Posted by: Bevan | November 30, 2011

Interesting Times

Re-entering the market at a time when Trendfollowing is struggling is a bit difficult, although in some ways I expect I’m ‘buying a dip’.  It seems that the approach pulls through when performance is at its worst!  It was certainly a test of my fortitude, with my first four trades being losers!

Although I trade mechanically I find economics fascinating and following world events in this time of massive risk is fascinating.  It also makes me inclined to think that there are plenty of sources of significant trends in the offing if I keep plugging away.  Unwinding risk, the possibilities of significant changes in bond prices, the threat of inflation, all create interesting possibilities.  Following my losers I have managed to latch onto some interesting positions including:

Eurodollars

In my brief trading career (since late 2007) I’ve only ever traded this market from the long side.  In fact as reflected on Peter Brandt’s blog here we’re looking at the first trend change since 2004 (incidentally I’ve just recently discovered this blog, its great and the book sounds good).  This is certainly interesting, and my first short position has followed through with some conviction.  It will be interesting to see it develop.  Although the trade is a no-brainer from a technical approach I find it a bit difficult to understand from a fundamental perspective.  Surely at the moment the demand for safe fixed-income assets should be causing continuing buoyancy?  Something tells me that this is one of those ‘canary in the mineshaft’ moves  that I’ve seen a couple of times, where the market starts acting in a very strange way but continues to follow through because the ‘big money’ is already acting.  In this case perhaps liquidity in the money markets is drying up because of the extreme risk forcing rates higher, ala August/September 2007.

UPDATE: Stopped out for a small loss after market intervention

Corn

This market has experienced a major slump, attributed to the problems in Europe, also reflected in other Commodities.  I had a large profit on this position although price is now (have rolled to the March 2012 contract) edging up above the $600 mark.  Unfortunately a high correlation with overall economic outlook at the moment means that this position like others will be influenced by market sentiment over the Europe crisis, along with any further intervention.

Euro FX

I’m pleased to have managed to secure a short position in this market with everything that’s going on (at 1.3630), and because of a subsequent significant move I have some wiggle room – hopefully its enough to cover the volatility and (as of last night NZ time) another round of intervention.

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