My best performing trades YTD have come from recognizing that September 3, 2019 was a HUGELY important inflection point across a number of KEY markets. The reversal in the interest rate markets on September 3rd was the epicenter of the inflection point...but the range of markets that reversed on or around that day is truly impressive.
The Bank of Canada and the Federal Reserve both roiled markets Wednesday...even though their initial communications were exactly as expected.
The S+P 500 index hit a new ATH today...up ~ 6% from Oct 3 lows...up ~11% from mid-summer lows...up ~29% from last December lows. We’re in the heart of quarterly earnings season...companies that beat are aggressively bid...companies that miss are clobbered.
Currency market trends often go WAY further than you can imagine...they develop a self-reinforcing momentum (which we used to call “Leads and Lags”) and then they turn on a dime and go the other way.
This was a perfect week to be reminded that trading is not a game of perfect. I was long stocks and crude and short gold early in the week...got cold feet and bailed out with tiny losses just before those markets moved hard against me. I was happy to have played just-in-time defense.
The major US stock indices fell sharply (DJIA down 1,200) Tuesday through Thursday as weaker-than-expected PMIs provided more evidence that the economy is slowing and as political tempers flared in Washington.
Political turmoil is having an out-sized impact on markets these days and it’s hard to not get sucked into trading on the latest political news flash or tweet. It’s not that the tweets and news flashes can’t move markets...they obviously do...but I want to trade the market not the tweet.
The attack on the Saudi oil processing facilities caused WTI to jump $8 to ~$63 when markets opened Sunday afternoon...but within a couple of days WTI fell back ~$5 to ~$58. The price jump was attributed to a risk premium build, fears of more attacks and/or retaliation, talk of $100 oil, as well as to the assumed loss of 5% of the world’s daily production for an indefinite time.
We’ve seen dramatic price reversals across markets since the Labor Day weekend...especially in the bond market where yields had their biggest one-week jump since Trump’s election.
The Canadian dollar up a cent this week trading at 76 cents after the Bank of Canada held rates steady on Wednesday and we posted an incredibly strong 81,100 gain in employment for the month of August. This move higher in CAD brought it to the middle of the small 74 to 77 cent range it has traded within this year.