THE WAY I TRADE ? IT IS MORE LIKE A MINDSET THAN A STRATEGY; I DO NOT BELIEVE IN STRATEGIES. ANYWAY HERE IS HOW I SEE IT
UsdJpy mentioned here , I have added as planned. Next decision area around 84.50 on pull back. Wanting to keep the lower add-ons until BOJ governor retirement in April.
Update of the ES_F core long posted here . Next add-ons around 1460.00 on pull back.
About the UsdJpy here. Added before the long awaited barrier attack, called on twitter real time. I will lock some add-ons when we cross 83.50.
Shinzo Abe looms, Fed gonna twist or something again and Japanese economy in an unavoidable need of a weaker yen. Being a swing global macro trader is knowing why the market is wrong but entering only when it starts understanding it. Here we can keep significant loads during next year, allowing us to add longs with shorter term targets at no risk. After Obama elections I closed the beginning of the leg and its numerous add-ons, posted here, because of the market shifting on the fiscal cliff. Now the path is clear and even though the Yen can pull back time to time it will always seek its way North.
An interesting situation now on ES posted here . As you know I was planning to add some size around 1430.00 and 1460.00 but tomorrow we have the FOMC statement and this is prone to QE4 rumors and such. I’ll wait for Bernie speech, in hope to get a better price before adding and if it pops up I’ll do it on retrace. Anyway QE4 or not, the next decision area is the fiscal cliff deal, as I am seeing that monetary policy is now falling behind fundamentals, although a less dovish fed can bring the price at cheaper levels. Interesting to notice here that I am hoping to see the price going against my opened positions, it’s because it allows me to average the add ons at a better price.
Sorry didn’t post for awhile due to some sad events in the family. I am going to reduce my posting here to one or two posts a week until debut of January .
Anyway here are some updates of the running trades:
ES_F : Posted here. . Everything is on the chart, waiting for 1430.00 and 1460.00 to add on pull backs. Now heavily loaded around 1.4000 area and will do the same at these next two areas. Target is the Fiscal cliff deal for upper add ons.
AudUsd, Add ons 2 and 3 lock was triggered closing them with +60p. Add on 1 and initial position still running now around + 200p.
AudJpy: Initial position here still running with around +200p, remember that I have closed 3 add-ons already with +170p. I don’t intend to add again as I am heavy on AudUsd and UsdJpy.
UsdJpy: Core long mentioned here still running with +400p. Will probably lock some add ons after Abe’s election next week. Target is the unavoidable way weaker Yen.
Wanted to mention that I was starting to feel bearish about the Euro, but I am not very sure about it on the medium term. Will comment on this when I ‘ll be less busy.
Time for this week’s recap.
All the 3 add-ons called real time here or on twitter are closed with +170p. The initial position at 84.50 is still running and is now at around +140p.
AudUsd long: still running at around +80 p.
So, I am keeping the whole position on AudUsd for 2 reasons:
- The first leg that is AudJpy paid significantly already and is still holding near +140p with limited downside risk due to the Yen structural weakness.
- The second leg, AudUsd, is going to be shaken mainly on the downside as the market is expecting the RBA to cut 25bp at 88% odds on Tuesday. I don’t see this happening and I am Aud bullish on the medium term.
This seems like gambling, being in ahead of a highly expected cut. Not at all, even though they cut, this is already priced in at around 70% (seeing the 88% odds), therefore I could still see a fall near my lower entry prior to the release but I don’t see it below that level. I find it low enough to keep it. Don’t get me wrong If I were higher in the range I would have closed it before the week end.
UsdJpy core long: The whole position is still running with around +385 p and in the money long option calls at 80 and 82 strikes expiring Dec21. You know my intentions about this core position; no decision before the elections mid december. Since then I am going to add into at every significant level.
EurChf opportunistic long: closed +30 p very heavy.
Es_F core long: Largely positive so far. The chart is explaining it all. No decision before the Fiscal cliff deal if any. Will add on mentioned pull backs (see chart). The current level is of a significant importance, that is why I am accumulating contracts around there.
