DKK to devalue by at least 10%, and probably much more. I'm looking to buy some long-dated forward exposure to EURDKK. You also win on this trade if DKK hikes rates aggressively to defend its currency. While I think this is likely to happen at some point, timing is very hard; when its obvious something will happen soon, it will be too expensive to enter the trade. I will wait for a lull and some complacency to get cheaper rates to put this trade on - probably risking a 1% move, looking for a minimum 10% deval.
The long-awaited (and hence very disappointing graphs):
EURGBP has gone too far:
GBP TWI bottoming:
JPY stupid up here:
All-time low in GBPJPY holds:
GBPCHF at all-time lows:
Finally, a legend quote from a great lad:"Owners of capital will stimulate working class to buy more and
more of expensive goods, houses and technology, pushing them to
take more and more expensive credits, until their debt becomes
unbearable. The unpaid debt will lead to bankruptcy of banks,
which will have to be nationalized, and State will have to take
the road which will eventually lead to communism."
Karl Marx, 1867
Good luck!
Thursday, 8 January 2009
Last update pre-NFP
Current positions:
Long FTSE March future at 4388, stop around 4390.
Long Dow March future at avg of 8652, stop around 8500.
Well, fortunately I added to my Dow futures position as I never got filled on any SPX or Nasdaq (frustrating in case of SPX where the low was below my original bid!). Both bids now cancelled. I still have my Kospi bid waiting though for the dip if there is one.
As I log off for the night, the fund is MTM up over 3% - however I note no profits or losses have yet been booked.
Good luck!
Long FTSE March future at 4388, stop around 4390.
Long Dow March future at avg of 8652, stop around 8500.
Well, fortunately I added to my Dow futures position as I never got filled on any SPX or Nasdaq (frustrating in case of SPX where the low was below my original bid!). Both bids now cancelled. I still have my Kospi bid waiting though for the dip if there is one.
As I log off for the night, the fund is MTM up over 3% - however I note no profits or losses have yet been booked.
Good luck!
Active trades! What a start!
To equities first where the fund is seeing it's first bit of action
Today's price action in the March futures:
SPX500: low was 891.80, my bid was 892, not filled due to bid / offer spread!
Dow Jones: low was 8605, my bid was 8644, active trade!
Nasdaq 100: low was 1222, my bid was 1220, so close!
Ftse: low was 4376.5, my bid was 4388, nice trade!
I am gutted about the SPX and Nasdaq after getting so close and debating whether to chase them. But on the other hand I'm loathe to push too aggressively before NFP's tmrw. Anything could happen and maybe I'm best not to be over-extended in stocks. I have 2 positions; both in the money (one only just and the other one already over 2% in the money). So I have cancelled my bids in the SPX and Nasdaq for now. I'd prefer to have the ammo to add from a position of strength if they continue to go my way tomorrow night.
In fact, I'm so much on side on the FTSE trade already (market trading above 4480 as I write) that I will already tighten my stop to entry level. I like that risk/reward! Slowly, slowly, catchee boatee. And with the fund up just over 2% on mark-to-market, we are exceptionally pleased with ourselves and wish not to go horribly offside on this equity trade. With the Dow future trading around 8660 as I write, we tighten up our stop on this to around 8500 limiting our possible hit to around 0.7%.
The reason I feel comfortable tightening up my stops is that the fact that the lows were so incredibly close to my bid levels in all four cases - this increases my confidence in the technical factors I was relying on. Not only that, but also in all four cases we have now provided the nice confirmatory 3rd touch to uptrendlines from last year's lows. In fact, I'm nearly talking myself into chasing the SPX and Nasdaq. I will see how it trades as I write this post.
For the currencies, the MPC did cut 50bps as expected and sterling ends the day roughly unchanged despite trying much higher. I lower my EURGBP offer again towards the 0.9300 level; keeping my stop constant. I am more certain than ever that GBP has made a low - I must be patient about my entry level though - the time will hopefully come.
