July 20, 2013
July 18, 2013
Weekly update 7/18
After this mornings squeeze above all time highs I am quite comfortable entering short positions on a daily, weekly and monthly time frame.
We now have reports out from the strongest companies as well as infinity + 1 speeches from the Bernank. What else is there really?
We also have neutralisation of overly bearish sentiment as is witnessed in the AAII sentiment survey as well as put/call ratios and data from individual broker firms.
Hedged positions can consist of:
Long SPX, short tech in general or weak companies like BBRY, NOK, LOGI, AAPL, LXK, HPQ. Remember that the market boat has lifted these as well over the last months.
Long SPX, short commodities.
Long Germany, short PIGS.
Basically these are the themes that I have held as a base all year.
We now have reports out from the strongest companies as well as infinity + 1 speeches from the Bernank. What else is there really?
We also have neutralisation of overly bearish sentiment as is witnessed in the AAII sentiment survey as well as put/call ratios and data from individual broker firms.
Hedged positions can consist of:
Long SPX, short tech in general or weak companies like BBRY, NOK, LOGI, AAPL, LXK, HPQ. Remember that the market boat has lifted these as well over the last months.
Long SPX, short commodities.
Long Germany, short PIGS.
Basically these are the themes that I have held as a base all year.
July 16, 2013
Weekly update 7/16
Ok, so right now with the snp at 1674 we are at the one day pullback as outlined earlier. Expect aths and then there is potential for the larger correction/ consolidation phase.
July 10, 2013
Weekly update 7/10
SPX at 1652. A lot of intraday hedging going on for me today since market behaviour favour that the last breath run could continue another week or maximum two as outlined in previous post. I am daytrading in this environment, paying respect to the upward momentum and waiting for that to wane. Probably we will see a one day pullback met by some buying and then a failure with the following movement. Stay patient and know that the next big move is down.
July 9, 2013
weekly update 7/9
Sticking to plan in previous post and staying short here. Both equities and broad based commodities basket. Very strong "short" focus by also being long the dollar vs various other currencies. Sure it is possible we will see the squeeze continuing one more week but up here it is not worth chasing even if the last points in a bull run squeeze like this is very "easy" money for the correctly positioned traders. With easy, I mean that it is usually a low volume, quick increase in asset prices, compared to the more long term fundamentally anchored increase that is more choppy.
July 1, 2013
weekly update 7/1
My last post was one of a cautionary stance. I am keeping my exposure low still with this chop-chop going on. But I am seeing signs of a continuation to the downside in most risky assets starting within a week or two from now. As correlations are all over the map right now, with the dollar, commodities, gold and equities swithings signs from day to day, I am still keeping my size small and scaling in to bearish positions both in time and price, for the moment, increasing only on rips.
In 1-2 weeks or when S&P hits 1630-1635, whatever comes first, I will be fully short.
In 1-2 weeks or when S&P hits 1630-1635, whatever comes first, I will be fully short.
June 18, 2013
Weekly update 18/6
Buying in to OPEX once again proved a profitable strategy. I am not taking any chances with the central planners day and will exit most positions and actually start scaling in to more bearish positioning again. It seems most commodities again are breaking down and interestingly enough crude oil has held up, that could be something catching up on the downside once the upward momentum wears off.
Looking for a consolidating summer with current levels being the higher area of that range.
Looking for a consolidating summer with current levels being the higher area of that range.
June 5, 2013
May 19, 2013
Weekly update 5/19
SPX @ 1666, "Long time no update" and "From the devil to the Bernank"
1000 points. Pretty amazing! Obviously the strategy outlined in the last post was for a top to be created around 1580-1600. Sentiment and other technicals suggested in the beginning of May as we rose above previous highs and still bears stayed committed to their negative positioning that we would continue to pain trade upwards. I have stayed mostly short commodities and long equities, trying not to get net short. Obviously my calls on gold and silver have paid off well.
