Change of stance.
Conclusion:
- Sell 2070 on SP500 future.
- Sell 10,550 on DAX. (this time I prefer to short the US)
Reasoning:
1 – The news is well priced and was kind of leaked without tremendous upside.
2 – Earlier this week, I thought the market would climb to 2070 before the news and the market could climb another 3% after the news – did not happen.
3 – Key European bonds are already trading very tight and it is unlikely this QE can drive yields lower and provide a substantial boost to equities.
4 – Monthly statistics are stretched
- DAX that moves on average 700pts a months and is already 1000pts wide this month (1200 at 10550).
- SP500 that moves on average 95pts per month, will reach that target at 2070.
5 – From a game theory point of view, the capping zone is well known now and a breakout that does not complete to speed limit could be the trap/signal missing.
6 - The volatility has not abated – the moves are very wide – I read this as very unhealthy. I don’t know any precedent to compare this with.
7 – The apex of the cone is getting very narrow – I find a bit too easy for the bulls to enjoy more upside to their final 2015 target.
Other comments:
- Gold may end up reaching 1340 and may initially benefit from the QE and the correction.
- Oil which had its own life could be floored at 44 and XLE could move up.
- In the EM space, I thought Brazil could go up. Could this hold true if the rest of the market corrects. Possible.
- EURUSD – not sure but clearly it will drive the relative performance of US versus Europe.
Risk Management:
Short 40% SP500 at 2070 and watch until the end of the month – Time stop 1 week.
On SP500, the risk is an extension to 2140.
On DAX, the risk is an extension to 10,100.
In both cases, if the risk limits are not breached, the levels Shorted shall be seen again before further upside.
Other trading:
Short 5% USDIDR, the chart is a perfect range over the last 20Y
Bund – SHORT 158.50 if provided (it is probably falling already and I am already short 60% at 155.80)
Conclusion:
- Sell 2070 on SP500 future.
- Sell 10,550 on DAX. (this time I prefer to short the US)
Reasoning:
1 – The news is well priced and was kind of leaked without tremendous upside.
2 – Earlier this week, I thought the market would climb to 2070 before the news and the market could climb another 3% after the news – did not happen.
3 – Key European bonds are already trading very tight and it is unlikely this QE can drive yields lower and provide a substantial boost to equities.
4 – Monthly statistics are stretched
- DAX that moves on average 700pts a months and is already 1000pts wide this month (1200 at 10550).
- SP500 that moves on average 95pts per month, will reach that target at 2070.
5 – From a game theory point of view, the capping zone is well known now and a breakout that does not complete to speed limit could be the trap/signal missing.
6 - The volatility has not abated – the moves are very wide – I read this as very unhealthy. I don’t know any precedent to compare this with.
7 – The apex of the cone is getting very narrow – I find a bit too easy for the bulls to enjoy more upside to their final 2015 target.
Other comments:
- Gold may end up reaching 1340 and may initially benefit from the QE and the correction.
- Oil which had its own life could be floored at 44 and XLE could move up.
- In the EM space, I thought Brazil could go up. Could this hold true if the rest of the market corrects. Possible.
- EURUSD – not sure but clearly it will drive the relative performance of US versus Europe.
Risk Management:
Short 40% SP500 at 2070 and watch until the end of the month – Time stop 1 week.
On SP500, the risk is an extension to 2140.
On DAX, the risk is an extension to 10,100.
In both cases, if the risk limits are not breached, the levels Shorted shall be seen again before further upside.
Other trading:
Short 5% USDIDR, the chart is a perfect range over the last 20Y
Bund – SHORT 158.50 if provided (it is probably falling already and I am already short 60% at 155.80)