5000 Trades

ASX, will it finally break the 4300?

2012-02-08T17:20:00.000+11:00

- RBA kept rates on hold, saw the AUDUSD cross rates surge above 1.08.
- Bernanke spoke again last night, not ruling out a possibility for another stimulus, saying that monetary policy is lagging, and with a caveat, that employment factors are now shifting towards competitive issues globally. Gold spikes higher, USD falls, whilst sp500 recovers into the green, to close up slightly for the session.
- Greece seems closer to a deal, although it's been lagging, the EURUSD spike and hold above 1.32 shows that speculations about an agreement are in place - now we may see some short covering which could easily take eurusd to 1.34.
- I added AIG, WYNN to my portfolio, and very leveraged into this current rally - there just doesn't seem to be any corrections >1%, so the risks still seem skewed to the upside despite the rally - every leading stock seems to be acting well, and price action in many stocks are forming bottoms and breaking out of their range.

Another Green Day, Strength on Strength

2012-02-02T17:23:00.001+11:00

Last night we saw prices up again, with adp payrolls not doing so well, but showing improvement in private sectors sales.

We saw China PMI doing better than expected, and US PMI also showing improvements (http://www.calculatedriskblog.com/2012/02/ism-manufacturing-index-indicates.html)

ASX equity prices are still lagging - the notable big names BHP, RIO, WPL etc are recovering a lot of lost ground from 4qtr last year, we should see a lift from the materials sector for the remainder of the quarter easy momentum.

AMZN came in with a earnings report that came in significantly worse than expected - but the killer was probably modest guidance going forward - some positives were that margins were somewhat better - although still very very low - and we saw some strong buying at 175 to close at 179.

My natural Gas position is bleeding, as we are seeing a retest of the recent multi-year lows. I just realised an issue that I had long known about, but have never thought would impact ETFs - that of contango - right now the contango on UNG is 7-8% - The case of where contango gets higher the lower the underlying price gets - and this ETF position is going to really hurt, unless we see a continued bounce in prices - I am thinking of switching the position I hold to UNL - which will suffer from less contango as it spreads its futures exposures across the maturity curve. I guess the CFA course does give you some practical applications after all.
http://vixandmore.blogspot.com.au/2008/07/natural-gas-implied-volatility-spiking.html

UNG - Natural Gas - Is the Bottom Finally In?

2012-02-01T07:26:00.000+11:00

Natural Gas has suffered from a vicious bear market, and in recent days, I've seen a nice spike from the multi year lows that was last experienced in 2009. Price seems very close to the bottom, and we may see an easy recovery back to 4.00 - given how risk is behaving in recent weeks.

The position I am taking is through the ETF - UNG - $5.44 - with stop at 5.00 - and scaling in the trade for a hold for at least a quarter - this is more of a medium term trade.

Market is Strong like an Oxe - Buy the Dips

2012-01-25T17:16:00.000+11:00

Apple come in with a record breaking revenue qtr, the numbers are truly incredulous, the second highest ever reported earnings since exxon - http://www.splatf.com/2012/01/apple-1q12-charts/
I do see some weakness in the next 12 months as we see a lot of the sales have come from iphones and ipads - an increasingly competitive space. However, even leading up to the earnings report, it was trading at cheap multiples, so it still would be risky to ever short Apple.

Greece may be put on 'selective default' by the SP - not sure what they really means, but the indices still remain resilient coming off their 1% sell-offs to close down 0.2%. German PMI was also better as we see manufacturing data improving in all regions. However, we got to remember that the market has been seeing lower yields across europe, all back to normalise levels as we see a sharp relaxation of European financial risk.

However IMF trimmed global growth estimates from 4% to 3.3% in 2012 - citing europe as the main headwind.

Australia's domestic data seems good from the PPI front - low inflation does leave a possibility of a rate hike in the first qtr. Given the latest employment report ticking to the downside, as it posted the weakest growth since 1992.

Price action has been strong and long this January with markets being up 10/12 sessions, and buying on each weak open as seen a good prospect for the year going forward.
The allocation attention is now moving towards the cyclical stocks - as it's become clear that market prices has clearly lagged improving data; given the strong AUD and prospects of strong cyclical recovery in the US - it may be time to start allocating some of my AUD $ into US equities. I already hold AMZN, GS, ATVI - will probably look to add a few more over the next few weeks.

Risk Markets and Decorrelation from the EURO?

2012-01-17T13:25:00.000+11:00

Past few sessions has seen the EURO lingering - the downgrades seem to have a muted effect on equity markets, as it was projected a long time ago.

Seen a lot of pundits come on the record to say the Euro is going lower, but at 1.26 - 1.27 seems to have some strong support - my position got stopped out, and I will concentrate on my equity long positions before I can take another stab at this.

Oil and Gold both seem to be going higher after some consolidation in oil the past few days, might see the price remain above 100 over the next few weeks - and Gold after freaking out a lot of the short term traders, seems poised for another run at 1800 - I am heavily betting on the gold miners making a strong comeback this year.

Despite the china slowdown, I just can't see the major commodity producers going much lower this year, given how low the prices are. FMG came in with production numbers better than expected 19% lift over the qtr, and China topping 8.9% gdp better than the expected 8.7%.

It's only a matter of time before the euro mess becomes a moot point for the rest of the world, and we see higher prices in risk assets.

Amazon and it's Next Big Move coming up this Earnings Season

2012-01-13T02:00:00.001+11:00

I already have a small feeler stake in Amazon - but now with the earnings profile coming out in the last week of January - We are starting to see the volume pick up in this name.

The importance of this earnings figure is based on it's latest Kindle Fire coming into market in the past few weeks in the US - and how this will be impacted across it's bottom line in terms of cost per unit and how much impact it's had on it's digital listings.

Anytime a new questionably low margin product comes to market - especially when it's hardware and there's been much $ thrown into the equation - we're going to see some price volatility post the first iteration of it's sales in the market - how the analysts will dissect the numbers and consequently how the traders will trade the number will be very interesting.

My personal bias is that you're going to see minimal addition to bottom line results, but obviously a boost in topline numbers - we're going to see how much capex has gone into developing this product. However the key is looking at the sales in its digital base - and if this has responded significantly then we may see some hardcore buying in this name.

I've set up the position by entering long calls at 180, and long puts at 175 - setting up a strangle to profit from a this price volatility in the coming weeks.

Trade 1272: Euro Making a Stand?

2012-01-10T16:19:00.001+11:00

First Trade of 2012, I'm betting on a EuroUSD price rebound.

We are playing off the breakout on the 10 minute 1.278, and a HS pattern on the hourly. The risk in this trade is that it's happening pre-euro markets, which always shows some head fakes, however, recent risk-on action in the sp500, and decent economic data, may be just enough headwind to nudge this crapshoot currency back to 1.3.

Bullish Signals

2012-01-06T14:24:00.002+11:00

Sp500 saw a huge upswing from the first trading day of the year, with the last 2 days seeing some digestion of the bullish sentiment, which positions us for a swing higher - some indicators are improving economics in the US and not so bad ISM from china.

adp number increasing much better than the 160k expected- http://www.calculatedriskblog.com/2012/01/adp-private-employment-increased-325000.html

sentiment getting bullish - http://www.robertsinn.com/2012/01/05/sentiment-turns-highly-bullish/

ISM numbers 52.6 in line- http://www.calculatedriskblog.com/2012/01/ism-non-manufacturing-index-indicates.html

bond market may offer clues of next upswing in equities - http://www.tylerstrading.com/bonds-approaching-critical-juncture/

equities 50ma - golden cross bullish - http://www.investmentpostcards.com/2012/01/05/dow-rings-in-2012-with-a-golden-cross/

ECB news.. again - this time Refinancing

2011-12-22T15:36:00.001+11:00

Euro news continues to dominate the headlines, even in the current illiquid trading markets.

Last night we saw futures higher on the ECB's LTRO which brought in 3 yr auction of E489bn - which is a positive for the financing issues for all the major financial institutions. However, the market as volatile has either priced in the news (2 nights ago) or there's just no direction from this headline at the moment whilst the major players are now on holidays.

The US housing data on Monday re-iterates the continuing trend in improving economic situation out of the US - this combined with the fact that the USD is the safe haven has seen both the sp500 outperform emerging markets.

Gold has been a huge target of profit taking and selling and partly to the stronger USD - however the past 3 years has seen 20% + returns in 2009/10 and 10% returns this year - the trend of Gold prices may remain given the liquidity that is still being pumped into the global economy.

Market prices have been volatile within the ranges - the sp500 continues to hold above 1200 and the emerging markets continue to drift lower - I see that sector themes and pair trading will be a key strategy to focus on in 1Qtr 2012.
Financials should perform and take the lead in asset prices if the euro situation starts to show more positive sentiment from the media community - and commodities should follow suit as demand picks up globally.

Geopolitical issues will remain in 2012 - with some notabls - N.Korea's new leader Kim Jong-Un, Conflict with Iran, Iraq civil war possibilities, Russian Election uncertainties.

Progress of Euro Zone Meetings

2011-12-09T16:01:00.001+11:00

Source: Euro Zone Meetings In 2011
Reuters, December 2011

They've hemmed and hawed, made many public announcements, but each time the market has continued it's downward path... will tonight's announcement be a strong enough catalyst for a reversal?

Setting up pre-ECB meet

2011-12-08T17:59:00.001+11:00

Market thinks that EU interest rate cuts are likely - whether we'll see 1% or something smaller is probably what we want to clarify - and the obvious accompanying statement.

The market seems dead quiet in terms of price action, and the Euro is now trading in a very tight range, a triangle consolidation breakout could lead to a nice strong move. I have a bias to the upside, but I've put buys stops at 1.34214 and sell stops at 1.33881 and we'll take whichever move as long as it's a strong impulse.

Italy Annouces Austerity

2011-12-05T20:51:00.001+11:00

Monti unveiled a 30bn euro package of austerity. Increasing value added tax, property tax, raising the pension age. Mainly 20 bn euros of budgest measures over 2012-14 and futher 10bn in measures to boost growth.

The euro rallied 50 pips on the open - but retraced fairly quickly to close the gap at 1.34 and I got set with some longs at 1.3418 (trade 1258).

The asia trade was fairly muted, but we're currently trying to break out to new highs above 1.344.

The main level in the coming week will be 1.354 - and this may be breached if the EU summit is positive - one headwind we face is the possible ECB rate cut - which will make the currency fundamentally cheaper - however, it's obvious that the macro factors have a much greater weighing on the direction of how the euro will trade in the short term.

The target for this breakout if it occurs 1.354 - (1.354 - 1.336) = 1.372

Fed, ECB, Canada, Japan, England, Swiss in Joint Action

2011-12-01T01:05:00.001+11:00

The sp500 futures are rallying 3% on the back of co-ordinated action to keep the commercial banks in play - right now sovereigns have been destroying financial market confidence and raising borrowing costs to unsustainable levels.

This move is a prelude to both the global policy tools that are available, but there is no way that this move could've been priced in (not many precendents) - this predicates a large upside bias, we are going to take weeks to adjust to the reality that the Bernanke put that exists for U.S equities, also exists on the global scale.

The bottom is most definitely in - but I'm fairly certain we'll see a huge upswing into the year end. What's going to happen in the 2nd qtr of next year is anyone's guess, but for the time being, there's only way way to trade - and that's with the upside bias.

Futures up, Gold back above 1700

2011-11-28T15:03:00.001+11:00

Haven't taken any positions for the week, still have a few equity longs that I'll see if the green continues. Saw this great article from the aleph blog..

When you see an odd opinion

from The Aleph Blog by David Merkel

I find commentary regarding open vs. closed minds to be vapid. For example, I saw this tweet:

Inspired_Ones Inspiration!!!
Minds are like parachutes – they only function when open. -Thomas Dewar

I responded with this:

AlephBlog David Merkel

‘ @Inspired_Ones Minds are like castles under attack; they function well when the drawbridge is up, moat full, & the defenders are ready.

I’m a value investor. I do well partly because I am skeptical. I implicitly trust few opinions shared over the internet, or among my acquaintances. There are many out to bamboozle the naive.

Now, I’m not saying never believe anything. I am saying that you should test claims that you receive from others. What is the historical evidence? What are the biases of the writer? Few in investing write neutrally, so analyze the angle of the writer.

But after that, once you understand the biases, read the contrary data. They may know something that you or I don’t know. Compare it against other opinions, and ask those that would likely disagree for their opinions. Analyze, asking which opinion is most likely, or whether yet another opinion not yet imagined could be right.

This isn’t easy to do; it takes humility, which makes it hard for me to do, but the effort must be made.

Odd opinions must be made to jump high hurdles. We don’t want to be like those that believe things merely because they are odd. (I have known more than my share of those.) For investors, in prosperous times, oddity yields bad results. In unprosperous times, oddity yields volatile results. Some do incredibly well, and some very badly.

If someone proposes a novel investment idea to you, be wary. Few novel ideas pay off. This is not to say that classic ideas always do well, but the odds are skewed against novel investments.

