Sunday, October 9, 2011

Weekly Recap: October 2011, Week II

This week saw some of the assets rebound for selling pressure over the last quarter. In particular, the stand outs were industrial commodities like Crude Oil and Copper, that became somewhat oversold from the neat term perspective. Both were up over 4% for the week. It is also worth mentioning the impressive reversal equities staged from Tuesday onwards as both sentiment and breadth became oversold (Article: Equities: Sentiment Overview - Part II).

Natural Gas was the worst performer this week. Weather in the Gulf of Mexico stayed quite calm - usually notorious for cyclones this time of the year. Therefore, inventory levels on Thursday came above expectations again. All in all, an awful performance for Natural Gas during its very strong seasonal period triggered my stop loss for capital loss of 1.3%. While we are also on the top of the current investments I hold, while I opened Long Swiss Franc on Friday (Article: Portfolio Upate: Long Swiss Franc), I ended up squaring that positions for a break even straight after. Since the position was opened and than closed at the same day, I will not count it as a trade - but I will be back to buy some Swiss Francs in the near future again! I mentioned in the original article that:
A small position is at least worth the risk for its reward right now and as the trend starts to eventually change again, I will be adding some real decent positions.
As I wait for major inflection points to deploy majority of my cash holdings, I have noticed that the current volatility and market swings have slowly lured me into trading the market instead of investing - something that is definitely not my style, even though some of the time I have had periods of good return when trading. Therefore I am putting a stop to that type of a strategy.

I prefer to be out of the market right now because speculating while we have down side risks remain, is not the best way to allocate my cash. But having said that, I do not want to short any risk asset because they are currently very oversold and sentiment is very negative. So when I look at the broad macro picture, I come to a basic and simple realisation that the only asset in a proper uptrend is the US Dollar and that is only place where I remain long and am willing to add further capital on any decent pullback.

For those dare devils willing to take a risk and feel more comfortable trading as their main strategy, I have to admit a few assets look good for a trade currently. One of these is the Treasury Long Bond (chart below), which is currently three standard deviations above its 52 week range, over 20% away from its 200 day moving average and just put in a weekly reversal candle... very similar to the way 2008 played out.
On that note, I hope you enjoy the rest of your weekend!
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2 comments:

  1. "I prefer to be out of the market right now because speculating while we have down side risks remain, is not the best way to allocate my cash."


    Agreed. I've made the mistake in the past of concentrating all my effort on a very small % of my dosh and achieving very good returns on it before I realised that I'd missed the big picture and the overall return across all my money was nothing to write home about.

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  2. One of the first lessons I've learned was the following:

    "One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do. Most people, always have to be playing. They always have to be doing something." ~ Jim Rogers

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