We are getting closer to our USD entry levels - perhaps tomorrow's NFP will provide the USD dip.
And between the problems my computer has and the problems I have, I still have not mastered these bloody graphs. So forget them.
I noticed another Ponzi scheme discovered in Ireland today. And another chairman has resigned in India which is a worrying omen. The world is not a happy place at the moment.
Finally, as I was typing this blog, I tried to buy the SPX future at 897 and missed. I will leave the bid there for another hour approx but with stop significantly closer; around 880 - only risking about 1% on this trade. Similiarly on the Nasdaq future, I will leave a bid at 1230 with stop at 1200 risking 1% of my portfolio. Both bids will be reffed around closing time in the US. I don't like chasing a trade but then I do like the argument of buying equities especially now that the technical picture has confirmed my fundamental argument. So much so that I've added to my Dow position at 8659 as well. Again with a stop around 8500.
Maybe I've got carried away with NFP tomorrow. Very leveraged stocks with close stops? Sounds to me like stocks will dip and take me out, and then roar just to teach me a basic trading lesson. Oh well...I must go with what I believe in.
Good luck!
Today's price action in the March futures:
SPX500: low was 891.80, my bid was 892, not filled due to bid / offer spread!
Dow Jones: low was 8605, my bid was 8644, active trade!
Nasdaq 100: low was 1222, my bid was 1220, so close!
Ftse: low was 4376.5, my bid was 4388, nice trade!
I am gutted about the SPX and Nasdaq after getting so close and debating whether to chase them. But on the other hand I'm loathe to push too aggressively before NFP's tmrw. Anything could happen and maybe I'm best not to be over-extended in stocks. I have 2 positions; both in the money (one only just and the other one already over 2% in the money). So I have cancelled my bids in the SPX and Nasdaq for now. I'd prefer to have the ammo to add from a position of strength if they continue to go my way tomorrow night.
In fact, I'm so much on side on the FTSE trade already (market trading above 4480 as I write) that I will already tighten my stop to entry level. I like that risk/reward! Slowly, slowly, catchee boatee. And with the fund up just over 2% on mark-to-market, we are exceptionally pleased with ourselves and wish not to go horribly offside on this equity trade. With the Dow future trading around 8660 as I write, we tighten up our stop on this to around 8500 limiting our possible hit to around 0.7%.
The reason I feel comfortable tightening up my stops is that the fact that the lows were so incredibly close to my bid levels in all four cases - this increases my confidence in the technical factors I was relying on. Not only that, but also in all four cases we have now provided the nice confirmatory 3rd touch to uptrendlines from last year's lows. In fact, I'm nearly talking myself into chasing the SPX and Nasdaq. I will see how it trades as I write this post.
For the currencies, the MPC did cut 50bps as expected and sterling ends the day roughly unchanged despite trying much higher. I lower my EURGBP offer again towards the 0.9300 level; keeping my stop constant. I am more certain than ever that GBP has made a low - I must be patient about my entry level though - the time will hopefully come.
We are getting closer to our USD entry levels - perhaps tomorrow's NFP will provide the USD dip.
And between the problems my computer has and the problems I have, I still have not mastered these bloody graphs. So forget them.
I noticed another Ponzi scheme discovered in Ireland today. And another chairman has resigned in India which is a worrying omen. The world is not a happy place at the moment.
Finally, as I was typing this blog, I tried to buy the SPX future at 897 and missed. I will leave the bid there for another hour approx but with stop significantly closer; around 880 - only risking about 1% on this trade. Similiarly on the Nasdaq future, I will leave a bid at 1230 with stop at 1200 risking 1% of my portfolio. Both bids will be reffed around closing time in the US. I don't like chasing a trade but then I do like the argument of buying equities especially now that the technical picture has confirmed my fundamental argument. So much so that I've added to my Dow position at 8659 as well. Again with a stop around 8500.