In closing, be sensitive to your economic environment. There are no economic environments that offer unlimited potential. There are many that limit “normal” economic opportunities. Don’t force an overly optimistic view on the markets, or an overly pessimistic view.

Do your “due diligence.” Analyze your assets, and potential replacements. Then make businesslike decisions to buy and sell, after you have analyzed the situation in entire.

As my Longs are getting stopped out...a tip for Bottom picking

2011-11-24T13:12:00.001+11:00

http://ibankcoin.com/flyblog/2011/11/23/fundamentals-and-technicals-are-no-longer-relevant/

On the other hand, if you start to see stocks trading up in a down tape, after getting flushed, those stocks might be signaling bottoming out action. My favorite dip buys are stocks down more than 20% over the past two weeks, % of float sold short more than 15%, with solid fundies. The shorts will serve as a bid in a bidless tape. Often times owning stocks without big short positions can be more dangerous than heavily shorted stocks in liquidation tapes– due to lack of natural buyers. At least in heavily shorted names, profitable short sellers will close out trades, providing bids.

Euro Spiking While sp500 Tanking

2011-11-22T17:01:00.003+11:00

Last night, as the sp500 were making fresh lows in the 30 point variety - we're sitting around 1185 and I see the euro not able to make any new lows - This seemed to be one positive point in an otherwise sh1tty market sell-off.

Seeing a 50 pip up move move when the whole market is falling is fishy - especially if the sp500 finds it hard to pull itself off the floor just as quickly - the correlations were not there last night.

This could most likely be intervention in the markets - the timing of the move was about 30 minutes before the euro market close - which could be the 'put' that we are not seeing in the markets - we may continue to see this intervention occuring over the next weeks as markets try to remain less volatile in a jittery sentiments.

Given how far we've sold off, and there is liquidity still being pumped into global markets, the bets are again lining up for v. high risk-on trades.

I've added to 2 longs eur/usd and 2 long aud/usd contracts.

Trade 1240, 1241 - getting reset in the risk-on game

2011-11-18T13:37:00.002+11:00

So last night so the breakdown from the 1230 level at the sp500 level, hitting it's first target of about 1210.

My long aud/usd position got stopped out at 1.001 - but as I step back I see the price has formed a base overnight and was rangebound between 1.001 and .997 - and a similar trading range occuring on the euro.

I realised the market has now formed a much better support zone, with the trading range, and proceed to go long on the 1.001 breakout and the 1.348 euro breakout.

I've taken 4 contracts and 1 contract on the euro, and have stops of .998 on AUD and 1.344 on the euro.

Trade 1039 - Long AUD/USD

2011-11-17T21:02:00.004+11:00

Been a very long time since I wrote up a trade entry - I plan to write up the trade entries and exits more regularly.

I entered the AUD/USD trade with a few things that are positive for the trade - the support line near 1.00 coincides with the 1230 support levels of the sp500, the markets have been trading in a range the past week and may continue to do so.

The economic data is still improving and the euro situation isn't getting any worse for the time being despite Italy yields constantly tinkering above the 7.00% line.

Strategy: Buying Support in a trading range, with intermarket support at sp500 1230
Entry: 1.00651
Stop: 1.001
Target: 1.035
RR: 5.17
Size: 3 lots
Trade Plan: Will try to exit 1/3 of the position at 1.016 and another third at 1.025.

Some notes of the Headlines - and Themes for the QTR

2011-11-11T16:05:00.002+11:00

- USD has been performing quite well against the euro and AUD however, equity markets have held up reasonably well given the past correlations.

- I am currently bullish on Gold and Oil - however the USD strength may be a headwind against performance. The gold equities that I have positions in NCM, KCN, ABG all have underperformed the past 2 weeks of the Gold's rally and that's really hurting my book.

- I have taken very quick losses on the intraday swings the past 2 weeks - namely I was going long on the AUD and EUR at the beginning of the asian session, and getting stopped out by euro open. The frustrating part was seeing the US close usually end up flat.

- The sell-off with the positive closes on consecutive sessions on Friday, Monday to Tue - lead me to remain fairly positive on risk, and then we saw a 50 point sell-off in the sp500 on spiking Italian yields - going over the proverbial 7% line in the sand - but quickly falling back below that level the next day.

- It seems to me that the market is giving so many fake signals that staying put on your themes and not getting whipped out from intra-day swings is a key to protecting your portfolio; the tweet/blog post by 'the fly' that I retweeted sums up my past two weeks of trading action accurately.

- I have stay true on my holdings for my core themes Gold/Macau/Tech/ASX banks and have started to offload the ASX banks and slowly overweight into Macau - as they have sold off hard in the current uncertainty around Italy.

- Given that we've seen confirming neutral to slightly positive economic data - employment numbers in Aus and US were both O.K and china inflation was 5.5% - slowing; combined with fairly good earnings - we are looking at a very good backdrop for equity prices in the next quarter AS soon as the world starts to stop acting scared about the uncertainty in Europe.

RBA cuts rates, AUD falls 50 pips

2011-11-01T16:31:00.003+11:00

The RBA cuts cash rates to 4.5%, but I missed the boat trying to short the AUD/USD as I had been going long on the pair the whole month - just felt weird pulling the trigger.

Even despite the favourable macro events - Euro falling, sp500 selling at month's end, Yen intervention I still found it hard to get set in the short AUD/USD trade.

One key reason why it was hard to take some shorts was that I've been long the past month and I'm still biased towards the bull cycle for the final quarter, as seasonality articles are depicting a likelihood of positive returns.

However, some negative sentiments around the Man Financial filing for bankruptcy and lower China PMI data today is making me bide my time before I get set for my long positions. The Italy bond yeilds are at 6.17% which isn't a consistent with a equities on the euro front.

Looking for the sp500 to hold the 1250 line, to maintain the bullish bias - however, given that it fell 30 points in 1 session is also a sign to be cautious in setting up longs here. The only offsetting fundamental in this price action is that it could've been massive end of month rebalance out of equities.

It's Not Too Late to Get in, Just Control the Risk

2011-10-27T16:40:00.003+11:00

ASX up 2.5%, China 0.35%, HK 1.7%, sp500 futures 1.35%.

We're seeing price action in the majors flying straight through the top level of resistence i.e CBA breaking 48.50, BHP breaking 38.5 and we're seeing commodity prices will be soon to catch up quickly to the headlines, and we'll likely see some of the underperformers in the financials really catch a bit tonight - I'm looking at euro banks here, with the clearly defined haircuts in the greece debt and the 1.4tn debt deal, financials will be in trading focus tonight.

The rally to the upper end of resistence levels have been on light volume, which suggests that some of the bigger money players are yet to enter - cautiously awaiting the euro situation to resolve - thus the current upswing can be pretty much what you call the break-even trade - where a lot of the players who had extra capacity to 'double down' - this is where you'll see the strong hands who were able to offload before the main body of the sell-off decide to either go short or actually add some long exposure to their portfolio. Chances are that we'll see the trampling of participants here - as we are now just in the mid-stages of a 4th qtr rally - yes, we'll see more like 5-10% gains here til December, which is a lot less than the 10-15% we saw in the past 2 weeks, but that's the cost of being conservative.

A key headline for the china story is that inflation is that CPI is down, and PMI is up (over 50) - if we get a consistent message of global economic data being o.k - i.e gdp growth in the US - then we could really see a race to the bidding blocks tonight.

So we've got technicals i.e top level prices being broken to the bullish delight of momentum traders, and now we've got the fundamentals of sentiment out of europe, and economic data out of China and US not being as bad as anyone feared - so what are we waiting for?

Little Book of Currency Trading by Kathy Lien

2011-10-27T13:41:00.002+11:00

As the book title 'little' this is indeed a very brief intro in the world of forex - a lot of anecdotal stories and not many strategies to speak of.

The book's chapter titles will tell u the cliche'd nature of the writing - chapter 3 A's to Z of forex, chapter 6 - investor vs trader, chapter 11 top 10 mistakes.

There are 20 pages of decent writing - and it's about the bollinger bands and a strategy that I have actually never seen before.

Chapter 8 which covers value investing strategy based on the double bollinger bands and Chapter 9 which covers trading the news.

Chapter 8 is a good strategy to have in your arsenal, and this one chapter pretty much will make your 10 bucks a worthy investment. Chapter 9 is fairly similar to all the other trading news strategies out there, with her own opinion of how you should take trades based on how strong the prevailing sentiment is.

Euro Deal Details Released

2011-10-27T13:39:00.001+11:00

- 1.4tn in bailout
- 50% haircut on greek bonds.

More as I find it........

markets spiking 1% higher across the board - might see a meltup - in which I'll offload a lot of my margined longs.

Second Level Thinking

2011-10-24T17:18:00.003+11:00

I was reading the above book yesterday, and there are some concepts to market psychology and how price action plays out similar to how sessions of poker plays out.. firstly an excerpt from the book 'The most important thing' by Howard Marks

Thinking should be intuitive and Adaptive rather than mechanical and fixed

What is the range of likely future outcomes
Which outcome do I think will occur?
What's the probability that I'm right
What does the Consensus think?
How does my expectation differ from the consensus?
How does the current price for the asset compare with the current view of the future, and with my view?
Is the consensus psychology that's incorporated in the price too bullish or bearish?
What will happen to the asset's price if the consensus turns out to be right, and what if I'm right?

This is a great template for how we should actually frame our thought process before we act upon our own spreadsheet calculations, technical support and resistence lines, basically in every judgement we make whether fundamental or technical incorporates a human element...
I think the greatest macro traders and risk managers tend to be able to understand their own psyche along with the conditions of the market and how their portfolio is positioned against the current market sentiments.

In poker, 80-90% of hands are played out in a standard fashion - u fold 80% of your hands preflop - and play 20% of your top 10 hands raising the flop and based on how flops play. However once every hour or so, there are changing dynamics that require you to be both intuitive and adaptable - there are times when you're tested for all your chips preflop holding QQ - and your not sure whether your opponent has KK or AK - this is what Mike McD would call a 'feel' situation and essentially an internal psychology against all the hands that you've played against your opponent until that moment. However the situation may not only be dependent on your hand vs his hand - the next level of thinking is based on whether or not the game has been going for a long time, how many players have been playing aggressively, whether or not your opponent is deciding to change his temperament etc.. all these intangible factors have almost less than 5% of the significance in the actual value of the hand and even so leads to a variable outcome when the chips go in the middle. The required level of thinking for such a seemingly trivially small % of impact in the actual hand is needed in the game no-limit- where 1 hand can determine a large portion of your stack for the session.

Similarly I feel that in recent weeks, the volatility and the sell-off has presented a remarkably harder trading environment, but also a very feel based environment where the next breakout of the trading range was seemingly imminent at every turn, only to stay range bound for a long time. Each EU announcement seemed to be a headfake, and even today it seems to be the same - each support level getting crushed on the emerging markets while the sp500 seemingly held up fairly well on Bernanke rhetoric.

Despite the erratic earnings report so far, the economic data coming out of US have been surprisingly not so bad, and this is leading to a situation where the market is so heavily priced for a really bad outcome in the EU - which seemingly is not a high probability anymore.

Given this, my trading has remained steadfastly feelish on the bullish, buying mainly the AUD/USD on the bottom of the short term ranges and the euro as of today, getting ready for the likelihood of a very good finish for risk-assets by year's end.

EU Summit Short Summary

2011-10-24T15:21:00.001+11:00

- Markets rally 2% friday afternoon to get to a positive expectation for some sort of resolve over the weekend - this coincides with the key 1230 level being broken to the upside.

- liquidity issue (solved with bridging loan) and insolvency issue (debt restructure) - Greece is the latter, and the rest of the countries are the former.

- The number for the EFSF is 780bn, but there are rumours of a 940bn increase.

- The fund is big enough to support, Portugal, Greece, Ireland and Spain but NOT Italy - although many analysts think that Italy won't need it.

- So we are looking for 1/ Leveraged EFSF 2/ Bank Recap (euro100-250bn) 3/ specific reform proposals in the south EU including European Stability Mechanism 4/ aggressive haircut for Greece debt around 40-50%

Last Night..

2011-10-19T13:18:00.002+11:00

The Banks..
- Bank of America stormed 10% after 3q earnings exceeded expectations..
- Goldman Sachs gained 5.5% even after it reported a loss; just it's second loss since 1999.

The Techs
- IBM -4.1% after earnings disappointed after hours
- Apple -5.6% also missed estimates - eps of 7.05 missing by .23 on a 28.3bn revenue, which missed by 1.15bn.
- However, Intel and Yahoo after up 5% and 3% after their results.

- Resources getting sold off slightly with China coming in with 9.1% gdp growth instead of the 9.3% growth that is expected. My opinion however is that the macro outlook in Europe will most likely be the main factor in this area of performance over the short term, rather than fundamentals.

Interestingly, I would've expected techs to perform inline and banks to perhaps do worse, but the market continues to show mixed results - The market may trudge higher, but stock picking is now going to be more important in the next breakout.. if it comes.

First Book Review: The Inner Voice of Trading by Michael Martin

2011-10-18T20:28:00.004+11:00

A good coverage of trading psychology, in a easy to read format.

