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The Kenny Rogers School of Risk Management

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on Monday, 16 April 2018 07:41

Victor shares how The Gambler would play today's volatile markets. Hint: You'd better be nimble. 

“You’ve got know when to hold’em, know when to fold’em...know when to walk away, know when to run.” 

I started this week with all of my trades going against me. I was short CAD and NZD and long puts on Gold and WTI. I was stopped out of CAD and NZD early Monday and I liquidated the Gold and WTI puts early Tuesday. I’d been money ahead on everything at the end of the previous week so the net losses were pretty small...but they were losses all the same. BUT...it was a good thing I got out when I did...CAD and NZD jumped higher Tuesday/Wednesday, gold spiked higher mid-week and WTI just kept rising all week...gaining over $5 to hit 3 ½ year highs!

I make money when I’m going with the market...if the market is going against me I want out. The most important piece of trading advice I ever got was to cut my losses, and let my profits run.

The stock market felt “on edge” this week...who do you believe about Syria? Are the missiles going to fly? And then what? Where is Mueller going? What’s Trump going to tweet next? Did the “trade war” with China dampen down with Xi’s speech or is this just a lull before things get worse?  Price action was choppy and volumes were light.

The Canadian Dollar topped out with the US stock market in late January....fell ~5 cents to hit a 9 month lows in mid-March and has bounced back ~3 cents over the past 4 weeks. Maybe the market was too bearish at the mid-March lows...NAFTA worries seemed to lessen the past 2-3 weeks...the bounce back in the stock market seemed to help CAD and the 12% rally in WTI since mid-March has also helped. Western Canada Select has risen from ~ $34 mid-March to ~$51 now...a gain of ~50%!!   The Bank of Canada meets this coming Wednesday. (- Song Here)

dccsase

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The US Dollar Index hit a 3 year low as the stock market was making All Time Highs in late January. It has gone sideways in a narrow range since. Futures market speculative positioning is heavily negative the USD.

US short term interest rates continue to grind higher. The next Fed meeting is May 2. Speculative positioning in the futures markets is heavily negative short term interest rates.

My short term trading: I’ve had a good run the past couple of months but I was obviously “out of sync” to start this week so “going flat” was a good idea. One of my main trading ideas the past couple of months has been that the stock market looks toppy after a 9 year bull run. I’ve been shorting “bounce back” rallies that ran out of steam. I thought this week’s low volume price action looked like a weak “bounce back” rally and when the S+P made new highs for the month on Friday and then rolled over I bought OTM puts. The weak Friday close may simply be a case of people not wanting to buy ahead of the weekend...or maybe it signals weakness ahead...I don’t know. If the S+P trades up through 2,700 next week I’ll liquidate my put with a small loss but if the market drops below 2,600 it could build downside momentum.

 

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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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