Maybe I've got carried away with NFP tomorrow. Very leveraged stocks with close stops? Sounds to me like stocks will dip and take me out, and then roar just to teach me a basic trading lesson. Oh well...I must go with what I believe in.
Good luck!
Wednesday, 7 January 2009
No graphs today, my patience has gone away...
Fraud of the week: Well, given the day, you would think that Mr. Raju, Chairman of Satyam Computer Services, would be a shoe-in. After-all, he did claim his company's cash balance was 53.6 bio Rupees but failed to confess that 50.4 bio of those Rupees were more imaginary than my boat in the Med - a trifling 1575% exxageration!
However, I have to give the award to the Marbella property scam. After arresting an official who earns €150,000 a year, they then managed to find €2.4 bio in assets to confiscate. Impressive. And astonishing.
And yes I am cynical enough to believe we'll have a worthy challenger nearly every week going forward for quite a while - sorry. I believe it was Warren Buffet who said something along the lines of "when the tide goes out, you see who is swimming naked".
I should point out that I have not gone with the emotional blow here - some of my own money is "invested" in an Indian Tech Fund - I don't dare check what percentage was in Satyam but I suspect quite a decent chunk unfortunately.
So today I still have no "active" trades though we are edging ever closer to my equity bids across the board. Today's blog will be mainly used to give more detail behind yesterday's thinking. And a picture is worth a thousand words so it will be largely graphs.
First, my GBP-bullishness; walking home this evening, I noticed the emptiness of McDonald's at 6pm and then read the evening headlines about our crummy rail system messing around thousands of would-be passengers. And I shook my head and muttered "this country really is screwed". So why the GBP bullishness? Well, we know we are screwed. We practically have been celebrating the fact for months now. But as a result, not only are we being one of the most proactive in fighting the problems, it is also all priced in! The rest of the world (as the above frauds testify to) is just as screwed but the UK and the US lead the world in a free press and capitalist markets - both which hasten but shorten the painful cleansing process.
So I remain bullish GBP and in fact tighten up all my entry levels on my GBP trades while keeping the same stops - so size has been reduced. I'm now offering EURGBP around 0.9350 while bidding for GBPJPY and GBPCHF around 136.00 and 1.6025 respectively. Price action is confirming a GBP bottom unless there is a serious run on the currency - something I don't believe in yet. Should I chase it? Or have people just bought GBP after the shadow MPC voted for no rate change tomorrow? I think they cut...probably 50 bps...sterling sells off, we get filled on our bids and then sterling roars for ever after and in one year's time, we are swimming off a beach on the Costa Del Sol? Or have I missed the boat, both literally and figuratively...
Well I had 5 graphs for you under the headings below but IT problems are driving me insane and preventing me pasting my graphs for today. So hopefully tomorrow.
EURGBP has gone too far:
GBP TWI bottoming:
JPY stupid up here:
All-time low in GBPJPY holds:
GBPCHF at all-time lows:
My GBPCHF target is ultimately above 2.0000 at some point later this year. Targetting a 25% move may seem crazily ambitious but bear in mind we were there in October!
Finally, I am becoming more and more convinced that equities are set for a bear-market roar. Bad data doesn't whack them down any more - everyone is expecting the data to be rubbish first half of this year. What will cause stocks to test the lows again? Either another major wave of deleveraging or the sudden realisation that the we may only be in the early stages of the economic slowdown; not on the way out.
With Obama's inauguration and fiscal stimulus in the weeks ahead, there will be a feel-good vibe. Credit should perform well for another few weeks. The new year's supply will only start hitting next week and the market should be able to soak it up for a week or two. With so many funds overweight cash and with the new year and new money to be allocated, we could easily get another 20% - 25% rally in equities from here.
I'm looking for nervousness ahead of the NFP number on Friday to weigh on the market sufficient for my bids to be filled and I think post the number, equities rally regardless - the whisper number for Friday is already very scary.
