Sometimes, it seems I do the best in the market when I don’t do anything at all. I spent most of yesterday at the hospital, with my laptop (loaded with TradeStation) keeping me abreast of the market action. I love those wireless cards…although they’re a little slow, they do work. My grain positions remain hedged, where I would have been better off remaining at risk, as they’re poised for a nice rally. The spread portions of my grains are actually working. Gold and sugar keep going up, and I plan on buying some more sugar to add to my position. I remain confused about the stock market right now. The stock market has always been such a pain for me. I keep watching copper, and removed it from my screen to keep me away. Copper has always brought out irrational behavior in me.
January 26, 2008
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Good on you Jeff for trading your spreads and hedges well. This is not an easy equities environment at all. I got stopped out of my two trading positions, for which I bought short ETFs just before the market bounced.
Based on the volumes we saw at the lows, the Fed easing, stock buy-backs, and the timing, stocks SHOULD generally go up for a couple of weeks at least - maybe longer, but to me the one big boat anchor that could change all that at any time is the credit environment. Commercial real-estate may start coming down because of the trouble getting financing for large projects/deals. That would scare the crap out of everyone all over again.
Just think about what actually happened. Three massive financial markets - mortgage-backed bonds, junk bonds, and commercial paper - literally seized up; stopped functioning. That is a huge, unprecedented (since the 1930’s bank failures), systemic dislocation. A lot of businesses are still levered, and if they can’t roll over their debts, like the sub-prime mortgaged property holders can’t pay the resets, then companies will start hitting the wall and we’re into serious deflation - which will be disastrous.
Because of the still fairly robust economic activity around the world (though Europe seems to be starting to slow down, and the fact that Europeans and Asians likely don’t use as much leverage (I’m guessing here), I don’t think deflation is what we’re going to get - but’s its risky not to keep an eye on credit and have a plan B in case it starts seriously contracting.
Interestingly, I see the US dollar starting to hold its own soon - mainly because other central banks are now starting to move into easing mode themselves (Canada case in point), so that will have implications for gold and the interest rate complex (bonds, treasuries etc…
I haven’t done well trading equities to this point. The environment is not favourable to using stops. Equities are highly sensitive to news - positive will spur relief buying and short-covering; negative more heavy selling. Great environment for getting whip-sawed.
Hmm. I think I’ll just take the above and put it on my own blog too…
How’s Denise? Say “hi” to her for me.
Cheers,
George
Comment by allocator — January 26, 2008 @ 7:35 pm
On the topic above (credit crisis), read this excellent article I just found at http://www.atimes.com/atimes/Global_Economy/JA26Dj04.html .
Cheers,
George
Comment by allocator — January 27, 2008 @ 12:09 am
George,
That was a good article.
Jeff
Comment by masteroftheuniverse — January 28, 2008 @ 12:10 am
Agreed about the equities whip-saw, I’ve particularly noticed that in my own trades over the last month, and have developed some ideas to compensate for the present environment. Some of the whip-sawing is just violent and hard to believe, large moves can be completely reversed and then some.
I’ve noticed how magical it is when you are doing almost nothing and the market is flowing in your favour, and the opposite when you are frenetic and nothing seems to go right.
I was placing orders from a mobile GPRS connection on my laptop while travelling around Scandanavia in 2005, I remember the feeling I had as I was watching the cracker bull market in Australia lift my futures positions and deposit money in my account faster than I could believe as we were enjoying the post card sights, at the time I was naive enough to believe it would always be like that and it was a wonderful feeling
Comment by Andrew — January 28, 2008 @ 1:11 am