Trading Desk Notes - Feb 9thSubmitted by Polar Futures Group on February 8th, 2019
From the Desk of Victor Adair
Slowing Global Growth concerns have been hitting some markets more than others...German bond yields, for instance, have been falling steadily since early October...they are now nearing their historic lows made in the Brexit summer of 2016...while US equity markets, crude oil, copper and the commodity currencies have rallied from their oversold Christmas lows on the “Fed is done tightening” idea.
My macro view for the next few months is that slowing global growth concerns become the BIG story across asset classes (overshadowing the “Fed is done tightening” idea) with market sentiment becoming increasingly risk adverse which produces 1) lower bond yields, 2) wider credit spreads, 3) lower share prices, 4) lower commodity prices, and, 5) a stronger USD. Gold made its low for the year in mid-August 2018...just as the USD was making a 14 month high...and has rallied ~$150 since. Gold often trades as the “mirror image” of the USD but I think it’s also benefited from a “haven” bid just like the German bond.
German bonds chart – prices rise as yields fall:
My favorite trade the past couple of weeks has been long US 10 year treasuries as they rally on slowing global growth. The Eurozone bond rally helps “pull” US bonds higher and treasuries may also catch a bid if the stock market rolls over.
This week I bought S+P puts thinking that the rally from the Christmas lows may be rolling over.
I’m expressing my bearish view on commodities with short positions in WTI and copper. Both of these commodities (and the COMDOLS) have been strongly correlated with the bellwether US stock market since the turn of the year and may be rolling over.
I’m expressing my bullish view on the USD with short positions in CAD and NZD...they “rolled over” a day or two ahead of the S+P.
I trade futures and options and I’m quick to abandon my positions if they are not working. My 40+ years of experience trading these markets tells me that most of my trades will result in small profits or losses which more or less offset each other. I definitely want to avoid taking any big losses and hopefully I’ll occasionally get a big winner.