I'm looking to add a position in the Kospi (the Korean index) to my portfolio if it dips far enough over next two days; looking to buy the March contract around the 152 level with a stop at 140, targetting a move towards 190.
In summary, I'm looking to enter 10 different trades at the moment (3 GBP, 2 USD and 5 equity trades). Maximum amount risked on any trade is 2% of total capital allowing for slippage - i've actually reduced to around 1.5% for some of them. If all trades get entered and fail, total portfolio loss will be around 17.5%.
Good luck! And this stupid blog is confirming my incredible ignorance when it comes to bloody computers - endless problems for half an hour of writing...
However, I have to give the award to the Marbella property scam. After arresting an official who earns €150,000 a year, they then managed to find €2.4 bio in assets to confiscate. Impressive. And astonishing.
And yes I am cynical enough to believe we'll have a worthy challenger nearly every week going forward for quite a while - sorry. I believe it was Warren Buffet who said something along the lines of "when the tide goes out, you see who is swimming naked".
I should point out that I have not gone with the emotional blow here - some of my own money is "invested" in an Indian Tech Fund - I don't dare check what percentage was in Satyam but I suspect quite a decent chunk unfortunately.
So today I still have no "active" trades though we are edging ever closer to my equity bids across the board. Today's blog will be mainly used to give more detail behind yesterday's thinking. And a picture is worth a thousand words so it will be largely graphs.
First, my GBP-bullishness; walking home this evening, I noticed the emptiness of McDonald's at 6pm and then read the evening headlines about our crummy rail system messing around thousands of would-be passengers. And I shook my head and muttered "this country really is screwed". So why the GBP bullishness? Well, we know we are screwed. We practically have been celebrating the fact for months now. But as a result, not only are we being one of the most proactive in fighting the problems, it is also all priced in! The rest of the world (as the above frauds testify to) is just as screwed but the UK and the US lead the world in a free press and capitalist markets - both which hasten but shorten the painful cleansing process.
So I remain bullish GBP and in fact tighten up all my entry levels on my GBP trades while keeping the same stops - so size has been reduced. I'm now offering EURGBP around 0.9350 while bidding for GBPJPY and GBPCHF around 136.00 and 1.6025 respectively. Price action is confirming a GBP bottom unless there is a serious run on the currency - something I don't believe in yet. Should I chase it? Or have people just bought GBP after the shadow MPC voted for no rate change tomorrow? I think they cut...probably 50 bps...sterling sells off, we get filled on our bids and then sterling roars for ever after and in one year's time, we are swimming off a beach on the Costa Del Sol? Or have I missed the boat, both literally and figuratively...
Well I had 5 graphs for you under the headings below but IT problems are driving me insane and preventing me pasting my graphs for today. So hopefully tomorrow.
EURGBP has gone too far:
GBP TWI bottoming:
JPY stupid up here:
All-time low in GBPJPY holds:
GBPCHF at all-time lows:
My GBPCHF target is ultimately above 2.0000 at some point later this year. Targetting a 25% move may seem crazily ambitious but bear in mind we were there in October!
Finally, I am becoming more and more convinced that equities are set for a bear-market roar. Bad data doesn't whack them down any more - everyone is expecting the data to be rubbish first half of this year. What will cause stocks to test the lows again? Either another major wave of deleveraging or the sudden realisation that the we may only be in the early stages of the economic slowdown; not on the way out.
With Obama's inauguration and fiscal stimulus in the weeks ahead, there will be a feel-good vibe. Credit should perform well for another few weeks. The new year's supply will only start hitting next week and the market should be able to soak it up for a week or two. With so many funds overweight cash and with the new year and new money to be allocated, we could easily get another 20% - 25% rally in equities from here.
I'm looking for nervousness ahead of the NFP number on Friday to weigh on the market sufficient for my bids to be filled and I think post the number, equities rally regardless - the whisper number for Friday is already very scary.