The chapters are more question based rather than tasked based - if you're looking for specific instructions, Brett Steenbarger is probably a better author.

The style here is based on the commodity style trading, where the trading of breakouts will see a lower probability + higher leverage style personalities that are constantly struggling to stick to a trading system or even choose the one that fits the personality.

This is a good start to finding out how to develop your own internal dialogue to help align your emotional undercurrents with your technical trading strategies.

I would recommend this book based on the price alone, however like breathing, trading psychology is something that you must work on everyday, because of how often it is overlooked.

While all investors will benefit from this reading, the greatest benefit are for those who trade frequently, and who are constantly looking to increase their level of self awareness and their reactions to the market.

Retail Sales up on Friday, Commodities up on Monday?

2011-10-17T13:22:00.004+11:00

So retails sales on Friday was 1.1% much better than the 0.6% expected, Google came in with better than expected revenues, and we saw a huge lift in tech shares through AMZN and GOOG both moving close to 5% on the day. I expect tech sector to continue to outperform in the final quarter of the year, I haven't yet gotten any exposure, but will pick my spots to get in, once I reduce some exposure in commodities.

Whilst we approach the resistence levels that everyone is watching 1250 we have to take into account both the sentiments, economic data and the macro developments.

Sentiment is definitely improving - with the less negative headlines now no longer a hurdle. Economic data improving, both on the company and the US front. The final frontier of the g-20 meeting are now in the works, and should see some moves this week - this final confirmation may lead to the meltup as the cautious players will pile on at week's end.

A key stock I'm watching is BHP, as it is threatening to break the 50MA, which is in line with last week's resistence and the timing of the upside in the sp500 levels - which are actually moving higher intra-day.

Learning from the Past Rather Than Living in It

2011-10-13T13:42:00.001+11:00

Trading Tip

by D.R. Barton, Jr.

This week I am writing from my hometown in Virginia where the leaves are starting to turn in the Blue Ridge Mountains and the setting is almost surreal. I am here to celebrate my grandma’s 93rd birthday.

I realize now that I took so much for granted growing up here. The natural beauty of the area, with all of the elevation changes, is amazing. Toss in the yellow, orange and red leaves on the trees, and you have a rich tapestry that has to be seen to be believed.

In the midst of this splendor, my grandma leads a gracious life in a house on the hills. Grandma Megs gardens, cooks and cleans, and is an active leader in her local church. She still drives to the market, church, and all over her little town visiting friends and shut-ins. This past Saturday, her church participated in the Heritage Day fair, and my grandma was right in the middle of it. She single-handedly made 301 biscuits!

While the good health and active life that she enjoys is enviable, what impresses me most about Grandma Megs is the grace and kindness with which she leads her life. She treats everyone she encounters with kindness, compassion and joy. And she has a way to make you feel better after an interaction with her: an encouraging word, a gentle touch or a simple act of kindness leaves a wake of positive energy with all those around her.

As I reflect on Grandma Megs, I have found that there are two types of people who have reached a certain age and experience level—those that are inwardly focused and those that are outwardly focused.

Inwardly-focused people tend to talk about their infirmities and recount past happenings. They relive past glories and avoid past misfortunes.

Outwardly-focused folks concentrate on what they’re going to do next. They talk very little about their own aches and pains but are keenly aware of the situations of those around them. While they have learned from the past, they don’t dwell on it. Instead, they use past experiences as a guide to help them understand how they can best spend their time in the future.

As traders and investors, we can learn much from these two types of experienced folks.

In my interactions with thousands of traders and investors, I’ve found similar issues with their focus.

Inward or Outward Focus in Trading

Inwardly-focused traders and investors often make decisions based on whether they can be perceived to be right rather than whether the decision pattern will be profitable in the long run. This need to be right reflects the tendency of inwardly-focused traders to overemphasize how trades or investments make them look. Traders with this inward focus tend to emotionally relive trades from the past, especially a particularly good or bad trade. This drives traders to change their decision making process based on the emotional impact of prior trades (and on events from a small sample size).

On the other hand, outwardly-focused traders care less about how they’ll be perceived and more about what is useful and works. Outwardly-focused traders live in the present with a bias toward the future. They learn from past trades and move on. They don’t let the outcome of individual trades change their decision making process.

I don’t want the labels I’ve used here to throw anyone off. There are many internally-focused activities that are useful for traders and investors. Personal development and looking inside one’s self to understand your trading and investing psychology are critical to trading success.

The great take away is that trading, like life, is best experienced by focusing on what’s happening now with a bias toward future results and activities. When you get caught up or overly influenced by what has happened in the past, you open yourself up to decision making biases that diminish enjoyment and results. It’s a way of life that my grandma has taught me and that will serve us all well!

Great Trading,
D. R.

After we saw a Bull Trap, We are in for a Retest of the Upper Range

2011-10-12T18:05:00.002+11:00

Last night, Slovakia was the last of the 17 euro countries to vote on the bailout fund. Regardless of the political issues and the first round of votes being delayed, it looks like the vote will get passed given that the stakes seem too high.

Looking back on my trading of 2008 GFC and the V-shaped equity price recovery then the subsequent stall in the market prices prior to QE2 - I remember thinking that being bearish was the right thesis given the economic data was not that great, despite the fact that the data points showed 2nd derivative improvements. The clich'e 'climbing the wall of worry' was dear on my mind, and all my positions were hedged into the upswing - which concurrently led to a huge underperformance in my equity positions.

Given last week's UK stimulus, the euro bailout fund and now the talk of possible China easing (on the backdrop of falling inflation) we may see another upswing in equity prices.

My thesis here as a portfolio strategy would be to hold energy, materials as your leveraged beta, which you offload your excess margin into strength and keep your core holdings in asx banks anz/cba for the upcoming earnings report.
From a macro trading perspective, the analysts are heavily shorting the AUD given the bearish China sentiment (somewhat warranted given that commodity prices have broken uptrend lines) I think the last rebound off .95c will be the low for the meantime, as a quick look at the weekly AUD chart will still show that we are in an uptrend, and the conditions for USD debasing are still somewhat in place.

The key level in the AUD for the week will be 1.00, and the sp500 is clearly trying to breach 1200-1220 - and if the Nasdaq maintains its strength, and we see some recovery in commodity prices, we may be all hands on deck for risk-on mode.

Price Pay on Dicey Days

2011-10-05T16:01:00.003+11:00

- Valuations are Pointless when Price follows Macro Headlines/Fears on the bearish impulse
Yes there are now plenty of stocks near the valuation p/e's that we saw in 2008. Many pundits will claim this is not 2008 by any means - however there is one thing about the current situation that is affecting price sentiments negatively - uncertainty. Uncertainty about how the euro will manage their situation, how to value the haircuts on collateral damage, and the consequential moves that we will see from supporting cast of the ECB, the IMF, the Fed.
The markets will hang at every work of the Fed and last night proved no different, as the market saw a bid during Ben's speech to congress regarding their 'tools' regarding the euro situation - which seems to be limited to lending of USD to the ECB, in which they can utilise to provide a stable curency to their banking system.

- Watch the trend lines on the downswing - Trade with tighter targets and stops
Technical analysis has a lot of subjective interpretations to trading strategy - but one fairly basic and very well applicable strategy is the simple trend line break. We have seen a very strong downtrend line on most majors - sp500, euro, AUD. As we see prices in the sp500 taking leads from the eur/usd pairs last night we saw the bid in the eur/usd breakout of both its trading range and downtrend line at about 1.32 - a move that anticipates the possible positive moves by the Fed - however 1 hour before the US trading session's end, we saw all the gains returned to the market as we saw a revisit of the lows. The trade to be long on the break was there, but only trailing stops or exiting on intra-day price targets would've been profitable.

- The market is extremently Bearish on Rhetoric, it can Meltup on the same Rhetoric
Finally, after seeing a retest of the day's low, we saw a huge meltup in the last hour of the US trading session as the rumours of an actual plan for the euro banks hit the wires. Once again, even a small positive sentiment after a huge sell-off, we see many trigger happy traders just ready to pile on their risk bets.

- Equity trades on the ASX lag the Macro prices
Today I saw the gap open on the majors - I kept an eye on the CBA and the WPL as the prices fell to session's lows - CBA for the possible dividend play that we might see in the upcoming earnings seasion, and WPL as it threatens to break from the downtrend line.

Choppy Choppy, We long Poppy

2011-09-30T13:53:00.003+10:00

The last few days has seen the fade trade work well - if the premarkets are weak, you go long on breakouts and if premarkets are strong, u fade the strength.

Last night the German vote was largely a non-event, the price was positive leading up to the vote, but the vote's news and positive economic data wasn't able to create a push past the resistence levels in the Euro or AUD - a significant gravitation towards the range conditions remain.

However, today's markets are once against trading at the bottom of the new breakout range - which I define as 1.3520 to 1.37 - trading the ranges here - going long at 1.352 and short near the top, has seemed to work well, with another trend position if the prices follow through with some catalysts to the upside at 1.37. The key is to keep an eye on the sp500 as the US market futures seems to indicate how traders are positioning with their risk-on trades.

Euro Zone deadlines and dates

2011-09-28T17:59:00.000+10:00

TIMELINE (source: http://blogs.wsj.com/source/2011/09/27/euro-crisis-calendar/? )

Wednesday, Sept. 28

The troika return to Athens to continue assessing Greece’s progress in cutting its budget deficit. The talks are crucial, because without the €8 billion bailout payment the country runs a high risk of going bust.

Tuesday, Sept. 27

Slovenia votes at 1800 GMT on changes to the EFSF.

Wednesday, Sept. 28

Finland is due to vote on changes to the EFSF.

Thursday, Sept. 29

Germany’s and Estonia’s parliaments are due to vote on EFSF changes. Spanish banks face a deadline to meet new capitalization requirements.

Friday, Sept. 30

Austria votes on increasing the country’s share of contribution to the EFSF.

Early October

Dutch parliament votes changes to the EFSF.

Monday, Oct. 3

The meeting of euro-zone finance ministers. Markets expected this meeting to yield a decision on Greece’s next aid tranche, but officials have sought to dismiss this.

National and regional purchasing managers manufacturing data for September will highlight to extent to which the euro zone’s debt crisis is spilling over into the real economy and increasing the risk of a euro-zone recession.

Tuesday, Oct. 4

European Union finance ministers meeting.

Euro-zone unemployment data for September.

Wednesday, Oct. 5

National and regional purchasing managers’ index for the services sector for September.

Thursday, Oct. 6

ECB rate decision, outgoing ECB President Jean-Claude Trichet’s last press meeting in this role.

Spain issues April 2014 bonds.

France issues long-term bonds.

Tuesday, Oct. 11

Greek and Italian T-bill auctions.

Thursday, Oct. 13

Italian bond auction.

Friday, Oct. 14-Saturday, Oct. 15

G-20 finance ministers meeting.

Monday, Oct. 17-Tuesday, Oct. 18

EU Council meeting

Tuesday, Oct. 18

Spanish and Greek T-bill auctions.

Thursday, Oct. 20

Spanish and French bond auctions.

Tuesday, Oct. 25

Spanish T-bill auction.

After Oct. 25

Slovak parliament votes changes to the EFSF.

Friday, Oct. 28

Italian bond auction.

Monday, Oct. 31

Belgian bond auction.

Spanish Support Euro Bonds

2011-09-27T18:11:00.002+10:00

Euro officials have also talked about increasing the size of Europe's 595bn rescue fund by allowing it to take loans from the Euro Central Bank.

The markets have been going risk-on overnight, and currently opening higher in the euro session.

The eur/usd is still playing catchup to the AUD/USD - but I think it will make a fresh break above 1.36 by tonight's session, warranting no stupid political rant/ revelation regarding the euro crisis.

So far, the plan to abate the crisis is in place - we are just awaiting the details, and the markets will price in hope, at a discount to the price they've put in fear the past few days. I expect a normalising of market price action once the euro situation clears.

All positions closed

2011-09-26T23:21:00.002+10:00

I closed all long positions AUD at .979 and Euro at 1.34851, as the price stayed within range, as expected from the morning session as we will remain range bound until specific details about how the euro crisis will be managed can be revealed.

However, today's plan was made very difficult by the fact that the market tried to initially push through the support levels, whipsawing my longs into shorts then finally into longs. I was unable to capitalise any great amount before the US open, but I am no flat going into the US trading session and will continue to monitor the price action and act accordingly.

And now I'm long... 3rd time 'lucky' ?

2011-09-26T17:35:00.002+10:00

What a crazy day, after being long on support levels, then short on the breakdown, I saw the price quickly recover the levels, and am now long, as the market seems to be finally showing its hand.

I am actually very far behind in terms of points for the day, but might tight stop losses played against my overall position, which is a bullish bias. I am back to my original thesis, as the market continues to be bid.

I entered 40,000 AUD at .96655, and 30,000 EURO 1.34233. This will be my final play of the session, if I get stopped out here, no more trading until tommorrow.

