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.