I'm looking to add a position in the Kospi (the Korean index) to my portfolio if it dips far enough over next two days; looking to buy the March contract around the 152 level with a stop at 140, targetting a move towards 190.
In summary, I'm looking to enter 10 different trades at the moment (3 GBP, 2 USD and 5 equity trades). Maximum amount risked on any trade is 2% of total capital allowing for slippage - i've actually reduced to around 1.5% for some of them. If all trades get entered and fail, total portfolio loss will be around 17.5%.
Good luck!
Tuesday, 6 January 2009
Humble beginnings for a Grandiose Plan
Hello! And welcome...to what I hope shall prove to be, over time, a blog that is both entertaining and profitable to my readers - if I ever gain any.
The aim: Basically, to prove that it is possible to make a living trading on your own account using common multi-asset class internet trading portals. I'm a macro trader and my main asset focus will be FX, with a sprinkling of equity indices and commodities thrown in. Nothing exotic or complicated.
My background: I have been trading on a largely professional basis since 2003 - not a very long career relative to any great trader but long enough to have experienced several traumatic events and made many many mistakes. It's not that I now think I know it all but that I believe the next step in my learning curve is to expose my thinking to the critical public. I am still in a trading seat - if I'd been an instant trading legend or even ridiculously lucky, I would instead be on my (imaginary) speedboat in the Med - maybe that will be the outcome in a year's time.
My method: I will endeavour to explain my thinking as much as possible - and highlight entry, target and approx stop-levels in advance. On the off chance I gain some interest and following, I will not give exact stop levels for a trade but the approximate level - call it trader's paranoia. My overall logic is very macro but I will be focussed on technicals for timing - something that is key on a leveraged account. I would prefer to miss a trade than enter a poor trade. My general rule will be to only enter trades that provide a reward to risk ratio of at least 3 to 1 (though all rules made to be broken). Any web-based trading or spread-betting portal that enables leverage shall suffice (though my advice would be that spread-betting providers give the advantage of being tax-free if you ever achieve the holy grail of being profitable). Let us assume that I have a portfolio size of "x" - 100% of "x" would provide me an enjoyable living for a year, annual returns of 200% of "x" would make me extremely happy (or happier to be correct!) and maybe even provide real outlines to my speedboat. To start with, all trades will risk roughly 2% unless specified - giving me 50 failed shots without a hit before I'm done.
So: The plan was to run this blog in line with the calendar year but circumstances have delayed this opening post - this is no problem however as I would have entered no trades yet anyways wanting to assess the year's opening price-action and await for decent liquidity to return to markets - unfortunately I fear the latter issue may be something I am waiting in vain for so will carry on regardless. The volatility already seen in currency markets in the first few days of 2009 has been scary - in the future, I will provide more facts / statistics to make my point but this post is already long and only just starting. Today will skim over my views without detail.
What will be my opening trades?
Well, the circumstances that delayed the start of my blogging career were good ones - I was skiing in France. Wonderful as that was, I won't dwell on it. As a London-based trader, what I could not help focussing on for the whole trip was how expensive Europe now is for us Londoners. EURGBP has gone too far - end of chat (there are endless anecdotes involving Irish in Northern Ireland and French in the UK - no need to repeat here). Now, this doesn't mean it can't go much further, as the oft-quoted Keynes says: "The market can stay irrational longer than you can stay solvent."
However, the first few days price-action of the New Year seem to imply a bottom is finally in place for GBP - and in fact we have rallied very hard already against the currencies I most want to buy it against. What are these currencies?
Well my GBP-bullishness is longer-term. I know the UK has problems; in fact it has endless problems; but we all know that - they are the most-publicised and hyped and mis-quoted problems in the world (I think). GBP has priced it all in...and more. Everywhere has problems. The UK (like the US - more below) is just ahead of the curve in dealing with these problems since they were unhideably (not a real word I know!) big.