Adding to my shorts

2011-09-26T16:38:00.002+10:00

Ok, saw a test of 1.34, and sp500 lead a market rout - added to my euro short, another 3 lots at 1.33922, 7 contracts now, will keep stops v. v tight, but right now, the markets are not happy, so I'll go with the momentum.

Euro - Flipping it as the market breaks down

2011-09-26T15:12:00.002+10:00

The market just broke down, so I reversed my longs to short now, this may be a fake breakout, but I'm playing it by being as flexible as possible. I am short 1.337 and stops above the 1.342 level.

Now is the Time to go All in the Euro - Trade 1112

2011-09-26T14:37:00.003+10:00

I have been a sucker for the dips the past few weeks, and my performance has been horrible. However, during this time, they were 'feeler bets' into the market, and with nothing biting, I had nothing to write home about - i.e I wouldn't dare to post those trades onto my blog.

However, I have now setup a trade, which I feel the probability of it's move just too high - the EURO - the current sell-off has been unabated, and now we see a potential for a reversal, at least a relief rally that will feed the chooks for a few days.

I expect the retail pitchfork traders will make one last hurrah at the last line of defense, the 1.34 is a huge support level, one that comes just in time with the current urging of all stakeholders to the european political leaders to make a move, and to make it fast. We have the fib level on the weekly, a weekly rising price, and the lower end of the support in the hourly, and currently the 10minute has failed to show strong follow through near the 1.34 - the europe open is likely to show us the market's hand, so we set up and wait a few hours to see how it goes.

I take my stand at 1.3411 - 4 contracts, which have a v. tight stop just below 1.34 and I'll trade half out at 1.35, and try to ride the rest up to 1.39 - which is the bottom of the last breakdown range.

Once again, if the price falls through 1.34 - we may need to see some crisis of epic proportions to see the 1.30 level - no matter how likely that seems right now, my bet is that the market is crying wolf just one last time.

Operation Twist and the Volatility Continues

2011-09-21T16:00:00.002+10:00

Italy gets downgraded yesterday and the markets held up - the Fed meeting titled 'operation twist' has traders loaded with their positions, as we saw USD fall last night.

I still think we see a strong Q4 trading rally to end the year, and I'll position my portfolio to represent this.

Some links
- Most volatile times since 1990
- Steel sector in US poised for recovery
- HK dollar ready to rise?
- Soros on the Euro and what needs to be done
- Equity markets and their likelihood of predicting the past recessions

Uncertainty in Europe...

2011-09-14T13:02:00.003+10:00

Market correlations go to 90% as the uncertainty surrounding europe remains.
The sp500 has been capped at 1190 and well bid at 1120, however the risk currencies AUD and EURO have both been getting hurt due to the increasing demand for safety in the USD. Whilst the past two years of forex in AUD and EURO have been quite a good indicator of the risk-aversion trade - the bottoming of the USD may see a change in the trend.
In either case, the market is not in healthy form as the sell-off days are still higher on volume and the ranges of the days are much higher than they've been in the past 2 years.

The equity markets have been volatile, but not in a complete sell-off, I presume valuations will matter in the coming weeks as correlations come back off, and the macro catalyst will actually be a resolve of Greece - even a default which eliminates Greece will actually be a positive for the markets as the yields will stabilise and markets will probably be more happy with certainty of the news. As long as there is no mass default in Europe, things will be business as usual.

Last night we saw some comments of support for the euro by the BRICs (Brazil, Russia, India, China), however the bearish tone may remain for a few more weeks.

Obama's Plan will keep US from recession

2011-09-09T15:17:00.000+10:00

Stimulus insures against downturn

If President Barack Obama's economic proposals get through Congress - and that is a very large if - they will go a long way towards sustaining a stuttering economy during 2012.
The headline price for the total package is $447bn, about 3 per cent of gross domestic product, of which about $400bn or so would hit the economy during 2012. Mr Obama's first stimulus package was slow and spread out, so fiscal support for the economy in 2012 would be no less than in 2009 or 2010.
"I think what it does do is allow the economy to continue to grow at a low rate - say 2 or 2.5 per cent - and keeps us from dropping back into recession," said Steve Blitz, senior economist at ITG, New York. "It keeps the economy afloat for long enough to let the household sector continue with its deleveraging."
What the package would not do is impart a large new impetus to growth. Much of it extends or replaces previous measures - last year's payroll tax cut or infrastructure spending from the first package - that are now winding down. It would reduce fiscal drag rather than add a fiscal push.
The stimulus effects will also be heavily discounted until it becomes clear whether they will pass Congress. Households, for example, are unlikely to start spending more in anticipation of the payroll tax cut until they know whether it will happen.
The stimulus plan, therefore, is an economic insurance policy. It will be ready and waiting for Congress to pass in full, and the worse the economy becomes, the more of it is likely to get through. Many of the measures should be fairly palatable to Mr Obama's Republican opponents in the House of Representatives.
The design of the policy leans heavily on tax cuts, often seen as less stimulative than spending because some of the money goes to people who will save rather than consume, but which reach the economy quickly.
$175bn of the total cost is for extension and expansion of employees' payroll tax cuts. For employers, payroll tax cuts are limited to the first $5m of payroll and any increase in their payroll bill, limiting the cost to $65bn. That tries to answer a serious objection - that much of the benefit goes to companies that would have created jobs anyway.
On infrastructure, the administration went for highly visible schemes - $25bn of school repairs, $50bn of transport infrastructure and $15bn of refurbishment for blighted properties. These have good potential to create jobs.
A group of researchers, including former administration adviser Jared Bernstein, estimate that construction and building repair create 9,000-10,000 jobs per billion dollars spent<http://web.epi-data.org/temp727/Fix%20America%27s%20Schools_Today_FINAL.pdf>. Repair is highly labour intensive, whereas new building requires more materials and equipment.
The push for a strong fiscal stimulus is all the more important, because while the Federal Reserve signalled its willingness to consider more monetary easing on Thursday, there is little sign that it is gearing up for radical action.
Ben Bernanke, Fed chairman, said on Thursday the Fed "will certainly do all it can to help restore high rates of growth and employment". In a speech in Minneapolis<http://www.federalreserve.gov/newsevents/speech/bernanke20110908a.htm>, he did nothing to push against rising market expectations that the Fed will act at its next meeting, starting on September 20. An option being discussed internally by Fed officials is a balance sheet rejig, called a ''twist". Its investments would be moved into longer-term bonds to try to drive long-term interest rates even lower.

Quick Commentary

2011-09-05T11:26:00.001+10:00

Sept is historically a weak month for equities..
Employment data came in at zero, way below the 85k predicted number, however this stokes the speculation that Fed will add stimulus. This was the weakest reading since sept 2010.
Oil dropped 2.9% to $86.33
US markets closed tonight, so could be just a precautionary sell-off as portfolios are positioned for the Fed announcement
Euro continues to get whacked at 1.41 as renewed tensioned in Greece about disagreement from greek authorities and debt inspectors putting a concern about the EU bailout.

Tense Moment in the Markets

2011-09-02T14:00:00.003+10:00

We are now approaching a point in the markets we're we face some hard decisions. Markets had the up rally that was to be expected, now the markets can continue it's bear trend down over the coming week, or be propped up again for one final hurrah.

This morning I saw some sharp selling programs come into the market and take out some key levels to the downside on aud/ euro/ sp500 / asx200.. The euro has remained stubbornly weak despite the fact that the sp500 has been bid quite decently.
This is a worrying sign.
Oil, usually the first to be moving fast, has been somewhat dulled to the price action.

The chinese equity markets have been also in sell mode looking at this article http://www.datadiary.com.au/2011/09/01/chinese-equities-and-the-commodity-conundrum/

We are reaching a some upside resistence across the board, and only some strong news fundamentally can drive this market higher - payrolls tonight and Fed meeting next week may lead the markets.
However, tonight could be one of those classic asymetric bets - a good number will actually lead to flat or slightly negative price action (as people close positions for weekend) and a bad number may actually see price action to the upside as people factor in the possibility of QE3 as a greater likelihood.

I've reduced most of my margined long positions, and now proceeding to to into pair trading mode - all new positions will be paired with short positions to hedge out market risk for the time being.

Some key Points on why the Market may continue it's Rally

2011-08-31T17:01:00.003+10:00

- Insiders are buying hard - 1.7bn worth of insider buying - highest since October 2008.
- 163 buybacks totally $39.7bn have been annoucnements - highest since February 2008.
- According to Trim Tabs there are 3 things missing for markets going lower -
1/ M&A activity
2/ Insider buying
3/ buybacks
As we have all 3 things firing, we should be bottoming based on what happened in 2008.

Yesterday consumer confidence collapsed from 59 to 44.5 - which is a contrarian indicator that we are near the bottom of the US market.

A Play by Play of the Jackson Hole Trading Annoucement

2011-08-29T15:41:00.003+10:00

Last week's trading was all about the Jackson hole meeting, where Bernanke was going to give a speech about the market and possibilities of the next round of stimulus.

However, last Wednesday and Thursday we saw market weakness as the crowd expected Ben to stand pat.

The key was to stay patient with the price action leading up to the actual event and wait to react to the price action on the actual statement by Bernanke.

On Friday morning in the US, the AUD traded in a tight 50pip range, and when the expected speech of 'standing pat' by Ben did in fact occur, the market responded with a short burst of selling, but nothing confirming below the trading range - as we see the long tails near the bottom of the trading range.

I got trigger happy and quickly shorted the AUD on this sell-off, but luckily I was able to feel the market putting in the buying support - I saw the lead from the sp500 price action and was quickly able to reverse my position and go long, and saw the price eventually breakout to the upside for a 120pip gain.

Jobs Resigns, Buffet Buys

2011-08-26T17:13:00.002+10:00

Buffet invests 5bn in Bank of America citing it was 'dropped a lot' and markets spike 10 points in futures trading before being quickly sold of 20 points and endng 2% lower on the session.

AUD and Euros continued in their ranges, likely to make a move tonight based on Bernanke's comments. However, there were lot of headfakes, as it threatened to move lower, before spiking higher on Buffet's sentiment buy and then continuing lower.

Jobs resigns, and Apple stayed fairly well bid, only being down 1.8%.

Gold Rush Over?

2011-08-25T13:16:00.002+10:00

Gold after hitting a record high of $1918 crashed 8.3% since last Tuesday.
Last night it fell 5.76%, to 1757, 8 biggest fall in the last 30 years.

The Gold trade looks crowded, with a lot of warning signs such as GLD etf overtaking the sp500 ETF in total value.

The Death Cross

2011-08-25T11:57:00.000+10:00

Trading Tip

Debunking the Death Cross: Part 2

by D.R. Barton, Jr.

Last week, we looked at one of the better known technical analysis events called the Death Cross or Black Cross. The signal triggers when the 50-day simple moving average (SMA) of the S&P 500 cash index crosses below the 200-day simple moving as it did recently on Friday, August 12.

The Death Cross also triggered in July of 2010 with a lot of buzz and broad media interest. Just days ago, however, that same signal received little to no media coverage at all.

Why? As we discussed last week, the reason for the differing receptions is simple: the July 2010 signal followed the December 2007 signal—the most successful Death Cross signal of all time, which presaged the market meltdown accompanying the bursting of the real estate and credit bubbles.

In sharp contrast, the much-heralded July 2010 signal failed to predict a decline—in fact, the market actually moved strongly up almost immediately after the Death Cross and kept going up for months.

Last event bias clearly explains this month’s silence about on the signal and last year’s media hype. Regardless of the hype factor, a much more important question looms for traders: Is the Death Cross any good in the first place?

Cocktail Party Novelty or Serious Trading Tool?

Does selling the S&P short when the 50-day SMA crosses the 200-day SMA and then covering when the 50 crosses back above the 200 make you money? To answer this question, let’s look at two studies.

First, let’s apply that rule to the S&P 500 cash index back to 1960. For 51 years of S&P 500 data (and 50 years of signals), here are the statistics:

Total trades: 26
Winning Trades: 8
Losing Trades: 18
Winning %: 31%

Most people who follow Van’s or my work know that a system’s winning percentage alone is insufficient to tell you whether you have a quality trading system. This is especially true for long-term trend following systems.

This system would be very hard to trade, similar to a long-term trend following system. In the last 50 years, there have been no consecutive winners! This means that every winning trade has been followed by a loss and a lot of losing trades were followed by other losing trades. The biggest string of losing trades was eight in a row from 1984 through 1999. Trading this would obviously be very difficult from a psychological standpoint.

So what’s the bottom line? This Death Cross system is very close to break-even on the S&P—just slightly positive. If you exclude the one monster winning trade from December 2007 through April 2009, however, the system had a negative expectancy for the last 50 years.

In a study similar to mine, Jason Goepfert looked at Dow Jones Industrial Average data back to 1928 and found that all the Death Cross trades from 1928 to 2000 were cumulatively negative. Once again, only if you add in the big win during the real estate and credit meltdown from 2008-2009 does the system enter positive territory. Just one trade making a system slightly net profitable over 50 to 84 years of data clearly shows the Death Cross as just a conceptual novelty rather than anything to guide your trading.