Same indicators suggest still that the pain trade is upwards even if some of that "bearish upward pressure" has been alleviated during the last week of opex squeeze. Friday afternoon it was especially visibile when DAX all of a sudden jumped 50 points, obviously a short squeeze. Looking at more extreme assets like Greek equities shows a parabolic development indicating extensive short covering. This suggests bears are beginning to capitulate. I am not suggesting there are even that many bears but on the margin given these central bank injections, it does not take a lot of bearish hedging to give the market this kind of bernanke put that just gives it this continous upward drift.
Now, we are at a point where technicals in terms of mean reversion potential etc is extreme out of a historical perspective. If we can only get some bear capitulation, we can begin a consolidation and downward drift period.
I would decrease position size and look at this from a longer than usual perspective, say a couple of months instead of couple of weeks, and for that period I see a high conviction of lower prices.
One simple and really disturbing fact of the markets is that they are 90% politically and central bank driven. Naturally that news flow decreases during the summer when they go on vacation. It is also the time when people in the northern hemisphere tend to group and protest against the measures that the same ruling guys/troika imposes on them. So that simple fact could actually contribute to a very real new normal seasonal effect (New Normal.X11?) where markets correct during the summer (on central planners vacation) and rise during the rest of the year.
Begin with long/short on strong vs weak markets (weak markets that have squeezed lately) Increase bearish positioning during the next 4 week period if subscribing to this game plan, but with a smaller than usual size.
1000 points. Pretty amazing! Obviously the strategy outlined in the last post was for a top to be created around 1580-1600. Sentiment and other technicals suggested in the beginning of May as we rose above previous highs and still bears stayed committed to their negative positioning that we would continue to pain trade upwards. I have stayed mostly short commodities and long equities, trying not to get net short. Obviously my calls on gold and silver have paid off well.
Same indicators suggest still that the pain trade is upwards even if some of that "bearish upward pressure" has been alleviated during the last week of opex squeeze. Friday afternoon it was especially visibile when DAX all of a sudden jumped 50 points, obviously a short squeeze. Looking at more extreme assets like Greek equities shows a parabolic development indicating extensive short covering. This suggests bears are beginning to capitulate. I am not suggesting there are even that many bears but on the margin given these central bank injections, it does not take a lot of bearish hedging to give the market this kind of bernanke put that just gives it this continous upward drift.
Now, we are at a point where technicals in terms of mean reversion potential etc is extreme out of a historical perspective. If we can only get some bear capitulation, we can begin a consolidation and downward drift period.
I would decrease position size and look at this from a longer than usual perspective, say a couple of months instead of couple of weeks, and for that period I see a high conviction of lower prices.
One simple and really disturbing fact of the markets is that they are 90% politically and central bank driven. Naturally that news flow decreases during the summer when they go on vacation. It is also the time when people in the northern hemisphere tend to group and protest against the measures that the same ruling guys/troika imposes on them. So that simple fact could actually contribute to a very real new normal seasonal effect (New Normal.X11?) where markets correct during the summer (on central planners vacation) and rise during the rest of the year.
Begin with long/short on strong vs weak markets (weak markets that have squeezed lately) Increase bearish positioning during the next 4 week period if subscribing to this game plan, but with a smaller than usual size.
April 23, 2013
Weekly update 4/23
The coming opportunity to once again sell the market at 1580-1610 is a gift. Holding long short positions in equities vs commodities has been profitable. Will look for shorts in fundamentally weak markets that has short squeezed lately, like spain and italy, together with shorts in commodities. Continously, on/off, after the market has corrected some, hedging is done with a strong market like the s&p.
April 15, 2013
Weekly update 4/15
Have a look at the previous recommendations and my charts.
I would not continue to aggressively sell commodities here.
In the S&P I would be looking for a consolidation move sideways in before mentioned intervals this week and perhaps next and then higher again if the bearish hedging continues at this pace.
Will evaluate the relative value of commodities vs equities as this consolidation period continues.
As always, sell volatility on any spikes.
I would not continue to aggressively sell commodities here.
In the S&P I would be looking for a consolidation move sideways in before mentioned intervals this week and perhaps next and then higher again if the bearish hedging continues at this pace.