And longer-term, I think EUR is absolutely screwed. I won't get carried away today but I think Trichet has got it horribly wrong - I want to call him an idiot but he's just too damn articulate to allow me to. In the worst case scenario, EUR will break-up (perhaps led by Ireland devaluing / pulling-out / being kicked out). And they are very much behind the curve. So fine, they are not printing cash yet like everyone else and they are maintaining higher rates - but at some point their ostrich-like behaviour will end, and they will suffer (regrettably) for so much longer due to socialist and out-dated labour laws througout Europe. I'm tempted to agree with Milton Friedman that the Euro will not survive its first recession. I'm looking to sell EURGBP around 0.9400 with stop around 0.9700, risking 3 big figs and looking for the pair to eventually absolutely collapse. If it goes through 0.9700, the pair will surely not only retest the highs, but also break parity and I will get better levels to re-enter.
Longer-term, Japan is bankrupt. I know it benefits during deleveraging. And I'm sure there is much more deleveraging to come in the future. But JPY is stupid up here. Japan has terrible demographics, a pension system it can't afford, no resources and is too expensive. I don't like selling it against anything else yet but GBP has taken the pain and most importantly, the all-time low in GBPJPY at 129.35ish (from 1994) has held perfectly. A double-bottom and a strong bounce - I like. Too strong in fact, and I will wait for a move back towards 134ish level before I buy with a stop below that all-time low. Over the next 10 years, GBPJPY is going to 550 at some point! I will be looking to catch most of that move over the coming years and will job it about appropriately. I'm hoping that at some point the Japanese MoF might intervene to protect my downside but no sign so far.
Finally: CHF. Switzerland has always been expensive. But that's not the reason I particularly hate the currency now. CHF is doomed. Of what FX traders call G10 currencies, Switzerland is the most dependant on exports. In a world where global trade is collapsing. And what do they export? Financial services and watches. The former aren't too popular at the moment, and no-one can afford the latter. Ok, so chocolate is recession-proof but that's a bit-part. Not only that, but it is a bit like Iceland in that Switzerland has no hope of bailing out its two main banks if they get in trouble - and I think all banks are in trouble (for a later post). Ok, so it's not quite as bad as Iceland, but relative to FX reserves, there is still a lot of bank leverage and a lot of private-sector debt. At some point, the cows will come home to roost (in this topsy-turvy world). Also, I think the private-wealth arm of Switzerland will take a major beating. I wonder how many more Madoff-like frauds will be uncovered in the year ahead...and Swiss-managed money will have exposure to all of them (even if nothing shall hopefully compare in scale!). GBPCHF is at all time lows. I'm looking to buy around 1.5900 with a stop around 1.5350 - will discuss targets in the future but roughly 15 - 20 big figs higher will do for a start! If it goes through 1.5350, it means new lows will be forged as GBP will surely be going through a further bashing.
What else do I like? USD. Simply put: it is not quantitive easing until it works, i.e. until the velocity of money picks up - and that is still collapsing. And there is much more deleveraging to come and USD remains the world's reserve currency. I love USD for a few months at least! Obama will provide a stupidly big stimulus, everyone will rightly want to be long US stocks against other shorts and money will poor in. Until quantitive easing kicks in - then we'll reassess. But we'll wait til we're sure that deflation has been beaten before jumping on that bandwagon. I'm looking for a small dip in USD to sell EURUSD around 1.3900 level with a stop around 1.4400. And in USDCHF, I'm looking to buy around 1.0750ish with a stop around 1.0350. I think USD will break the 2008 highs against both at some point in the months ahead.
Finally, and hurriedly, as this first post is too mammoth, I'm buying stocks. I'm risking 2% each on the SPX, Dow Jones Index, Nasdaq 100 and FTSE. I do believe that new money being put to work will sustain for a few weeks. I'm looking to buy the March contract in each at roughly 890, 8650, 1215 and 4380 respectively. With stops around 850, 8300, 1150 and 4300 respectively. These stops should provide adequate room to cope with random noise-based volatility. I hope. Levels were largely based on Fib-retracements, trendlines and recent lows - no time for detail now.