If you have read an interesting article on the Death Cross or have seen any interesting research, please pass it along to me at drbarton “at” vantharp.com. And as always, we love to hear your general thoughts and comments about the articles.

Volatility Continues

2011-08-23T11:47:00.002+10:00

Markets were up 2% last night, and my long AUD/USD trades were cut short as the 2% gain quickly got reduced to break even on the session.
However, the volatility isn't as extreme as the 7% ranges we saw last week, and I get the feeling we are trying to form a bottom near the 1120 level in the sp500.

The asx200 major stocks like bhp, anz and wpl all held their line yesterday, despite ending slightly weaker, so I established a long position in wpl for the week ahead.

The market will be expecting some sort of magic bullet from Bernanke's speech on Friday at the central bank's annual meeting.

Gold continues to move higher on expectations of further monetary easing, being up 1.9% to 1894.

Der Spiegel Interview with George Soros

2011-08-17T12:52:00.001+10:00

'You Need This Dirty Word, Euro Bonds'

In a SPIEGEL interview, billionaire investor George Soros criticizes Germany's lack of leadership in the euro zone, arguing that Berlin must dictate to Europe the solution to the currency crisis. He also argues in favor of the creation of euro bonds as a way out of the turbulence.

SPIEGEL: Mr. Soros, we currently see a global banking crisis, a currency crisis and a sovereign debt crisis. Has the financial dilemma become too big to handle? How can politicians on both sides of the Atlantic be expected to solve such a multitude of crises?

Soros: The politicians have not really tried to fix any crisis; they have so far tried only to buy time. But sometimes time actually works against you if you refuse to face the relevant issues and explain to the public what is at stake.

SPIEGEL: Are you talking about the Germans? Many experts think Chancellor Angela Merkel has been particularly hesitant to address the euro crisis.

Soros: Yes. The future of the euro depends on Germany. This is the point I really want to drive home. Germany is in the driver's seat because it is the largest country in Europe with the best credit rating and a chronic surplus. In a crisis, the creditor always calls the shots. Sure, this is not a position Germany or Chancellor Merkel ever desired and they are understandably reluctant to embrace it. But the fact is that Germans are now in the position of dictating to Europe what the solution to the euro crisis is.

SPIEGEL: Why should Berlin embrace that idea?

Soros: There is simply no alternative. If the euro were to break up, it would cause a banking crisis that would be totally outside the control of the financial authorities. So it would push not only Germany, not only Europe, but also the whole world into conditions very reminiscent of the Great Depression in the 1930s, which was also caused by a banking crisis that was out of control.

SPIEGEL: What, then, needs to be done to fight this crisis?

Soros: I think there is only one choice. It is not a question of whether Europe needs a common currency. The euro exists, and if it were to break apart, all hell would break loose. Germany has to make it work. To make it work, you have got to allow the members of the euro zone to be able to refinance the bulk of their debt on reasonable terms. So you need this dirty word: "euro bonds". But when you study what it involves to have euro bonds, you really have a problem because each European country remains in control of its own fiscal policy, and you have to rely on the country to meet its financial obligations.

SPIEGEL: Germans hate the euro bonds idea. They fear that under this scenario they will ultimately need to bail out everyone, even large nations like Italy.

Soros: That is why you need to establish fiscal rules that will ensure the solvency of every member. This should make the euro bond acceptable to German voters. Europe needs a fiscal authority that has not only financial but also political legitimacy. The difficulty is agreeing on the rules. Unfortunately, Germans have some funny ideas. They want the rest of Europe to follow their example. But what works for Germany can't work for the rest of Europe: No country can run a chronic surplus without others running deficits. Germany must propose rules that other countries can also follow. These rules must allow for a gradual reduction in indebtedness. They must also allow countries with high unemployment, like Spain, to continue running cyclical budget deficits until they recover.

SPIEGEL: More and more economists, especially in Germany, would like to see Greece leave the European Union. Do you consider that to be a viable option?

Soros: I think that the Greek problem has been sufficiently mishandled by the European authorities that this may well be the best solution. Europe, the euro and the financial system could survive Greece leaving. It could survive Portugal leaving. And the remainder would be stronger and more easily managed. But the financial authorities have to arrange for an orderly exit in order for the European banking system to survive it. That will cost money because the European banking system including the European Central Bank has to be indemnified for its losses. Depositors in Greek banks also need to be protected. Otherwise, depositors in Irish or Italian banks will not feel safe.

SPIEGEL: Is the current crisis even worse than the one in 2008?

Soros: This crisis is still the continuation of the same crisis. In 2008, the financial system collapsed and it had to be put on artificial life support. The authorities managed to save the system. But the imbalances that caused the crisis have not been removed.

SPIEGEL: What do you mean?

Soros: The method the authorities rightly chose three years ago was to substitute the credit of the state for the credit in the financial system that collapsed. After the failure of Lehman Brothers, the European financial ministers issued a declaration that no other systemically important financial institutions would be allowed to fail. That was the artificial life support; it was exactly the right decision. But then Chancellor Merkel stated that such support would only be granted by each EU member state individually, and not by the European Union.

SPIEGEL: That undermined the concept of a strong European response to the crisis. Has that been the biggest mistake so far?

Soros: That Merkel statement was the origin of the euro crisis. It shattered the vision that the EU will protect the euro in a joint effort.

SPIEGEL: Where will the current crisis stop? Even France now seems to be threatened by a financial meltdown.

Soros: Of course it is spreading. Markets fear uncertainty. Germany has to realize that it has no alternative but to defend the euro. The longer it takes, the higher the price Germany will have to pay.

SPIEGEL: You have been very critical of how the crisis has been handled by governments. Many European citizens, however, blame speculators like you for their attempts to bring down the euro. Huge hedge funds like yours have waged massive bets against the European currency over the past year. And in recent days, several European countries have even imposed temporary bans on short selling, bets on falling share prices.

Soros: You are confusing markets and speculators. At the moment, the biggest speculators are the central banks because they are the most important buyers and sellers of currencies. Hedge funds have definitely been supplanted by central banks. Markets expect the authorities to produce a financial system that actually holds together. If there is any hole in that system, speculators will rush through that hole.

SPIEGEL: That sounds very noble. But in reality, speculation makes any crisis worse. Look at the credit default swaps (CDS) market where speculators can bet on a further decline of currencies and economies. How can that be helpful?

Soros: Of course, speculation will always make a crisis worse. If there is a weak point, it will expose it. And you are right, the CDS market is a very dangerous instrument and I think it should not be allowed. I am one of the very few people who argue that the CDS is a dangerous instrument because it is so lop-sided in favor of a negative outcome.

'You Can Count on China To Back the Euro'

SPIEGEL: Do you think the European Central Bank is part of the solution or part of the problem when it comes to the dealing with the euro crisis?

Soros: It is part of the solution, but which part? Any central bank should only be in charge of liquidity. Solvency is a matter for the treasury. But because there is no European treasury, the ECB was pushed into that arena. To keep the financial system alive they overstepped their limits, as the former German Bundesbank president Axel Weber pointed out, by discounting the government bonds of a country that was clearly bankrupt.

SPIEGEL: You are referring to the purchase of Greek bonds. Now the European Central Bank even started buying Spanish and Italian bonds. It is not even clear, however, if it is legally allowed to do so.

Soros: Yes, but there is a well-established conviction that the central banks always do what is necessary to keep the system going and then afterwards you then take care of the legal aspects. In a crisis, you simply do not have time to think about such concerns for too long.

SPIEGEL: The United States is drowning in even more debt than Europeans. Its economic recovery has been painful. Are we going to see a double-dip recession in the US?

Soros: The indebtedness of the US is not all that high, but if a double-dip recession was in doubt a few weeks ago, it is less in doubt now, because financial markets have a very safe way of predicting the future. They cause it. And the markets have decided that America is going to see a recession, particularly after the recent downgrade of the US by the rating agency Standard & Poor's.

SPIEGEL: President Barack Obama has been fiercely criticized for his handling of the economy. You were one of his biggest supporters in 2008. Are you happy with his economic policy?

Soros: No, of course not. But the reality is that we have had 25 years of excesses building up in America -- a combustible mix of too much credit and too much leverage. You need a long time to reverse that.

SPIEGEL: Obama tried to stimulate growth with a gigantic stimulus program which increased the national debt further. Was that a mistake?

Soros: Obama embraced the ideas of John Maynard Keynes. Basically, the analysis of Keynes is still very relevant -- with one big difference between now and the 1930s. In the 1930s, governments had practically no debt and could therefore run deficits. Nowadays, all governments are heavily indebted, and that is a big change.

SPIEGEL: If Keynes were still alive, would he adjust his theory?

Soros: Definitely. He would say governments can still benefit from running fiscal deficits, but the new debt has to be invested in a way that will pay for itself. So the money spent would have to increase productivity.

SPIEGEL: The $800 billion stimulus program launched by Obama did not live up to that?

Soros: Obama's stimulus program was not big enough and it was not directed at improving infrastructure nor human capital. So it was not productive enough.

SPIEGEL: And any further stimulus is now basically a non-starter, because the conservative majority in Congress is hell-bent on preventing it.

Soros: That is what is pushing the world towards another recession, into a double dip.

SPIEGEL: The Republicans are doing that?

Soros: Yes, but Obama is also at fault. He yielded the agenda to the Republicans. He is talking their language. The president would have to show leadership to counter the Republican wave, and so far he has not done so.

SPIEGEL: Do you think the US deserved the recent downgrade by Standard & Poor's?

Soros: Probably not. This decision was the attempt by the rating agencies to reinvent themselves as anticipating rather than responding to changes that have occurred. So they are really basing that downgrade on the expectation that the political process will not provide the solution. Judging such political developments is a very new role for the rating agencies, though.

SPIEGEL: As an investor, do you listen to the rating agencies?

Soros: Well, I do not, but many other investors do.

SPIEGEL: The credit rating agencies are accused of exacerbating the crisis. Do you think the role of the rating agencies in the financial system needs to be scaled back?

Soros: I do not have an answer to that.

SPIEGEL: There are no alternatives.

Soros: Frankly. It is an unsolved problem in my mind

SPIEGEL: As an investor, would you still bet on the euro?

Soros: I certainly would not short the euro because China has an interest in having an alternative to the dollar. You can count on China to back the efforts of the European authorities to maintain the euro.

SPIEGEL: Is that the reason why the euro is still so strong compared to the dollar?

Soros: Yes. There is a mysterious buyer that keeps propping up the euro.

SPIEGEL: And it is not you.

Soros: It is not me (laughs).

SPIEGEL: In the end, will China be the only winner in this crisis?

Soros: China, of course, has been the great winner of globalization, and if globalization collapses, the Chinese will also be among the losers. So they have a strong interest in preserving the current global system. However, in some ways, they have been just as reluctant to accept it as the Germans. Germans have been hesitant to accept responsibility for Europe, and the Chinese have been hesitant to accept responsibility for the world. But they are both being pushed into it.

SPIEGEL: Mr. Soros, we thank you for this interview.

Interview conducted by Gregor Peter Schmitz and Thomas Schulz

Easy Money Banked, Now the Skill

2011-08-16T12:18:00.004+10:00

After the wild gyrations last week, where 7% range days were the norm, we now have some semblance of normality. The week that past and some key levels: http://macromon.wordpress.com/2011/08/14/week-in-review-can-the-european-center-hold/

Are we now back in the range bound markets?

Looking at some key charts, the AUD has retraced half it's selloff from 1.1 to the low 1.00 - sitting squarely 1.05 today. We may see some resistence here before floating slowly higher.

Mean reversion trades: http://www.robertsinn.com/2011/08/14/when-mean-reversion-goes-horribly-awry/

The jury is out whether or not this is a dead cat bounce as a healthy bounce should have stronger volumes in its rally - http://goldstocksforex.com/2011/08/15/what-a-real-bounce-looks-like/
If we think the market is going to trend lower -then we'd be looking at setups that resemble bear flags to short: http://www.upsidetrader.com/2011/08/14/so-many-bear-flags-so-little-time/

If the markets continue to stabilise and scramble positions in the liquidity trade, then we'd stick to the probability that we're still in range bound mode, i.e mean reversion mode, so we'd be staying long until we closer to the top end of the trading ranges of the majors.

Wayne Swann's comments of the AUD likely to remain higher sounds good for the carry trade - and whilst we still have the risk of a possible rate cut next month, we still have a good 2 weeks to ride the current rally before a possible re-rate lower.

Some ASX dividends dates

2011-08-15T13:50:00.003+10:00

Markets are starting the week in the green, after last week's rallies, we proceed cautiously in adding to our long positions, starting with some upcoming dividend plays.

Sourced from www.dividendtrader.com.au

I like the following dividend plays

JBH, 17/8/11 (ex-div) , 2.6%
TAH, 19/8/11 (ex-div), 7.72%
MGX, 22/8/11 (ex-div), 3.56%

The strategy would be to, buy in catching a intra-day low bid, then try to ride the 2-5% range that is likely, or to hold to ex-div date, and hold it til price goes post-div. Simple strategy, but likely to work in a flat, to recovering price environment.

