Trading Desk Notes - April 14thSubmitted by Polar Futures Group on April 13th, 2018
The Kenny Rogers school of risk management: “You’ve got know when to hold’em, know when to fold’em...know when to walk away, know when to run.” Song Here
I started this week with all of my trades going against me. I was short CAD and NZD and long puts on Gold and WTI. I was stopped out of CAD and NZD early Monday and I liquidated the Gold and WTI puts early Tuesday. I’d been money ahead on everything at the end of the previous week so the net losses were pretty small...but they were losses all the same. BUT...it was a good thing I got out when I did...CAD and NZD jumped higher Tuesday/Wednesday, gold spiked higher mid-week and WTI just kept rising all week...gaining over $5 to hit 3 ½ year highs!
I make money when I’m going with the market...if the market is going against me I want out. The most important piece of trading advice I ever got was to cut my losses, and let my profits run.
The stock market felt “on edge” this week...who do you believe about Syria? Are the missiles going to fly? And then what? Where is Mueller going? What’s Trump going to tweet next? Did the “trade war” with China dampen down with Xi’s speech or is this just a lull before things get worse? Price action was choppy and volumes were light.
The Canadian Dollar topped out with the US stock market in late January....fell ~5 cents to hit a 9 month lows in mid-March and has bounced back ~3 cents over the past 4 weeks. Maybe the market was too bearish at the mid-March lows...NAFTA worries seemed to lessen the past 2-3 weeks...the bounce back in the stock market seemed to help CAD and the 12% rally in WTI since mid-March has also helped. Western Canada Select has risen from ~ $34 mid-March to ~$51 now...a gain of ~50%!! The Bank of Canada meets this coming Wednesday.
The US Dollar Index hit a 3 year low as the stock market was making All Time Highs in late January. It has gone sideways in a narrow range since. Futures market speculative positioning is heavily negative the USD.
US short term interest rates continue to grind higher. The next Fed meeting is May 2. Speculative positioning in the futures markets is heavily negative short term interest rates.
My short term trading: I’ve had a good run the past couple of months but I was obviously “out of sync” to start this week so “going flat” was a good idea. One of my main trading ideas the past couple of months has been that the stock market looks toppy after a 9 year bull run. I’ve been shorting “bounce back” rallies that ran out of steam. I thought this week’s low volume price action looked like a weak “bounce back” rally and when the S+P made new highs for the month on Friday and then rolled over I bought OTM puts. The weak Friday close may simply be a case of people not wanting to buy ahead of the weekend...or maybe it signals weakness ahead...I don’t know. If the S+P trades up through 2,700 next week I’ll liquidate my put with a small loss but if the market drops below 2,600 it could build downside momentum.