And that's it for the first blog. I hope further ones will be shorter and more interesting. Good luck to me - and good luck to you if you ever follow this post in the future. Bring it on!
The aim: Basically, to prove that it is possible to make a living trading on your own account using common multi-asset class internet trading portals. I'm a macro trader and my main asset focus will be FX, with a sprinkling of equity indices and commodities thrown in. Nothing exotic or complicated.
My background: I have been trading on a largely professional basis since 2003 - not a very long career relative to any great trader but long enough to have experienced several traumatic events and made many many mistakes. It's not that I now think I know it all but that I believe the next step in my learning curve is to expose my thinking to the critical public. I am still in a trading seat - if I'd been an instant trading legend or even ridiculously lucky, I would instead be on my (imaginary) speedboat in the Med - maybe that will be the outcome in a year's time.
My method: I will endeavour to explain my thinking as much as possible - and highlight entry, target and approx stop-levels in advance. On the off chance I gain some interest and following, I will not give exact stop levels for a trade but the approximate level - call it trader's paranoia. My overall logic is very macro but I will be focussed on technicals for timing - something that is key on a leveraged account. I would prefer to miss a trade than enter a poor trade. My general rule will be to only enter trades that provide a reward to risk ratio of at least 3 to 1 (though all rules made to be broken). Any web-based trading or spread-betting portal that enables leverage shall suffice (though my advice would be that spread-betting providers give the advantage of being tax-free if you ever achieve the holy grail of being profitable). Let us assume that I have a portfolio size of "x" - 100% of "x" would provide me an enjoyable living for a year, annual returns of 200% of "x" would make me extremely happy (or happier to be correct!) and maybe even provide real outlines to my speedboat. To start with, all trades will risk roughly 2% unless specified - giving me 50 failed shots without a hit before I'm done.
So: The plan was to run this blog in line with the calendar year but circumstances have delayed this opening post - this is no problem however as I would have entered no trades yet anyways wanting to assess the year's opening price-action and await for decent liquidity to return to markets - unfortunately I fear the latter issue may be something I am waiting in vain for so will carry on regardless. The volatility already seen in currency markets in the first few days of 2009 has been scary - in the future, I will provide more facts / statistics to make my point but this post is already long and only just starting. Today will skim over my views without detail.
What will be my opening trades?
Well, the circumstances that delayed the start of my blogging career were good ones - I was skiing in France. Wonderful as that was, I won't dwell on it. As a London-based trader, what I could not help focussing on for the whole trip was how expensive Europe now is for us Londoners. EURGBP has gone too far - end of chat (there are endless anecdotes involving Irish in Northern Ireland and French in the UK - no need to repeat here). Now, this doesn't mean it can't go much further, as the oft-quoted Keynes says: "The market can stay irrational longer than you can stay solvent."
However, the first few days price-action of the New Year seem to imply a bottom is finally in place for GBP - and in fact we have rallied very hard already against the currencies I most want to buy it against. What are these currencies?
Well my GBP-bullishness is longer-term. I know the UK has problems; in fact it has endless problems; but we all know that - they are the most-publicised and hyped and mis-quoted problems in the world (I think). GBP has priced it all in...and more. Everywhere has problems. The UK (like the US - more below) is just ahead of the curve in dealing with these problems since they were unhideably (not a real word I know!) big.