Redacted Version of the August 2011 FOMC Statement

2011-08-10T11:17:00.002+10:00

by David Merkel http://alephblog.com/2011/08/09/redacted-version-of-the-august-2011-fomc-statement/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheAlephBlog+%28The+Aleph+Blog%29&utm_content=Google+Reader

June 2011	August 2011	Comments
Information received since the Federal Open Market Committee met in April indicates that the economic recovery is continuing at a moderate pace, though somewhat more slowly than the Committee had expected.	Information received since the Federal Open Market Committee met in June indicates that economic growth so far this year has been considerably slower than the Committee had expected.	Shades down their view of GDP again. I think they need to hire better modelers.
Also, recent labor market indicators have been weaker than anticipated. The slower pace of the recovery reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan.	Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up.	Shades down their view of employment further. Wishful thinking regarding transitory factors disappears… Japan does not have that big of an impact on US employment, nor do food and energy prices, which have been going up for some time. (See 2 boxes below.)
Household spending and business investment in equipment and software continue to expand. However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed.	Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand.	Shades down their view of household spending, otherwise similar.
	Temporary factors, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan, appear to account for only some of the recent weakness in economic activity.	New sentence that takes back part of their wishful argument from last month. They were grasping at straws.
Inflation has picked up in recent months, mainly reflecting higher prices for some commodities and imported goods, as well as the recent supply chain disruptions.	Inflation picked up earlier in the year, mainly reflecting higher prices for some commodities and imported goods, as well as the supply chain disruptions.	Basically the same.
	More recently, inflation has moderated as prices of energy and some commodities have declined from their earlier peaks.	What evidence do they have that overall inflation is declining? I don’t see it; this is more grasping at straws.
However, longer-term inflation expectations have remained stable.	Longer-term inflation expectations have remained stable.	Basically the same.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The unemployment rate remains elevated; however, the Committee expects the pace of recovery to pick up over coming quarters and the unemployment rate to resume its gradual decline toward levels that the Committee judges to be consistent with its dual mandate.	Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate.	Shades down their view of the recovery overall. The misplaced optimism is declining.
Inflation has moved up recently, but the Committee anticipates that inflation will subside to levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.	Moreover, downside risks to the economic outlook have increased. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.	Shades down their views on inflation, but for little good reason.
To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent.	To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent.	No change.
The Committee continues to anticipate that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate for an extended period.	The Committee currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.	Defines the “extended period to be 2 years.
The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings.	The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings.	No real change.
The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.	The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.	No change
The Committee will monitor the economic outlook and financial developments and will act as needed to best foster maximum employment and price stability.	The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate.	The Fed doesn’t have any good tools left. All they can work with are the bad tools, and work they will.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.	Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.	Note dissenters below.
	Voting against the action were: Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an extended period.	They would have preferred the old language not specifying how long the extended period would be at minimum. This is a pretty weak dissent; there is a lot more to be objected to in our monetary policy.

Comments

The FOMC defines the “extended period to be 2 years. Short-intermediate part of the Treasury curve flattens. Long end goes on a speculative tear. Hope the FOMC likes that, but it will only allow high quality borrowers to borrow more cheaply, not average people and small businesses. The Fed’s policy can’t bring down credit spreads, not that it should.
Still engages in wishful thinking regarding inflation, thinking that it is declining. Points at energy and commodities, but that’s not the largest part of what drives inflation.
Finally shades down its views on GDP and employment growth.
The Fed ends much of its wishful thinking regarding transitory employment factors… Japan does not have that big of an impact on US employment, nor do food and energy prices, which have been going up for some time.
The key variables on Fed Policy are capacity utilization, unemployment, inflation trends, and inflation expectations. As a result, the FOMC ain’t moving rates up, absent increases in employment, or a US Dollar crisis. Labor employment is the key metric.
The hawks finally flew with a weak dissent, objecting to specifying how long the extended period would be at minimum.
The Fed is not shrinking its balance sheet anytime soon.
The Fed is out of good policy tools, so it will use bad policy tools instead.

Questions for Dr. Bernanke:

How big is the effect on employment from higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan?
Couldn’t increased unemployment be structural, after all, there is a lot more competition from labor in emerging markets?
Isn’t stagflation a possibility here? I mean, no one expected it in the ‘70s either.
Could we end up with another debt bubble from keeping short rates so low?
If the Fed ever does shrink its balance sheet, what effect will it have on the banks?
Is it possible that you don’t really know what would have worked to solve the Great Depression, and you are just committing an entirely new error that will result in a larger problem for us later?

The Rip Your Face Rally on Bernanke's Moustache

2011-08-10T09:57:00.003+10:00

The US market started off way off it's pre-trading lows, to open 1.5% higher, before falling off aggressively on the intial statements by the Fed, with 3 members dissenting from action to stimulate (First time since 1992 this happened).

Then Ben delivered his patented market put - keeping rates low for another 2 years. He then backed it up with some unclear statements as to the how - 'range of policy tools'.

This brings up the much expected talks of QE3, treasuries losing 28bps to 2.03% - an all time record low.

asx200 makes a historic comeback

2011-08-09T18:09:00.002+10:00

After being down 5.5% early today, we saw a recovery of 7.11% off the lows, finishing above 4000.

I have set up my long AUD/USD and long EUR/USD positions for tonight's Fed meeting - expect some sort of crisis abating action - i.e QE3.

I also added BHP, WPL on the afternoon's run-up.

List of ASX stocks hitting lows after the sp500 downgrade

2011-08-08T19:00:00.002+10:00

The Bold Shall be Rewarded

2011-08-08T16:56:00.000+10:00

sp500 gets downgraded, Markets Puking

2011-08-08T11:23:00.005+10:00

Last week was possibly the beginning of a crazy bear move. I started the week thinking this would be a buy the dip opportunity, but I was starting to get stopped out in my long equity positions very quickly.

I closed off my positions in ANZ, BHP, WPL all which were positioning for a good earnings season and continued strength in the markets.

However, the current macro climate has offered some re-thinking of the long bias as markets are now taking a strong bear impulse smashing all index support lines on the sp500.

Last week I shorted 3 contracts of AUD/USD the minute RBA kept rates on hold at 1.095, however my biggest mistake last week was not holding onto these shorts and closed them near 1.08 as both a portfolio hedge, as the markets tanked 5% on Thursday night. The AUD/USD is now a sessions later at 1.04.

If I had held onto the AUD/USD shorts, my overall losses would've been about 75% less.

The buying opportunity gets even more attractive today, there is a g7 meeting tonight and historically g7 meetings have been catalysts for market inflection points. We will have to wait and see.

Market Panics.. Good Opportunity?

2011-08-03T14:20:00.006+10:00

Sp500 fell off 2.00% last night and this is spooking all the buyers.

I still think we can buy this oversold price action, especially in high yielding plays/ high quality plays.

Continued USD weakness -

AUD got sold off hard yesterday on RBA comments about interest rates, however, it looks to be holding the 1.07 line in today's trading, near the bottom end of the rising channel in the daily. This is actually a 'healthy' sell-off for the continuing uptrend in AUD.

Suprisingly, the Euro held up fairly well and this is giving me small clues that perhaps equities are not selling off risk so hard.

I get a sneaking suscipicion that this current sp500 sell-off isn't an equity to bond market trade (i.e flight to safety); it's just a re-allocation of funds between US to other better yielding equities for the time being.

A potential catalyst could be an unexpectedly good payroll number on Friday. We'll wait and see.

China equities remained flat today, Aus200 is very much near the bottom of it's range - this is the time to load up.

PMI flushing the toilet, and shaking out all the Longs

2011-08-02T15:30:00.003+10:00

So yesterday's trading session started off very well, banking some coin in sp500, AUD positions. However I got greedy in my portfolio exposure adding CFDS on a euro/usd setup on the hourly, which got flushed out 250 pips in a matter of 1 hour as the US ISM figures come in 50.7 down from 50.9 last month and way below the 54 figure that the market was expecting. This compounded the downgraded growth figures of last Friday.

Today's crazy volatility saw the sp500 take a huge turnaround, from being up 20 points in the futures to being down 15 points at the session's lows. These are the volatile trading conditions that may break me before I get to the end of 5000 trades if I don't stick to my risk exposures and management in my overall portfolio.

Trading the US debt agreement

2011-08-01T19:36:00.003+10:00

The euro spiked earlier this morning during Asia, then formed a bull flag as part of a head and shoulders - this is a chart formation that the masses are seeing, and the continuation of the price action is very likely.

As I type the trade has broken out from the Head and Shoulders pattern on the hourly, which we can see offered a very tight stop loss of 1.437 on the 10 minute chart.

Getting the target on 1/3 of the position will be from taking the low 1.425 from the breakout point 1.44 to get a 1.455 target.

I've taken a max position here as the fundamental newsflow and the price sentiment will remain positive at least until tommorrow and possibly a continuing relief rally during the week.

US Debt Deal - As expected Down to the Wire

2011-08-01T10:17:00.005+10:00

Reuters Claims the debt deal is close, the markets this morning look to be in agreement, positioning their bets for the upside.

I was one step ahead, getting long AUD 1.09856, and long sp500 at 1291.

Some good links over the weekend

Who to Blame?

Boehner's dilemma?

How the British Resolves Budget votes

Who is holding federal debt

More details about the plan, essentially republicans want budget cuts and no tax rises, while democrats want tax rises with continued spending to increase stimuls in the economy

a bloggers thoughts on the possibility of each party's gains/losses and why the democrats may cave

As Expected Inflation is in the News

2011-07-27T11:50:00.003+10:00

Australia got hit with inflation higher than expected..

AUD shot up, and is now breaking to new year highs. This is doing well for my AUD long trade.

Trading Around the Debt Annoucements

2011-07-26T12:54:00.003+10:00

Markets were holding up decently after a rough start yesterday, with the sp500 futures dropping 12 points in Asia trade - I faded this move at 1332, but was unable to offload it at the day open price which is almost hit at 1344. I closed the trade as a scratch.

The AUD trade yesterday was much better timed, as I had planned the trade to go long at 1.08, and the price touched this level, which I was able to offload half at 1.085, then repick up some positions today on the 1.88 breakout. The AUD long trade seems to be a no brainer at this point - USD sovereign issues, carry interest, commodities/inflation themes, risk/peripheral economy trade. The question is rather how much leverage do you want on the trade.

All the equity markets are likely to rally as there seems to be no real negative news despite the US uncertainty. Tech is still holding up well.

I added GBG to my portfolio at 81c as it hovers near the lows of the year, but has recently spiked on high volume, which is likely to see some short term bounce towards the 1.00 level.

I'm trying to get overweight commodity producers and add a Oil producer to my portfolio as the themes from debt issues shift back to the ever present inflationary concerns in the coming weeks. I'll be looking to add some WPL on any weakness.

Japan's case of ratings downgrade - not a huge deal

Weekly Wrap

2011-07-22T12:09:00.001+10:00

Friday ended flat, to end a week that had a positive bias. There were some decent housing numbers but not so great employment numbers from the US. Greece got a haircut on its debt, effectively a default, but perception seems to be everything in the market and the prices moving higher in the euro seems to be some risk on for the time being.
All the Italy debt media coverage seems to have subsided, as austerity measures have been put in place.
Gold is holding 1600 - there seems to be continued inflation/sovereign risks being priced in.

I took a long position in the AUD in the 1.07 range, for the 1.08 consolidation breakout, finally breaking my losing streak that spiraled since the euro one day flip on Italy.

Whilst reading 'More Money that God' by Mallaby this weekend; I realised that in the 90's we had both the Asian Crisis and Russia default on debt and now we have the Euro Crisis. In comparison, the Asian crisis seemed to have lasted a shorter period of time, but the shakeout (and recovery) was greater. My impression on this current Euro scenario is that the liquidity and debt injections from the euro bank is a key stabiliser; albeit the 'can being kicked' further down the road. This delay of the inevitable seems to be a concern with sluggish economic growth in the region - Asia had high growth going for them after the shakeout - what will the Europeans produce to get out of this slump?

On the US Debt front, it looks like it's going all the way down to the wire, as both parties are probably going to come to some agreement by the coming week.

Either way, the price action depicts a rally this quarter, and the markets to begin the weak may be uncertain, but a retest of the AUD at 1.08 then will look to hold this position to the year's high at 1.10. I may look to hedge the position with short EUR positions as it is retesting the upside of the trendline near 1.44.

I've added heavily to my equities portfolio the past two weeks; PAN, BHP, CSR, ANZ.

Rocky Humbert Speaks of when Countries are Riskier than Companies

2011-07-20T17:05:00.001+10:00

It's a scary world when countries become riskier than companies.