Will evaluate the relative value of commodities vs equities as this consolidation period continues.
As always, sell volatility on any spikes.
April 3, 2013
Weekly update 4/3
SPX @ 1561. So, in my last two posts I called for
1) Obviously we seem to be needing new all time highs in SPX and DAX to finally flush out the last of the bearish speculators. I do not expect much follow through and will follow the scenario outlined in the last post with a trading range between 1540 and 1570.
2) Sentiment, technicals and fundamentals now warrant a decline below 1540, maybe all the way to 1500-1510 in to earnings season.
Both these statements I actually hold on to still. I am short puts and calls around this strategy. Tomorrow is ECB day and there is a tradable chance (i.e. market is underestimating the chances of a rate cut IMO), that ECB lowers the rate or signals strongly for lower rates. That would create a huge spike since short interest has risen the last few days near the all time highs in the SPX. Without that ECB fuel, I expect us to visit 1510 without much of a pause within the next 1-2 weeks. A second trigger could be the payrolls report friday. So within that event setup lies the trading strategy.
I would hold onto the statement selling around 1570-1575, expecting we do visit the region around 1510 into earnings season. THAT would provide fuel for another leg higher but that is also a leg I would sell in to... altough at slightly higher levels, lets say even above 1600 if we are lucky.
That is my road map at the moment. Obviously any long equity exposures are hedged partly or completely by short commodities as pointed out previously and in the yearly strategy update.
1) Obviously we seem to be needing new all time highs in SPX and DAX to finally flush out the last of the bearish speculators. I do not expect much follow through and will follow the scenario outlined in the last post with a trading range between 1540 and 1570.
2) Sentiment, technicals and fundamentals now warrant a decline below 1540, maybe all the way to 1500-1510 in to earnings season.
Both these statements I actually hold on to still. I am short puts and calls around this strategy. Tomorrow is ECB day and there is a tradable chance (i.e. market is underestimating the chances of a rate cut IMO), that ECB lowers the rate or signals strongly for lower rates. That would create a huge spike since short interest has risen the last few days near the all time highs in the SPX. Without that ECB fuel, I expect us to visit 1510 without much of a pause within the next 1-2 weeks. A second trigger could be the payrolls report friday. So within that event setup lies the trading strategy.
I would hold onto the statement selling around 1570-1575, expecting we do visit the region around 1510 into earnings season. THAT would provide fuel for another leg higher but that is also a leg I would sell in to... altough at slightly higher levels, lets say even above 1600 if we are lucky.
That is my road map at the moment. Obviously any long equity exposures are hedged partly or completely by short commodities as pointed out previously and in the yearly strategy update.
March 21, 2013
Weekly update
SPX @ 1548. Sentiment, technicals and fundamentals now warrant a decline below 1540, maybe all the way to 1500-1510 in to earnings season. But then there could also be a silly Cyprus is saved effect, but then also I believe many people are positioning themselves for exactly that so complacency favours the downside to 1500-1510.
March 15, 2013
ATH
SPX @ 1560.
Obviously we seem to be needing new all time highs in SPX and DAX to finally flush out the last of the bearish speculators. I do not expect much follow through and will follow the scenario outlined in the last post with a trading range between 1540 and 1570.
Obviously we seem to be needing new all time highs in SPX and DAX to finally flush out the last of the bearish speculators. I do not expect much follow through and will follow the scenario outlined in the last post with a trading range between 1540 and 1570.
March 8, 2013
Strategy update
SPX @ 1550.
So, we have come a long way in a short period of time. SPX at close to all time highs, indices everywhere on multi year highs. And people are still very bearish. That is the force driving this market higher still, in a pattern that means far between corrections and that corrections, when they come, happen at the point bears capitulate strongly, like >+1% days. I am starting to balance my portfolio from net long, to balanced (long equities balanced by short equity names mostly in the tech space as well as commodities).
I will also let myself be short some indices, mainly southern europe, going in to march and april. Below I offer a daily 1 year view and weekly 20 year view of SPX. First, I believe we will make some swings around these levels, to frustrate the hell out of bears who will pile on shorts on any decline and then run for cover on new highs, as well as new high buyers that will be whipsawed out of the market... in numbers lets aim for 10-30 point swings in SPX with a slight upward bias, moving in interval 1540-1570.