And longer-term, I think EUR is absolutely screwed. I won't get carried away today but I think Trichet has got it horribly wrong - I want to call him an idiot but he's just too damn articulate to allow me to. In the worst case scenario, EUR will break-up (perhaps led by Ireland devaluing / pulling-out / being kicked out). And they are very much behind the curve. So fine, they are not printing cash yet like everyone else and they are maintaining higher rates - but at some point their ostrich-like behaviour will end, and they will suffer (regrettably) for so much longer due to socialist and out-dated labour laws througout Europe. I'm tempted to agree with Milton Friedman that the Euro will not survive its first recession. I'm looking to sell EURGBP around 0.9400 with stop around 0.9700, risking 3 big figs and looking for the pair to eventually absolutely collapse. If it goes through 0.9700, the pair will surely not only retest the highs, but also break parity and I will get better levels to re-enter.
Longer-term, Japan is bankrupt. I know it benefits during deleveraging. And I'm sure there is much more deleveraging to come in the future. But JPY is stupid up here. Japan has terrible demographics, a pension system it can't afford, no resources and is too expensive. I don't like selling it against anything else yet but GBP has taken the pain and most importantly, the all-time low in GBPJPY at 129.35ish (from 1994) has held perfectly. A double-bottom and a strong bounce - I like. Too strong in fact, and I will wait for a move back towards 134ish level before I buy with a stop below that all-time low. Over the next 10 years, GBPJPY is going to 550 at some point! I will be looking to catch most of that move over the coming years and will job it about appropriately. I'm hoping that at some point the Japanese MoF might intervene to protect my downside but no sign so far.
Finally: CHF. Switzerland has always been expensive. But that's not the reason I particularly hate the currency now. CHF is doomed. Of what FX traders call G10 currencies, Switzerland is the most dependant on exports. In a world where global trade is collapsing. And what do they export? Financial services and watches. The former aren't too popular at the moment, and no-one can afford the latter. Ok, so chocolate is recession-proof but that's a bit-part. Not only that, but it is a bit like Iceland in that Switzerland has no hope of bailing out its two main banks if they get in trouble - and I think all banks are in trouble (for a later post). Ok, so it's not quite as bad as Iceland, but relative to FX reserves, there is still a lot of bank leverage and a lot of private-sector debt. At some point, the cows will come home to roost (in this topsy-turvy world). Also, I think the private-wealth arm of Switzerland will take a major beating. I wonder how many more Madoff-like frauds will be uncovered in the year ahead...and Swiss-managed money will have exposure to all of them (even if nothing shall hopefully compare in scale!). GBPCHF is at all time lows. I'm looking to buy around 1.5900 with a stop around 1.5350 - will discuss targets in the future but roughly 15 - 20 big figs higher will do for a start! If it goes through 1.5350, it means new lows will be forged as GBP will surely be going through a further bashing.
What else do I like? USD. Simply put: it is not quantitive easing until it works, i.e. until the velocity of money picks up - and that is still collapsing. And there is much more deleveraging to come and USD remains the world's reserve currency. I love USD for a few months at least! Obama will provide a stupidly big stimulus, everyone will rightly want to be long US stocks against other shorts and money will poor in. Until quantitive easing kicks in - then we'll reassess. But we'll wait til we're sure that deflation has been beaten before jumping on that bandwagon. I'm looking for a small dip in USD to sell EURUSD around 1.3900 level with a stop around 1.4400. And in USDCHF, I'm looking to buy around 1.0750ish with a stop around 1.0350. I think USD will break the 2008 highs against both at some point in the months ahead.
Finally, and hurriedly, as this first post is too mammoth, I'm buying stocks. I'm risking 2% each on the SPX, Dow Jones Index, Nasdaq 100 and FTSE. I do believe that new money being put to work will sustain for a few weeks. I'm looking to buy the March contract in each at roughly 890, 8650, 1215 and 4380 respectively. With stops around 850, 8300, 1150 and 4300 respectively. These stops should provide adequate room to cope with random noise-based volatility. I hope. Levels were largely based on Fib-retracements, trendlines and recent lows - no time for detail now.
And that's it for the first blog. I hope further ones will be shorter and more interesting. Good luck to me - and good luck to you if you ever follow this post in the future. Bring it on!
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