WTI Light Sweet Crude Oil

Another commodity sell visualized.

 

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...

Weekly update 1/30

With the SPX down to 1498 from 1511, that could actually be it when it comes to downside for now.

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.

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.

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.

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.

Weekly update 11/28

Looking to increase longs in to this weakness but it is not without hedging. There are many weak equity names out there and looking at the bigger macro picture, there are industrial metals and energy that are relatively weak and continue to be good hedges (something I have stressed for some months now) against equity longs. Precious metals continue to be good longs as well.

This could be the last upmove in equities before we get a bigger correction going (both in time and space). Emerging markets are horribly weak and also some developed markets like export oriented Sweden which also has not had its housing market crash yet (but it will), compared with for example the S&P. So there are many ways to setup long/short portfolios in this environment.

In many markets it is obvious that central bank actions are boosting financials relative to industrial. This I take as a sign as the final push higher, when fundamentals (layoffs) catch up, it will hurt everyone. But it is more - both in fundamental analys and technical analysis - a projection about generally "dead" markets than something that will crash like post 2000 and 2008.

 

Update 9/24

The previously suggested strategy to buy dips in the market seems to hold well. I have been succesful trading .5% swings. It seems like the market sentiment is a bit too positive at the moment for the market to make another sustained up move just yet. We probably need to see a bit of a flushout beyond these sideways consolidation movements as well as a new trigger, like q3 earnings. Sell rallies and buy the 2% dip.

Update 9/14

Like the blog stated 3 days ago, central banks control the world. Open ended QE until unemployment is down to much lower levels, or something else happens before that, that is what we have before us. I would call it a world war in monetary policy. It's all in now and it is just to go with the flow. Asset classes will rise until the following scenario plays out: Food prices and other input prices rise to the point that these factors offset the positive wealth effect. At this turning point, reducing demand in the economy due to the high raw material / input prices and at the same time squeezing margins of companies. It is the only scenario that can derail this and it is not so different this time, actually it is pretty text book stuff. It is thus relative hyperinflation, perhaps not by historical standards but hyperinflation in the definition of further stimulus is no longer possible because it weakens rather than strengthens the economy. Another scenario is more political and is linked to how other countries react to the weakening of the dollar policy. The big movement is in the near future, however, completed and I will invest in buying 1-2% dips in the index next week.

QE 2...N

Kort update. Tycker att tidigare inlägg i allra högsta graf fortfarande gäller. Pengarna flödar och korrektionen av aktiepriser sker endast realt, inte nominellt.

S&P 500 i guld kraschar vecka efter vecka. Lång även en korg av råvaror mot S&P 500 ger god avkastning i det här klimatet.

FED har nu inlett QE2. Det man kanske inte räknat med är omvärldens starka reaktion. Blir det omvärlden som sätter stopp för galenskaperna? Det är avgörande för om positioner ska tas lång/kort eller enbart kort och se även en nominell prisnedgång.

Perifera Europa är sämre än någonsin och räcker i sig för att motivera korta positioner i Europa.

Vågskålen (3)

Nu visar fler och fler sentimentindikatorer att investerare börjar bli complacent igen. Hedgefonder är åter långa, VIX faller som en sten, AAII visar på bullish flera veckor i rad, andelen aktier över 50 dagars glidande medelvärde är på höga nivåer, put/call ration är låg och slutligen själva p/e-värderingen på årets vinster börjar bli hög. Och sist men inte minst. QE2 är diskonterat av Aftonbladet.

Då har jag inte ens börjat tala om allt det negativa, utan endast diskonteringen av det lilla positiva.

Dags att börja sälja på naiva upprekkyler. Men kom ihåg att pengatryckeriet kan innebära att det inte blir någon real nedgång. Viktigt känna av läget och kanske gå lång vissa råvaror och kort aktier.

Vågskålen

Det är inte bara i valet som vågskålen står och tippar... Vågskålen i föregående inlägg har sedan det skrevs blivit mindre tung på bullish-sidan. Det är främst värderingarna som minskat fördelen, samt även att Double dip-klossen som symboliserar den cykliska komponenten i återhämtningen, blivit lättare. Vi vet fortfarande inte hur stora konsekvenserna av fiskal åtstramning blir.

Jag tror att vi nu är mycket nära någon form av topp. Inte säkert att det blir mer än en rekyltopp och att Q3-rapporterna ger fortsatt bränsle, men det är viktigt vara redo för en större topp isåfall senare efter, eller i samband med Q3-rapporterna. En dag kommer marknaden vakna upp efter ett fed-möte och känna att det inte längre går att dopa marknaden.