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Live from the Trading Desk

Canadian Investors Take Note!

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on Saturday, 17 March 2018 06:07

Victor hits another home run shorting the Canadian Dollar a double going long the US Dollar by being short Gold and a solid base hit shorting the US Stock Market. Victors comments on the Canadian Dollar are valuable for any Canadian Investor - R. Zurrer for Money Talks

Victors Transcript:

I started this week with a clean slate (I was skiing at Whistler last week and didn’t want any open positions) but I had a list of trades that I hoped to make if the opportunity presented itself.

Top of my list was to get short CAD and I did that Monday when CAD rolled over after last week’s little bounce. Dovish comments from Poloz on Tuesday re-focused the market on interest rate spreads (current and expected) between Canada and the USA (2 year spread now over 50bps) and that pushed CAD lower. Broad USD strength later in the week and Trump’s NAFTA comments increased the pressure and CAD ended the week at 9 month lows against the USD...down 5 of the last 7 weeks.

CAD is weak against a broad range of currencies...not just the USD. YTD it is down ~4% against USD,~6% against EUR, ~7% against GBP, ~3% against AUD, ~ 8% against MXN, and ~10% against JPY. This “across the board” CAD weakness points the finger at Canada-specific problems (self-inflicted poor fiscal policies, lack of competitiveness, domestic debt levels, etc.) The falling CAD is acting as a “release valve” or “shock absorber” for the Canadian economy...which is what should happen with a floating exchange rate. I think CAD may have much further to fall.

1vic

Click for Larger Image

Next on my list was to get long the USD and I did that by shorting Gold on Thursday. (Gold and EUR have been moving up and down against the USD in virtual lockstep so shorting gold was more or less the same thing as shorting EUR.) This is an “anticipation” trade...I anticipate that if gold falls a few more dollars it could trigger a wave of selling that would take prices much lower. On the weekly chart gold had its lowest close since December.



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Live from the Trading Desk

Victor Adair - Trade War Fears Trigger Market Moves

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on Monday, 05 March 2018 06:53

Victor Adair has had a superb month in Stocks, Currencies, Crude Oil and Gold. Here is his interview with Michael followed by Victors trading notes for this week and next - Robert Zurrer for Money Talks

The US stock market was a great barometer of risk appetite this week. The DJIA rallied to 3 week highs on Monday but began falling early Tuesday morning (Powell testimony) and was down nearly 1,600 points at Friday’s lows. The prospect of “trade wars” following Trump’s proposed steel and aluminum tariffs contributed to a high volume acceleration of the decline on Thursday. The major American stock indices all registered a Weekly Key Reversal Down.

For the past couple of months  my Trading Desk Notes have maintained that risk appetite was “dangerously high” and was due for (at least) a correction. I wrote that: Markets are in a blow-off phase...My gut instinct is to fade this price action...but my risk management override says wait...it could get even crazier! The key aspect of market psychology so far this year has been a willingness to aggressively take on risk. I quoted Bob Farrell, “The public buys the most at the top and the least at the bottom.”

I’ve had 2 key reasons why I thought there could be a significant reversal in risk appetite:

  1. Looking at the charts I believed that the stock market “melt up” in January was likely the last leg of a parabolic blow off. The DJIA had quadrupled from the 2009 lows, had rallied 45% since the Trump election, and now the public was “beating down the doors” to buy anything and everything.
  2. The global central banks, which had “underwritten” the 9 year rally in asset prices, were in the process of “changing their ways.”

My short term trading: February was a good month for me as I caught parts of the “correction” in the stock, currency and commodity markets. I started this week short CAD and Euro, and bond puts, and added short gold and short S+P. I closed all of those positions with profits except for the bond puts which I closed for a small loss. I’m flat at the end of the week, but in my managed futures account that Drew manages we remain short CAD and WTI.

The US Dollar rallied to 6 week highs this week but then reversed sharply on Thursday  on “trade war” fears.

The Canadian Dollar broke its relationship with the Euro on Thursday...that is CAD kept falling against the USD while the Euro rallied. I think this points to REAL weakness in CAD...which is now threatening to break below the 7750 lows made last fall. The “trade wars” story has real impact on Canada as it pertains to the Nafta renegotiations. The 2 year interest rate spread is ~45 bp in favor of the US and markets may be anticipating “dovish” comments from the BOC at next week’s meeting. Markets are still pricing a 36% chance that the BOC will raise rates in April...I have my doubts!

Click for Larger Chart

cadva

The Yen has been rising steadily since early January and ended this week at its best levels against the USD since Trump’s election. It’s often called a “safe haven” currency but it was rising in January even as the US stock market was soaring...so there’s something else in play...any unwinding of the massive short Yen positioning in the futures markets could accelerate the rally.

WTI has had a very similar chart pattern to the S+P so far this year...rising through January...falling the first 2 weeks of February only to bounce back the next 2 weeks. This week it rallied on Monday along with the stock market and then fell sharply with the stock market Tuesday through Friday.

Click for Larger Chart



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Live from the Trading Desk

Featured Guest Mark Leibovit

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on Sunday, 04 February 2018 15:31

Mark updates Mike on the long term Cannabis sector as well as some opportunities generated after the recent Dow Correction

....also Michael's quote of the week: Einstein Kicks It Through The Uprights

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Live from the Trading Desk

Buckle Up For a Major Sea Change

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on Monday, 22 January 2018 07:25

Victor points out that money is starting to move into the sold out Commodity sector which relative to stocks is down 75% in the last 7 years to an 18 year low. 

