I have a stack as high as me of reports I’d like to run through but I’m afraid the weekend will have to be the time to run through all the positional changes, top down perspectives as well as technical strategy and near term tactics. The markets are moving and price trends are finally providing clear confirmation on both near term and now medium term charts of the what the technical indicators have been suggesting for some time.
There was no excuse not to position for this move. How far she runs on I cannot say as yet. UBS cyclical models suggest a big bounce into the summer shortly, so long as their key levels hold. I have no such expectation. Its certainly possible of course and policy action by the ECB or BOC could well drive that move but its also very possible to me that we have already seen the year’s high in many indexes!
Seasonality wise we are getting close to the end of the tail winds and fast approaching the seasonal headwinds.
I’ll save more comment for the weekend. The wild cards at present are 1) the US$ index which is at or close to key supports (I’m long US$ here) and alongside this 2) the bond markets & 3) the commodity asset markets ( I remain long oil (not a high conviction yet), with good profit and long the bullion, expecting the commodity index 200dma to soon give way to the upside. Gold and silver are lagging the cci but this is a mis price opportunity in my view. The 200 dma on gold, around the $1500 mark, is likely to be revisited soon which would be a decent trading move.
These three are the wild card major asset markets in my mind which i don’t have as higher conviction level as on the equity weakness moves.
Nikkie and JPY wise my positions have played out to the letter from the end of last week. Short the Nikkie from 15000 and short the JPY from the 1.04 level. Both levels held and the move has been hard and fast since. The Nikkei stands at the key support here and so some chop to catch those late to the trade could well occur but the level looks in great danger to me, to the downside.
Trading practice comment.
Option puts were indeed the low stress way to play this from a hedge or out right short perspective. They allow you the trader to stand back and play technical weakness issues and indicators with a limited downside without the margin implications of using futures contracts. They are the perfect hedging vehicle for large books of assets. Occasionally they provide asymmetric returns but that is very much a professional strategy and very easy for non professionals to lose capital on. Given the contango in US index futures short selling index etfs have also been a reasonable way to play for weakness. The dividend yield on US index etfs like the nq is nearly zero and much less than the contango in futures lots. Your account is also cash credited if you sell short these instruments. As a general comment private investors dwell on entry techniques. They forget to invest some time to instruments and this is a great error. Different market tools exist for a reason. The reason is that each tool has a purpose and special function. Matching the correct tool to the correct moment in the market is a part of the discipline of investing and trading. I’d suggest devoting some time to this instrument issue if you lack knowledge currently.
I wonder if our Italian reader’s took some profit on the ftse mib index? In hindsight, it was timely call to take profit on that index.
To the latest AG report with the title line “timber” which, for equities, at least, is a good line to steal.
More over the weekend.
All the best
Rich