Rocky Humbert responds:

I'm probably being dense, but I still don't follow your logic. You first sentence doesn't address my point about what's happening in the PIIGS right now — sovereigns are being shut out of the bond market, but blue chip borrowers are conducting business (pretty much) as usual. The rising sovereign interest rate seemingly is becoming less and less relevant to the conduct of business to business lending. In pointing out this 7-sigma phenomenon in a private correspondence with a very knowledgeable spec this morning — that this is a a very different world than we've seen for the past 40 years — the spec replied, "[This is closer to ]the world that JP Morgan inhabited, where sovereign credits were more risky than sound companies and the banks bailed out the Treasuries. I grasp what you mean in the context of not-owning-risky assets when things seem uncertain. However, this is a mindbending paradox. The risk is arising from the riskless asset. So if the riskless asset is becoming more risky, does it follow that the risky assets are proportionally more risky? Because if you sell the risky asset because you're scared of the riskless asset, do you buy the riskless asset even though it's becoming risky even though it's what made you sell the risky asset to begin with???

Key Action Points for the Week

2011-07-18T16:00:00.000+10:00

- Earnings season has arrived, as we see 36% of sp500 market cap reporting over the next 5 days.
- Initial Claims on Friday morning
- Europe sovereign crisis: Wednesday's Eurogroup meeting, Thursday's Euro Council.

I think the action on Thursday may be volatile, and the leadup will see some trading range action. Sell euro at 1.416 and buy euro at 1.4020.

I have an bias towards equities recovering once the US debt issues and Euro meetings come to some certainty, so I've been picking up some stocks that will benefit.

BHP, PAN have been added to my portfolio, positioning a commodities rally in the next few weeks.

I plan to add my position of SBT as it's near the bottom of the 50-60p range, with the LAD takeover talks still in process. SBT takeover is a likely scenario given LAD attempts to stay inline with WMH growing online presence with its partnership in PTEC.

PTEC will also be a buy into the results - I expect a number in line or slightly below consensus, which may trigger some profit taking - a good opportunity to get set for the quarter.

Sp500 Value Range

2011-07-13T00:41:00.000+10:00

Yesterday's Action saw the most volatility in one trading day in global market's I've seen this year. We started off heavily down in the sp500 futures, hitting the 1300 level, before making a fast u-turn, seeing a recovery during the US session to 1320 - almost on zero real catalysts, then a short sell-off as Ireland gets downgraded.

I was heavily short on the euro - which turned into a small loss, which was also compounded by my short trade in sp500 in the value area which got stopped out.

We are sitting squarely in the middle of the trading range - which is the Value area - the strategy here is to get long if it stays above 1310, and short below, whilst adding long exposure on a breakout above 1360 and short exposure below 1260.

Euro Dollar Targets - As Italy Falls, we must Press Our Bets

2011-07-12T16:13:00.002+10:00

This could be the trade of the 2nd half of 2011, the uptrend is now clearly turning into a downtrend, and it may continue on until the end of year.

A year end target of 1.34 is legitimate, a trend and technical target of 1.31.

Aussie Carbon Tax - Summary

2011-07-11T17:54:00.000+10:00

The carbon tax will largely be borne directly by a narrow number of companies and sectors.

According to the 2010 NGER data, 90% of emissions are generated by 6 sectors:

Utilities 48%
Metal and mining 25%
Energy 7%
Steel 4%
Building materials 3%
Transport & logistics 3%

The table below largely breaks this impact out by company. This shows our estimates of the first year (FY13) earnings
impact assuming 0%, 66% and 94.5% compensation or pass through at the corporate level on total earnings (excluding
any additional assistance packages outside of free permits). This is a first take and provides a high level assessment
of the relative impact by sector and company.

Stocks like Bluescope (BSL), Onesteel (OST), Alumina (AWC) and Virgin Blue (VBA) were some of the hardest hit
today.
In contrast, some of the winners were Infigen Energy +7%, Geodynamics +22%, Ceramic Fuels +8% and Carnegie
Wave Energy +22%.

How much Stress Can the Euro Take?

2011-07-11T17:21:00.003+10:00

Now Italy is the cause of concern for the euro as an emergency meeting is held.

The price action looks like an imminent breakout to the downside of the triangle - a false breakout last week saw fast action to the upside, but is now facing heavy selling action - I'm short the EUR, and will add to the shorts on continuation below 1.41

I've also shorted AUD/USD, sp500, asx200 for short term risk off sentiment trades.

Macau the next Bubble?

2011-07-08T11:21:00.000+10:00

Macau is in a once in a lifetime Bull market.

Names that you can get into

Galaxy, SJM Holdings, Wynn Macau, Sands China

A concern may be that China growth is slowing - however, there seems to be a decoupling of china growth with Macau revenue growth.

There will be a cap on casino openings until 2012, and the current visitation levels have remained steady in the last 5 years.
The continued improvements in infrastructure continue, the levels of visitation is likely to increase, which effectively will prolong the revenue growth.

Continued developments from the major players in 2012+ will likely see continued tourism growth and demand for Macau services.

Carbon Tax Likely to Pass, but What then?

2011-07-06T13:09:00.005+10:00

- Markets are off slightly this morning, this looks like a slow grind upwards in July.

- Picked up bsl, and ost on price action out of congested range - with the catalyst of carbon tax exemptions for steel producers for 2 years.

- Commodities are up across the board, but for commodity equities we should wait until the carbon tax details this Sunday. Gold is holding up well, and NCM is now on the radar.

- I expect Macau to continue it's revenue growth over the 2nd half of the year, and expect Galaxy with its newest hotel to be the main benefactor of both the increasing revenue trend, with market share gain and increasing margins.

Data

- retail sales came in -0.2% v expectations on 0.6, RBA keeps rates on hold as expected - unlikely to raise for the rest of the year

- Moody's cut Portugals rating - Continuing the Euro woes, however seeing some resilience in the eur/usd pair this morning

- ECB rates tommorrow - will be the next catalyst for eur/usd

- and the big one.. US employment on Friday.

Euro and other Positions

2011-07-04T11:01:00.003+10:00

The Euro is breakout out on the daily wedge, I waited for a small retracement on the 10 minute before entering the position.

Whilst the euro issues remain, the rate hike expectations and the current risk on upswing may continue at least a few more sessions, even on lower volume.

Market Beta's On

2011-06-30T13:35:00.019+10:00

It's undeniable now, the markets are definitely back to risk-on mode - sp500, gold, euro, aud all overcoming their resistence levels. This may continue at least into the first week of July as people start resetting their equity portfolios.

Some key positive newsflows last night:
Greece vote came in despite the protests
BoFA reach agreement on its debts
AUD back to its winning ways

Interestingly my longs in the eur were stopped out on some very sharp whiplash action I got set at 1.44, then go stopped out at 1.433; i.e I bottom ticked my stops. I started yesterday's session bearish trying to fade the action, then was bullish mid-day on the 1.44 breakout, and was stopped on by US open. The volatility is killing me when I'm away from my computer.

However, I picked up PAN into my equities portfolio yesterday, and this morning added some beta, with RIO and FMG getting thrown into the mix. PAN and RIO look awfully cheap.

I did a quick and dirty corr on my equity holding for the past 6 months and they look a little too cosy.

	rio	fmg	pan	gns	cvn	sbt	bpty
rio	1
fmg	0.822346	1
pan	0.854976	0.663739	1
gns	0.687508	0.41117	0.823953	1
cvn	0.794955	0.557788	0.930432	0.830988	1
sbt	0.60632	0.420213	0.698344	0.707208	0.773388	1
bpty	0.599707	0.39698	0.77788	0.791088	0.867457	0.784906	1

Contingency Plan if Greece rejects austerity

2011-06-28T11:42:00.004+10:00

Ok here's the news report on EU having a plan 'B' before the vote tonight

From a game theorist and market psychology perspective, a possible reason why EURO officials would offer this statement in advance is that they are putting a high weighting on a rejection from the Greeks regarding the austerity measures.

This is the equivalent of a earnings warning from a company from a weak performing product line before it's actual earnings release- it seems immaterial, but market sentiment may punish the whole company with a sell-off in the mean time. This is a way of tempering negative expectations if they happen to form in reaction to any rejection of the plans.

The market is trading a touch below 1.43 and the trading range will likely hold between 1.41 and 1.43 until the vote is in. My bet is that greece will come in with a counter offer or ask for more time - delaying the inevitable.

The Euro Digest

2011-06-27T11:07:00.000+10:00

This week we'll see the Votes on Euro, and pending the outcome we may see price tone being set based on the outcome - likely to see increased volatility.

The opinion is still widely varied so it seems like it will be a coinflip at this stage. Since I'm a betting man, I'll go with my short positions, as the trend is still down.

Some reading for the EURO

Soros indicates some country will leave EURO at some stage
China PM indicates support for the EURO
Political Cross Currents within the EURO

and the rate hikes are looming across the globe, as inflation remains persistent.

FOMC tonight

2011-06-22T16:57:00.000+10:00

Euro: Got stopped out trying to catch the '5' wave turning point. The market sold off on the greece bailout, despite it's positive effects. A sell on the strength of any rally seems to be the key play still seems to be the correct play.

QE3 obviously unlikely given the current inflationary concerns, the FOMC may state a more conservative statement to reduce inflationary expectations. A qtr ago, they bluffed about inflation being a non factor, now that there are signs of inflation, they will adjust their rhetoric to minimse the negative impact of inf. expectations.

Range bound trading expected until tonight's FOMC statement, however I am taking a short 15 contracts on sp500 with an obvious statement by the Bernanke claiming that it will be unable to operate monetary easings due to inflationary data finally showing some concerns.

Gold is the only likely risk on trade that will perform if markets go bearish again tonight.

Intermarket Analysis

2011-06-21T13:20:00.000+10:00

Oil
Oil has been breached of it's key supports, and remains below the 100 line.
Oil 4 month Lows

USD
The US dollar has shown signs of strength, and despite the continuing eco data pointing towards weakness, the risk aversion trades are taking hold across the markets and the commodity prices are likely to face headwinds.
Dollar Bear Market Ending

Gold
The gold may start decoupling from other commoditiesif it maintains it's inflation and sovereign price premium.
I have tried to trade the gold equity miners in the past months without much success, and it seems that the commodity is outperforming the equities by a fair margin. Not sure what this implies, yet.
Miners tanking

China
China is completely lagging any market recoveries, and the rising of interest rates with ticking CPI may be too hard to overcome in the coming year to create any asset price momentum.

EUR
The political games being played within the currency are causing volatility within the currency. On the greek government front you have the Greece uprising against proposed austerity measures, on the euro board we have Germany who doesn't want to bear the risk of another countries economic malaise, and today we realised that Moody has interpreted the debt rollovers as sign of default. Moody's statement saw a short sell-off, but it has abated.
Germany seethes

AUD
The RBA meeting saw some dovish comments, based on inflation concerns, but nothing revealing beyond Stephens comments last week. Based on the technicals, I expect range bound to distribution selling of the AUD, and a break of 1.44 will see an easy test of 1.02. This would be my favourite short if it wasn't for the carry interest that makes me trade around it, as opposed to just flat holding it to target.
Dovish tone on rates

Greece near the End?

2011-06-16T12:53:00.001+10:00

Greece was unable to come to terms with their funding last night, and US registers highest inflation with core inflation figures looking like they are definitely ticking up. The USD spiked up largely in part with both the two themes of risk aversion and qe3 now probably not an option. As Santelli calls it, we are seeing good ol' stagflation. My short euro and aud trades are working out, I've closed it for the intra-day to re-evaluate as they are threatening to breakout to the upside in the short term.

Week Review

2011-06-11T17:12:00.000+10:00

Could it all be a case of something as simple as qe2 running out and momentum now playing a short reversal?

The easy trades are almost most definitely over, now alpha will determine most of the gains over the next qtr.

Going towards the end of the year, without a fed driven stimulus how do we create this alpha? Earnings seem to be coming in line with expectations, however gdp growth figures continue to remain revised to the downside.

All green shoot datapoint are now clearly over, with the inconsistent unemployment data in the US, the stalling employment in Aus, and the continuing Euro sovereign issues.

All global rate hikes seem to be on a temp pause right now, almost begetting the US to follow suit before they continue towards price stability.

Purchasing power parity effects and the skew of carry trades is covered in this article. Betting on carry trades is like betting on a valuation spread.
http://www.mebanefaber.com/2011/06/10/currency-carry-it-depends-on-the-valuation/

I've also been reading Invisible Hands by Drobney - a great book of interviews with hedge fund traders, and how they handled the 2008 GFC - most of the traders not having a losing year even during those horrendous downswings. It's interesting to note that most traders mention the importance of understanding the changes in liquidity during times of crisis and how to manage and position your risk as a dynamic system.

I have currently shorted the AUD/USD, added PENN to my long term shorts, and short the asx200.

My bias is now for a continued moved to the downside. I banked the sp500 1292 as my moving stops were hit, but have repositioned the other positions to incorporate my short term bear sentiments. I remain that the USD is going to bounce, how far I don't know, but I'm expecting AUD to test the 1.00-1.02 area before we see how things are shaping out around the economy.

The Frail Markets, Where Shall You Run?

2011-06-07T12:09:00.001+10:00

I've been on a few weeks break from writing due to my CFA studies, but I'm back now.

Firstly, the sp500 had hit the 1300 target that I had expected, but given how it retested and then fell through in the past 2 weeks, this is indicates a strong price action, in which I plan to hold my short position, which is also a hedge in my overall portfolio. I have moved my stops to lower, so it should be ok, the markets seem to be in sync with lower risk for the time being.