COMM-equities-vs-commodities-01112018



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Live from the Trading Desk

Fear Of Missing Out

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on Tuesday, 16 January 2018 13:32

Victor on what's driving stocks, crude oil, interest rates & Gold sharply higher & the US dollar 

Index breaking down sharply lower in the first few weeks of 2018

Screen Shot 2018-01-16 at 1.41.07 PM



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Live from the Trading Desk

Core Themes Going Into the New Year

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on Monday, 08 January 2018 06:20

Victor Adair Live from the trading desk on his core expectation for 2018 plus areas where the danger lies.

...also from Michael: They Chose Rape, Beheadings and Murder

FX-Volatility



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Live from the Trading Desk

Victor Adair: Strap In For The Battle Royal

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on Sunday, 17 December 2017 13:02

The skitzoid action of the markets the past couple of weeks has set up some fine opportunities.

Victor's Trading Notes:

Market price action (across asset classes) has been skitzoid the past couple of weeks...up one day, down the next (and in some markets up and down within the same day!) as breaking news or central banker comments have buffeted prices...while competing views about the future, about what’s important and what isn’t, seem to be enthusiastically embraced one moment, and then thrown under the bus the next! Yikes!

For me the big question is about the USD. My good friend Jack Crooks (www.BlackSwanTrading.com) makes the case that there are 2 primary expectations competing in the FX market:

     1) the US Dollar is about to rally on rising yield spreads, as the leader of synchronized global growth, as the beneficiary of Trump tax cuts and a self-reinforcing flow of multinational cash repatriation and foreign direct investments and,
     2) the counter argument that the good USD news is priced in and any rallies will fade quickly as the rest of the world’s major central banks also start raising interest rates (narrowing interest rate spreads) and their strengthening economies attract capital flows away from America.

Since the Sept 8 Key Turn Date (KTD) I’ve looked for opportunities to buy USD against other currencies...but my risk management rules kick in if it falls. My favorite FX positioning since the KTD has been shorting CAD against USD and this week, with the choppy price action around comments from BoC Chief Poloz I was stopped for small losses when CAD rallied.

One of the hardest things to do when you get stopped for a loss is to put the position back on and that’s exactly what I did...so I started the week short CAD...got stopped out for a loss on the Poloz rally...and then I re-shorted it. If I had begun the week with no CAD position and was simply looking at the price action I’d have to say that CAD looked to be at risk of breaking down...and I’d sell it. I think CAD actually looks WORSE after this week’s “failed rally.” This week CAD had its lowest weekly close in nearly 6 months. I think it’s at risk of breaking through the lows of the past 2 months (around 7750 basis March) and if that happens it could fall to 75 cents or lower. I hope to have the “courage of my convictions” to add to my short position if it breaks to new lows.

 cadva

Larger Chart

Crude oil also had wicked market action over the past month as prices seemingly surging higher one moment and then fell sharply the next. Like the 2 primary expectations competing in the FX markets noted above there seems to be 2 competing views in the crude market:

     1) The production cut back agreements made by OPEC-and-Allies has not only substantially reduced global inventories but demand is now running ahead of supply and prices will therefore continue to rally and,
     2) Rising prices (WTI rallied from ~$42 in June to ~$59 in November) have been the “best fertilizer” for increased production...American frackers have really ramped up their production...with expectations that total American production may increase by another 1 MBD in 2018. This view is that prices have already topped out around $59 and IF prices drop below $55 then the HUGE speculative bullish positioning in the “paper” oil market will start liquidating...thereby accelerating a price decline.

I have traded WTI almost exclusively from the short side since 2014 and therefore have a bearish bias towards crude. Unfortunately this bearish bias kept me from buying crude during the rally from $42 to $59 but at least I didn’t “step in front of the train!” I waited for what I thought was the “As Good As It Gets” moment following the Nov 30 OPEC meeting to come and go...waited for the market to hit a high ($59) , fall back, hit a lower high (a failed rally) before I sold it short around $58. The market broke to $56 but then rallied all the way back to $58.50 (the halted UK pipeline story) and stopped me out... turning a nice little unrealized gain into a nice little realized loss! Darn!

 

Larger Chart

I still think WTI looks toppy so I’ll watch for an opportunity to re-short it.

At the end of the week I’m short CAD and long Euro puts.

PI Financial Corp. is a Member of the Canadian Investor Protection Fund. The risk of loss in trading commodity interests can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. In considering whether to trade or the authorize someone else to trade for you, you should be aware of the following. If you purchase a commodity option you may sustain a total loss of the premium and of all transaction costs. If you purchase or sell a commodity futures contract or sell a commodity option  or engage in off-exchange foreign currency trading you may sustain a total loss of the initial margin funds or security deposit and any additional fund that you deposit with your broker to establish or maintain your position.  You may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice, in order to maintain your position.  If you do not provide the requested funds within the prescribe time, your position may be liquidated at a loss, and you will be liable for any resulting deficit in your account. Under certain market conditions, you may find it difficult to impossible to liquidate a position. This is intended for distribution in those jurisdictions where PI Financial Corp. is registered as an advisor or a dealer in securities and/or futures and options. Any distribution or dissemination of this in any other jurisdiction is strictly prohibited. Past performance is not necessarily indicative of future results


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