Intermediate term ~3 months, I would say it makes sense to look for sideways, if not lower prices from around these levels.
Choose your aggressiveness, long/short according to earlier strategies, equities/commodities or go outright short, depending on your risk level. You can also choose to go long SPX vs short NDX or long SPX vs short european indices etc.
So, we have come a long way in a short period of time. SPX at close to all time highs, indices everywhere on multi year highs. And people are still very bearish. That is the force driving this market higher still, in a pattern that means far between corrections and that corrections, when they come, happen at the point bears capitulate strongly, like >+1% days. I am starting to balance my portfolio from net long, to balanced (long equities balanced by short equity names mostly in the tech space as well as commodities).
I will also let myself be short some indices, mainly southern europe, going in to march and april. Below I offer a daily 1 year view and weekly 20 year view of SPX. First, I believe we will make some swings around these levels, to frustrate the hell out of bears who will pile on shorts on any decline and then run for cover on new highs, as well as new high buyers that will be whipsawed out of the market... in numbers lets aim for 10-30 point swings in SPX with a slight upward bias, moving in interval 1540-1570.
Intermediate term ~3 months, I would say it makes sense to look for sideways, if not lower prices from around these levels.
Choose your aggressiveness, long/short according to earlier strategies, equities/commodities or go outright short, depending on your risk level. You can also choose to go long SPX vs short NDX or long SPX vs short european indices etc.
February 28, 2013
Chart update
WTI, Light Crude Oil, Update, note real time quote @ 92
Silver
Gold
SPX - looking for a blow off top between 1530 and 1550, then some sideways/down action until we build a base.
Silver
Gold
SPX - looking for a blow off top between 1530 and 1550, then some sideways/down action until we build a base.
February 22, 2013
Weekly update
SPX @ 1512. The crowd turned awfully bearish after just one day of declines. I used the decline to sell vol and increase longs on equities while slightly decreasing shorts in the commodity space. Also keeping a bunch of shorts in weak equity names. The consensus is now very much to buy the dip and see new all time highs. My playbook says that we first at least will get a fake new high of the year in early march and then we could be in for some sort of wider consolidation period until things become more clear. At that point I would aggressively short commodities and almost as aggressively short some equities and on third place broader equity indices. So, first higher, but less than the crowd consensus will be, and then down, through the buy the dip camp levels. Perfect for fooling as many as possible.
February 18, 2013
February 14, 2013
Weekly update 2/14
SPX at 1521. OPEX tomorrow. Expecting very small movements until end of next week when indices will break upwards and continue to slow motion squeeeezeee...
Nice to see precious metals breaking down. This could get ugly on the downside with everybody and their granny long.
Nice to see precious metals breaking down. This could get ugly on the downside with everybody and their granny long.
February 8, 2013
Weekly update 2/8
SPX at 1517. The only update I will give is a first estimate of when it makes sense to start selling in to this rally. Until then, just ride the rally and sell option vol on any uptick in vol. That the equity market will continue its grind higher is the high conviction low risk trade, what will be more interesting is to see if metals will disconnect from the equity market in this rotation phase. There will be more money to be made in that space than the equity space if that is the case.
The first estimate of when to start selling is mid march. That is when according to my analysis of sentiment, fundamentals and other technicals, we will have a first window opportunity of taking advantage of a potentially neutralized bearish sentiment which can give way for some real profit taking. Until then, stay long.
The first estimate of when to start selling is mid march. That is when according to my analysis of sentiment, fundamentals and other technicals, we will have a first window opportunity of taking advantage of a potentially neutralized bearish sentiment which can give way for some real profit taking. Until then, stay long.
February 3, 2013
Weekly Update 2/3
SPX at 1513. Everybody are trying to call the top. This market will continue to grind higher in the following week, with perhaps, a small shakeout of new weak longs that will once again have us testing 1490-1505 area. But more likely than nominal levels, this is about relative levels, i.e. a 1% decline from high to low in a market that has around 3-5% more upside before the possibility of a larger correction, i.e. MA 20, MA 50 correction.