Have a good Week End.
Here is the update of the UsdJpy trade last mentioned here . I am posting this to point at my favorite intraday tactic, that is, the option barrier attack. A first attempt has been done last Friday and was rejected 10p before the level. This means that the barrier is well protected by the writers and that is why it’s always better to wait for a second test. There are several questions to answer when planning to join a barrier attack :
- How is the prevailing sentiment ? : Bullish
- Is that sentiment in sync with the longer trend? Yep.
After you have answer that, you can start thinking the surroundings over:
- Is there any upcoming catalyst that can help to gather momentum?. In today’s data not really.
- Is there any tech/price level on the path ? Beside the previous high at 82.89 nothing significant.
- Why the price is moving at this moment specifically ? : Weak Japanese CPI released this night, suggesting that deflation, which is the first BOJ and Gov enemy, is worsening.
- How many pips did we went already since the session starts? Is it in the upper limit of the normal range ? 50p, in the middle of the daily range.
Ok, Since I am already positioned, I ‘ll wait for a possible retrace during the London lunch break to add into around 82.50.
If I wasn’t already in and was playing it tactically, I would enter 40-30p before the level after it has been tested with a stop below the 80.50 support. TP half size and lock at BE to give its chance to the other half since I am bullish on the pair. Again keep in mind that it’s not an easy play. The positioning is already very crowded with bulls prone to TP around this level.
As mentioned in a previous post I am posting now my intentions about the SPX using the ES front month as a proxy. ES is a wild beast, working like a resonance chamber of current and near term market sentiment, amplifying and generating rumors, swinging sharply on headlines or staying put for several days. I look at it on the medium/long term only (at least 2 months), and play intraday moves just to add to a well established position.
I am rebuilding a core position taken last June and from which I closed all the add-ons after Obama election. At the time the focus shifted from the political uncertainty to the massive threat of the fiscal cliff. We had a significant pullback to 1340.00 and since then I was waiting for the price to return around 1400.00 before reloading, considering this psychological level as a support protecting from the downside. Now market is pricing in a compromise between lawmakers and should return to the previous highs around 1460.00-1470.00. That said, the market is very sensitive to anything about the cliff and can pull back sharply on any comment from politicians. I see those moments as opportunities to add into the position. I can do that because the risk premium is paid by the core at 1304.00 and I have already accumulated significant gains from the closed add-ons. Beside being covered already why am I rebuilding this position now?:
- The improving US economy, confirmed by more and more good numbers, mainly from the unemployment front and the housing sector. This was laso confirmed by the beige book.
- The open ended easing, targeting 7% unemployment rate decided lately by the Fed.
- The end of uncertainty on the political ground since President Obama election.
- The fiscal cliff meanwhile being a threat to the market is also an opportunity to add at a lower price and above all is able to push the price higher when the deal is done. This is important, because I don’t think that the market is going to fully discount the outcome ahead of the deal as it is a political matter with the usual surprises either side.
If i wasn’t already protected I would’ve tried, here at this current level, to start implementing a core position by splitting the size of it and entering on some strong positive catalysts.
Risk to the trade:
- No fiscal cliff deal but not that important on the long run.
- Fed less dovish though unlikely.
- Eurozone political difficulties as now I think that the main risk to the Eurozone is becoming political rather than debt linked. Bunderstag vote on Greek bailout, Catalonia independence, Italian elections etc .
As said in the last post here, I have added a 3rd add-on to the position. I wasn’t expecting Boehner to help, mainly after Reid pessimism this morning. Even though I thing that this Fiscal Cliff is going to be solved, what matters to us is the market fragility in these times of uncertainty. This upmove can collapse as fast as it popped up, but at the end it will return North, more because of the weakening of the Yen than of the Aussie. After the RBA meeting next week, the pair won’t remain an optimal choice probably. Until then it’s moving either in correlation with the UsdJpy or the AudUsd or both.