Euro staged a huge rally based on the on again off again greece and portugal debt issues. After seeing a low near 1.40, a swift rebound to 1.46, has allowed a new swing short position to be set. Short at 1.46379 with a 1.40 target. I plan to load up 2 more contracts if the move continues.

AUD is in a doghouse due to it's economic data likely to put a cap on the interest rate hikes for the time being. Employment ads fell, housing data was weak, and retail data is subdued. I see AUD heading below 1.05, and may hit the 1.00 - 1.02 level in which depending the US economic situation will re-evaluate.

Global Inflation is Real, US inflation is yet unseen

2011-05-11T12:55:00.000+10:00

Regardless of the current US inflation rhetoric - it still remains below the China and AUD inflationary data. The key to the current carry trade of low interest rates in the US v Global rates is the key to the USD weakness.
AUD trade

The inflexion point of the USD may be the first real inflationary data print (not the obvious hiking of rates) of the hidden inflationary pressures of the US - once the data points print the inflation numbers, the forex flows may underpin a structural shift in USD strength.

We have seen the small prints of possible traders hitting the eject button, however, the current rebound across the board may limit the downside until the economics actually catches up to the expectations.

Outlook for the Day

2011-05-06T16:35:00.000+10:00

We saw a good recovery in the sp500 based on the employment numbers, however euro tanks further on greece rumours.
AUD held up well on hawkish comments about inflation.
It is now becoming clearer that the emerging markets inflation numbers are impossible to hide (unlike US inflation) and they will depict lower real returns in the equity markets in the next few years; (Mauldin's book on bullseye investing covers this in a great deal).

Trade setups
The AUD will likely have some support in the coming week and the the budget talks tommorrow may play a cue for the USD for the rest of the week. If I had to take a trade in this session, I'd be shorting gold/ long oil and shorting AUD as it nears it's 50% tech levels, however as short term momentum is still up for AUD and gold, I'll wait to let the market show it's hand before taking any positions.

Trichet and US unemployment Deliver double blows in Sentiment

2011-05-06T10:35:00.001+10:00

So the recession trades are in play - euro falling hard off last night's trichet comment about monitoring closely the data points - traders were looking for obviously more hawkish comments. I added the sp500 position but got stopped out at a small profit overnight. The rising umemployment claims against an expected drop has sent some warning signals that not everything is rosy in the economic recovery.

Going forward I see the continuation of this current selloff - whether it be liquidity driven, profit taking or sell in may and go away, I expect at least a hard retest of 1300 on the sp500. Gold seems to have some support near 1450 but it's the headlines of commodity prices retracing and history that can give us an estimate of what to expect. The oil was near the highs before the last GFC crash, and if we really are in a secular bear market, then this is the beginning of some horrendous downmoves. However, I remain optimistic and think the sell-off will remain moderate and we'll remain range bound in the market for the next few weeks before some buying in the final qtr of the year.

Getting Shorts Set

2011-05-05T01:51:00.000+10:00

So, the inflation trades worked out to the tune of, spot gold for $200, and KCN tanking like crazy and taking my biggest hit of the year so far for $700, and ABG a scratch. Basically not stoked with how the bet panned out, given that my short term call was correct. Might be an example of getting too cute, with not enough competence when it comes to taking positions in equities as part of a 'macro' view.

To shore up my weakness in equity valuations/calls - I've been doing some heavy lifting, or shall I say reading - currently reading best practises for equity research analysts, picked up the little book of valuation, bull's eye investing by mauldin. All look promising so far, I've realised that my excel work, needs a lot of work.

Tonight I've put down some short positions on the euro, aud, gold, and sp500. This is my biggest short bet of the year so far, I think the fake breakout viz the Osama news, and the current reaction to weak ISM data has set the right scene for US to follow the commodity price downturn in the last few sessions.

As you can see all price flows are breaking supports and are now turning lower intermarket themes don't lie, they just take time.

Let's call my basket of shorts, the 'recession trade' for now. Got about 95k loaded up ready to go. This is my biggest swing year to date, will plan to hold for as long as the tape allows.

The Inflation Trade Bets

2011-04-28T19:50:00.000+10:00

So last week I was able to profit on the euro and aud rises against the weakening USD. The rhetoric continued last night with Bernanke coming in with more excitement from his Goatie as he delivered the same broken record statement: "We are not suffering inflation, we'll keep our policy in check". He remains firm in that inflation is in check (although 40% of the core inflation is in US housing - but the other 60% is clearly ticking higher) - and that the moment inflation is an issue that they'll take steps to thwart it. He also implied that the external influences of inflation like oil are transitory; that's comical in itself.
We do however have seen that in a fiat-related economy, deflation is a near impossible event - unless of course you're Japan, where everybody is tight as5 and whores , I mean hoards their cash.

I added some heavy exposure to Gold equities in AUS (KCN) in Britain (ABG) and also took 1 contract position in Gold mini contract. The total additional exposure is now about 25k more, which is practically putting my gold bet at about 50% of my total risk.

The gold mini will probably be held with a tight stop, and the gold equities, could be a 3 month + hold.

trade KCN:

trade ABG:

trade spot Gold:

Getting it Right

2011-04-20T19:52:00.000+10:00

The above chart is of the AUD/USD of the past few days, and 2 trades completed, and one trade currently in play. The red stars indicated the period of the USD downgrade, and the blue circles are last night's recovery in the markets. The green trade is tonight's trade, in which a very strong resistence line has been broken, and it looks like it is lights out from here.

So yesterday I closed off my AUD, EUR, gold, SP500 shorts. All had good gains except the gold short. The US downgrade, saw only a short period of losses, another fakeout to the downside, is likely to see shorts popped, and a continued flow into risk on sentiment.

I managed to not just close out AUD, EUR but actually go long, respectively with 20,000 each.

During the day I closed out both positions near their resistance lines, then I sat back to see how the levels resolve.

When I saw the AUD clearly and easily break the 1.06, I reloaded my position for 30,000 and will keep stops 20 pips below.

I've also bought some BPTY - partygaming with the regulatory issues now playing to a net positive; the earnings this qtr if good, will see the stock trade above 2.00.

Game Changing US indictments

2011-04-17T12:44:00.000+10:00

So pokerstars and fulltilt are going down.... This can bode well for the listed operators partygaming and williamhill or US will start to allow local operators to form online companies, which would likely go to partnerships between land based casinos in Vegas with online tech companies. In the case of partnerships, scouting out potential tech companies would be a better leverage to the regulation that buying the land based casinos - but if I had to take a bet on a land based casino, it would obviously be harrah's entertainment group - because of it's long running association with the world series of poker.

Some links.

traffic: http://pokerscout.com/

statement

http://www.justice.gov/usao/nys/pressreleases/April11/scheinbergetalindictmentpr.pdf

guy who took down fulltilt

http://www.businessinsider.com/boy-genius-online-poker-scandal-2011-4

sportingbet has made it's payments

http://www.bloomberg.com/news/2011-04-15/internet-poker-entrepreneurs-charged-with-fraud-money-laundering-by-u-s-.html

summary

http://www.pokernews.com/news/2011/04/online-poker-big-three-indicted-10218.htm

law clears

http://washingtonexaminer.com/local/dc/2011/04/dc-internet-gambling-law-clears

Tactics

2011-04-14T16:16:00.001+10:00

I've been trying to time a correction for the past week, with not much success.

I tried shorting the ASX 2 days ago, stopped out for a 20 point loss, before yesterday's 90 point fall.

I tried shorting AUD for a large position, getting stopped out for my largest yearly loss, before the AUD falls 2c due to reappearing risk off sentiments coming in a few days late.

As they say, being early is the same as being wrong, and in the case of short trading days, and tight stops, the more likely you are to be wrong.

I have no idea how far this correction goes...

Plan of Portfolio Tactics:

short the euro (although US dollar weakness remains the key risk to this trade http://blogs.wsj.com/source/2011/04/12/dollar-has-come-down-with-a-heavy-cold/ and obviously yield differentials http://blogs.reuters.com/eric-burroughs/2011/04/11/the-carry-trade-never-dies/), then short some oil if the correction continues, buy some QAN as AUD increases travel appetite locally (or US airlines to take advantage of AUD ARM(http://ibankcoin.com/chessnwine/2011/04/11/put-your-head-between-your-legs-and-kiss-your-airlines-goodbye/) lower oil prices: http://blogs.wsj.com/marketbeat/2011/04/12/guess-what-transports-love-lower-oil-prices-shocker/?) on the correction and get my long term leveraged positions into MACAU stocks. Whether the positioning will occur sequentially or concurrently we'll have to wait and see how fast the market decides to move (as well as the peripheral newsflow).

On another interesting note:

what to do what to do about the paladin and uranium??

Aus UE hits low, Euro rate hike tonight

2011-04-07T15:55:00.001+10:00

So the AUD is facing some key headwinds
- china continuing to raise rates
- Australia going into a suprise deficit
- The current price run-up in both AUD and equity markets

The current trend is very bullish and very strong, so what did I do? I shorted the AUD/USD going with the fundamentals, however being early is just as the same as being wrong, so if the next two days of price actions are still bullish, I will likely close my positions.

Tonight's euro rate hikes are likely to provide some selling the 'news' action, especially if the corresponding euro statements are not as hawkish as every analyst is expecting.

Week Ahead

2011-04-04T13:17:00.000+10:00

The current reflex rally since the Japanese crisis has been swift and v-shaped. The market is now reaching a decision point as to whether the new highs can be sustained, or we are just at a range bound state.

Current Pros:

- US payrolls and unemployment numbers are continuing to show improvements

- Japanese situation seems under control

- The Libya tensions have been easing due to the US/Nato intervention; however, oil continues upwards.

Current Cons:

- euro zone debt is still an issue.

- high oil and commoditiy prices have to be inflationary at some point.

- interest rates are rising across the global board, and US is just 1 or 2 qtrs away from being forced it's hand.

- market rising on low volumes - however, this has been not that important in the past few upswings.

Current Asset Movers:

- Oil, AUD, Gold all seem to be the fast movers in the past week, with AUD making v. strong highs - how far and long this will last is worth watching.

Current Newsflows

- The ECB and the RBA meetings are this week, might need to keep a finger on the trigger and plan some trades around this.

Trade Ideas:

- looking to load up on some macau stocks if the market gives me a shot

It's Always Good to wake up to a Bull Market

2011-03-25T08:55:00.000+11:00

--- if you're long to the hilt.

The Japan nuclear disaster had lead to a swift global reaction, and the markets have voted in favour of a continued bull run.

To that effect, I've decided to add to my long term positions; macau gaming through sands china and emperor resorts; sands being affected by the litigation and emperor at cheap valuations.

I've added playtech to leverage the more longer term theme of online gaming as it is a provider of software to major euro players like william hill.

I've also added goodman fielder which looks to be a deep value play, low p/e, great quality, but low growth. If the growth and cost factor can stabilise, should recover nicely.

The Japan Trades

2011-03-17T16:21:00.000+11:00

Has been awhile since I've posted, probably been trading a lot more than usual, and been learning a lot of lessons along the way.

I want to rehash a AUD trade that pretty much depicts the volatility of the market, and how when combined with leverage, you need balls of steel and a stomach that can swallow the shit that dish out in fear-factor.

So last Friday at 2pm the Japan earthquake broke out, and then the tsunami.

As you can see from the chart below the AUD moved swiftly to the downside and I got set at the red arrow - obviously repatriation and risk off sentiment should account for a move strongly to the downside. So riding the moment I shorted the AUD at 1.0006.

However, in life nothing ever goes so smooth - the market quickly turned around as people had thought the damages were not so bad, initially only 20 people reported dead, and just a few others missing.
With the euro bailout fund looking like a success for the euro, the AUD swiftly moved to the upside, closing higher at 1.015 and making my weekend sleep terrible.
Normally I would put a stop on my positions, but when there are situations as obvious as the Japan, where effects would surely be deflationary and risk off - I took double my normal positions without stops. When I woke up on Sat morning and saw that my PL was 700 in the red, about 2% of my total portfolio position, I pretty much puked. It was good that the weekend was there to let my emotions calm down and try to think about the situation calmly.
I still had no explanation of this AUD spike upwards, so I decided to wait til monday.

Then on Monday morning this week we had the radiation scare and uranium and global indices proceeded to tank, in the range of 1-3% then Japan further exacerbating 8% the next day.

The AUD soon followed suit, and the trade played out as I had thought it would, and I exited my trade .9880 - still a lot higher than the .97 reading we saw 2 days later.

Trade 569: short asx, another blue ball.

2011-02-22T10:58:00.001+11:00

This trade was a repeat of the stops being moved to my entry level working
against my overall trade. The vertical line shows the entry point, in which we
see a 10 minute breakout to the downside.
Then another test near that entry level - where we move our stops as the market sells off and subsequently gets closed out before selling off
quite hard into the euro session.
The Libya tensions added to the risk off woes and the trade with the 60,000 position
would've been a huge gain for my book if I hadn't been hasty to move my stops.