Friday, May 18, 2012

Downgrades and Risk Management

Moody's Dowgrades Spanish Banks and there seems to be no positive macro catalyst for the next 2 weeks.  It is imperative to be managing risk when the markets are selling off rapidly - I have closed my long positions at AMZN and ATVI 2 sessions ago, reducing my leverage to more manageable levels.  My LULU shorts are finally working, which has provided a stress relieving positive return - and my QAG position has been a good position against the risk-off sentiments.  The rest of my portfolio is in a muck - the SODA position had screamed higher 30% post earnings, but has basically given back all that performance in 2 weeks of this euro mess.

Does this mean we are going lower? Yes, we probably are going lower, selling might intensify going into tax loss selling period for ASX in the last few weeks of may.  The overall economic climate may be improving, but the uncertainty in the Europe that dominated last year, may be a recurring theme again in the 2nd half of 2012; then there is a good chance we'll probably see underperformance for the year - however, I firmly believe QE3 will be on the table in June or July.  Soros has quadrupled his position in GLD this week and his obviously putting his bets in.

Some positions related to Gold and Silver that will be worth watching; GLD, GDX, AG, NEM, QAU.  My preference is QAU as the AUD hedge will allow for price return even when AUD will rise eventually with the rally in global asset prices.

After breaking lower from 1340 - we've seen easy pickings for the shorts down to 1300 - and we may see even more downside now, could hit 1250 easily, bounce just below that level before we see any sort of price recovery.