Continuing to sell equity volatility on any increase in premiums is a very profitable strategy in this environment, as long as premium does not reflect the fact that markets will be dead (prices set by central banks) for some time still. After a 1-2% decline I would be selling atm puts.
I still prefer selling the commodity spectrum (especially precious metals) on any upticks, and especially when we are close to "risk market highs", which we are at the moment. Then the long equities, short commodity trade makes a lot of sense to increase in position size. Also to take advantage of the super short squeeze we have seen in some fundamentally very weak names like RIMM/BBY, NOK, AMD, LXK, XRX, PHILIPS, FB, LOGI. Short these against long positions in the likes of GOOG, IBM, GE, MCD, PG etc...
Continuing to sell equity volatility on any increase in premiums is a very profitable strategy in this environment, as long as premium does not reflect the fact that markets will be dead (prices set by central banks) for some time still. After a 1-2% decline I would be selling atm puts.
I still prefer selling the commodity spectrum (especially precious metals) on any upticks, and especially when we are close to "risk market highs", which we are at the moment. Then the long equities, short commodity trade makes a lot of sense to increase in position size. Also to take advantage of the super short squeeze we have seen in some fundamentally very weak names like RIMM/BBY, NOK, AMD, LXK, XRX, PHILIPS, FB, LOGI. Short these against long positions in the likes of GOOG, IBM, GE, MCD, PG etc...
January 31, 2013
Weekly update 1/30
With the SPX down to 1498 from 1511, that could actually be it when it comes to downside for now.
January 29, 2013
Weekly update 1/29
SPX at 1508. Look for a short term top in relation to the FED-meeting. I am completely hedged now with beta adjusted 0% net long positions (hedged long and short equity positions as well as equities vs commodities). Looking to gradually increase net short in the coming 3 days both in time and space (index level 1410-1415). This is not for more than 10-20 handles downside target. Also not sure how much higher we can go before a larger downturn as well. Not willing to risk net long at these levels and above.
My strategy will still be to sell volatility on any day spike and collect some premium. Writing covered calls is an excellent strategy in this environment where the market is stretched to the upside but still has limited downside. I would also write some puts as we go down 10-20 handels to best take full advantage of the consolidation phase.
My strategy will still be to sell volatility on any day spike and collect some premium. Writing covered calls is an excellent strategy in this environment where the market is stretched to the upside but still has limited downside. I would also write some puts as we go down 10-20 handels to best take full advantage of the consolidation phase.
January 25, 2013
Chart update 1/25
S&P now at 1502. A lot of people have jumped on the bandwagon the last week. Earnings and Revenues are not super great but they are there and equities are valued at around p/e 15 on this years earnings. Apple is yielding more than 10Y US Treasuries. I am not saying 10Y US Treasuries would be where they are without the FED's actions but still, there are bullish cases to be made and as long as that is the case, the bullish bandwagon is to be respected.
Considering the rapid rise and many days without correction I think the market will frustrate the hell out of both bulls and bears in the coming weeks, a trendless low volatility market say 1490-1510. Then we will see some final push in to 1520-1530 where the situation will need to be reevaluated but for now I am comfortable shorting equities there and being long short individual equity names as well as long short equity index vs commodities on the way up there. Most likely we will have a trendless market up there for some months.
What is more interesting and potentially trending is the commodity space. Gold could be breaking down hard and to a lesser degree copper. I believe there are two drivers behind this move now, 1) the beginning of the first period end of money printing (i.e. there will be more later on). 2) the great asset class rotation from interest bearing assets to income generating assets.
Considering the rapid rise and many days without correction I think the market will frustrate the hell out of both bulls and bears in the coming weeks, a trendless low volatility market say 1490-1510. Then we will see some final push in to 1520-1530 where the situation will need to be reevaluated but for now I am comfortable shorting equities there and being long short individual equity names as well as long short equity index vs commodities on the way up there. Most likely we will have a trendless market up there for some months.
What is more interesting and potentially trending is the commodity space. Gold could be breaking down hard and to a lesser degree copper. I believe there are two drivers behind this move now, 1) the beginning of the first period end of money printing (i.e. there will be more later on). 2) the great asset class rotation from interest bearing assets to income generating assets.
January 23, 2013
Apple earnings
I have been negative towards the iPhone 5 and lack of new ideas after Steve Jobs death, but at 445 AAPL is a screaming buy no matter the obstacles. I believe the shares will continue to trade violently in something like a 100$ range until all weak hands have been shaken out. Longer term the company will face pressure from competitors but short term, valuation and still a strong product mix will help the shares.
Weekly update 1/23
I am once again establishing short positions in precious metals. It seems a lot of the central bank news, including BOJ has been discounted in the short term and I belive we will have a nontrending/declining picture for the precious metals this year so I will be shorting on rallies.
This also rhymes with generally excessive hedges in the risky markets which means any short positions in the equity markets will have to wait until these hedges have been neutralized.
This also rhymes with generally excessive hedges in the risky markets which means any short positions in the equity markets will have to wait until these hedges have been neutralized.
January 17, 2013
Weekly update 1/17
January OPEX tomorrow and the S&P at 1484. Looking back at the previous post I would actually ride this rally a bit further considering the latest central bank news, the more nuanced FED ending QE-talk, the overall decent earnings and general (still) tendency to very quickly take profits, hedge, be under weighted, whatever.
I think my strongest calls on 1) low volatility / sell volatility on spikes, and 2) short commodities vs equities, still are the place to be. Looking at individual equity names there has been huge rallies in the most shorted stocks lately. They are mostly still awful businesses so the upcoming short opportunity will not be in the major indexes but in individual names. I am preparing a basket of shorts against the market to be entered gradually as the market will be topping out/drifting sideways during the period starting february and forward. I will then also try a short basket of commodities against equities, although the hedge will not be 1:1 since I also believe there will be a decline in equities in absolute terms but not in relative terms.
I think my strongest calls on 1) low volatility / sell volatility on spikes, and 2) short commodities vs equities, still are the place to be. Looking at individual equity names there has been huge rallies in the most shorted stocks lately. They are mostly still awful businesses so the upcoming short opportunity will not be in the major indexes but in individual names. I am preparing a basket of shorts against the market to be entered gradually as the market will be topping out/drifting sideways during the period starting february and forward. I will then also try a short basket of commodities against equities, although the hedge will not be 1:1 since I also believe there will be a decline in equities in absolute terms but not in relative terms.
January 3, 2013
Weekly update 1/3
Woha, debt ceiling relief with a boost! So what is the reaction to the action?
1) Debt ceiling relief. Short term, sell voll and await a further squeeze to 1480-1500. There it's time to be net short again. Seems like we will have a strong NFP report tomorrow and maybe finish the squeeze into january opex.
2) The Feds announcement of ending QE 2013! This is huge. My calls on buying USD, selling commodities including gold was valid even without this announcement. Now these strategy calls seems like the best bets for the year. Sell everything commodity and small cap like and buy large cap and relatively safer assets. Don't confuse end of QE with end of 0 short term interest rates. I believe that further along there will be requirements for more QE and then new buying opportunities in commodities. We are far from there right now though. The bullish retail speculators need to be flushed out.
1) Debt ceiling relief. Short term, sell voll and await a further squeeze to 1480-1500. There it's time to be net short again. Seems like we will have a strong NFP report tomorrow and maybe finish the squeeze into january opex.
2) The Feds announcement of ending QE 2013! This is huge. My calls on buying USD, selling commodities including gold was valid even without this announcement. Now these strategy calls seems like the best bets for the year. Sell everything commodity and small cap like and buy large cap and relatively safer assets. Don't confuse end of QE with end of 0 short term interest rates. I believe that further along there will be requirements for more QE and then new buying opportunities in commodities. We are far from there right now though. The bullish retail speculators need to be flushed out.
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