30 Mar – 3 Apr 2020 Trading week preparation

The content is now separated between markets/folders I track. It´s easier for me and I hope it´s easier clear for you too.

From last week:
Another crazy week, markets were up and down all over the place.
US unemployment claims reached a all time high, bigger than 2008.
Tensions between Saudis and Russians got worse.
Boris (BOJO) tested positive for covid19.
Europe is in turmoil because of the corona bonds.
If on the previous week insiders were buying like crazy, this week they are not buying this rally.

Insiders Buys/Sells

The market is officially broken Several ETFs are trading below their NAV. Last week I shared a list. Here is an updated one.

In midst of all this, I have been reducing the amount of trade I do per week, I am adapting my trades in a way I can be more “comfortable” with them.

On last week prep post, I said the market I am watching is the FX market,
the action will be here for the future months.
I shorted EURGBP @0.9156 and closed it @0.90138 ~134 pips.
I also shorted AUDJPY @66.508 which is a little bit under water but is still open, my target is 65.213 at least.

My macro opinions for long term:
Lets review this.

  1. We are heading lower, much lower on stocks.
    SPX had a nice rally but wasn’t able to breach a key level.
  2. US bond yields are going to zero.
    Short term US bonds are already negative
  3. Gold and silver will go a little bit lower before acting as safe heavens.
    Gold rebounded nicely, It surfed the market green mood. I think when the next sell off happens, gold will sell too
  4. Commodities will behave like gold, specially grains.
    CRB Index is off the lows but still “dead inside”

Next Week:

Bearish sentiment is starting to rattle the markets. Although this week, after a Dow rally WSJ announced that a new Bull market started.
In my opinion we haven´t even properly started a bear market.

US Market Sentiment AAII Survey & NAIIM Survey | Euro Zone Sentix & ZEW

Market safe havens started to rebound and closed strong on Friday

Market Safe Havens JPY, CHF, GOLD & US10Y Note

Technically SP500 is setting up a perfect bear setup:
Weekly chart, rejected the 0.5 fib level and key resistance zone. A bear MACD cross is in play.
On the Daily chart, look for a clean break off the trend line. Friday closed with a bearish Harami candle.

SP500 Weekly Chart
SP500 – Daily Chart
SP500 – 4h chart
SP500 – Daily cloud & candles chart

Another important note on SP500 clearly rejected the mean/ geomean lines.

SP500 – Mean and Geomean lines

The charts look really bad. The Geopolitical chaos is killing the price.
The rivalries between producers crushed the price and covid19 the demand.
The good trades are all on the spreads.

Crude Prices WTI / BRENT / OPEC oil basket
WTI Monthly Chart

Another Notes

Stocks / Commodities ratio chart looks like a rocket ship. I will be watching this chart every day for the next months, a break of the trend line can start a commodities bull market.

SPX = Cyan | Stocks/Commodities ratio = Pink

US10Y-US2Y spread correlation with SP500 is uncanny. be aware of the gap closing.

US10Y-US2Y spread correlation with SP500

EUR has been the biggest bad boy in town. the amount of negative correlations are increasing, maybe is acting like a new safe haven.

Correlation table

CHF – KOF Economic Sentiment
GBP – Net Lending to Individuals / GFK Consumer Confidence
JPY – Unemployment Rate / Prelim. Industrial Production / Retail Sales

CNY – Manufacturing PMI / Non Manufacturing PMI
GBP – Final GDP
EUR – Flash CPI
USD – Chicago PMI / CB Consumer Confidence
AUD – AIG Manufacturing Index
JPY – Tanken Man. Index Tankan Non Man. Index

JPY – Manufacturing PMI
CNY – CAIXIN Manufacturing PMI
EUR – German Retail Sales / Manufacturing PMIs / Unemployment rate
GBP – Manufacturing PMI
USD – Manufacturing PMI / ADP – Non Farm Employment Change / ISM Manufacturing PMI
CAD – Manufacturing PMI

USD – Unemployment claims / Factory orders

EUR – Services PMIs / Retail Sales
GBP – Services PMI
USD – Services PMI / Avg. Hourly Earnings / Non farm Employment change/Unemployment rate / ISM Non Manufacturing Index

US most traded ETFs vs NAV

I will try to provide a little bit more data that I use on my day to day.
Starting with a list of the US most traded ETFs vs NAV.
NAV (Net asset value) is a ratio that represents a fund’s per share market value.

This recent market sell off created a unique opportunity in the market, some ETFs are trading below their NAV. Creating opportunities to buy ETF units below their underlying assets.
If you are a value investor this is gold to you.

This list shows the most traded ETFs and their rates.

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23 -27 Mar 2020 Trading week preparation

The content is now separated between markets/folders I track. It´s easier for me and I hope it´s easier clear for you too.

From last week:
Not trading was the right decision for me. The market is a roller coast with huge swings up and down. Despite my macro ideas are working, I feel I would be straight up gambling if I was trading.
I like to think I am a confident trader, although this market conditions are making me uncomfortable to leave positions open at night. so I prefer not to trade my capital at the time and keep trading on paper.
Part of being a trader is to know your edge, I am working on it.

Last week despite not trading it was a very busy week. If you use my data / reports you will see I remade the Market Gauge dashboard entirely and added a new correlation Dashboard.
I also made a few paper trades on SP500. I think I am learning a lot in this market environment. Things are happening super fast and Central Banks(CBs) are trying to save everyone my making cash injections.
Reading about CBs policies I started to brush up my knowledge on CDSs (Credit Default Swaps) and this crises is looking more and more like a huge Junk debt explosion. (iTraxx Crossover Credit)
Junk bonds are collapsing, CDSs are rising, Government bond Yields are all going to zero or negative and people are talking about MMT, a lot.

This are indeed scary times, I have no doubt that together we will beat Corona Virus but the aftermath will be another battle.

SP500 broke the yellow box, this is bad. We closed below 2018 Christmas correction. The volume on this sells are insane, this is historical volume levels.
More than 90% of the SP500 stocks are below any reference Moving Average.
Things are bad, I am eyeing the 2000 level.

Overall sentiment is bearish, some people cleaver then me are saying this will be worse than 2008. There are no safe harbors, all Safe Havens are diving too.

Well that’s a poo.
I love to trade crude futures but the amount of uncertainty in this market is insane. Supply is increasing by the day,demand is decreasing , Geopolitics and relations between OPEC, Russia and US are deteriorating. It´s chaos and mayhem.
That $10 crude idea is looking more real by the day. Spreads between Crude and Brent are really high which validates the uncertainty of the market.

My macro opinions for long term:

  1. We are heading lower, much lower on stocks.
    SPX made a new low, and the weekend trading is pointing for a bad futures open, maybe a limit down.
  2. US bond yields are going to zero.
    Short term bonds like 1/3 month are already at zero.
  3. Gold and silver will go a little bit lower before acting as safe heavens.
    Unfortunately this is still heading lower, the panic haven’t peaked yet, precious metals will only bottom when panic peaks.
  4. Commodities will behave like gold, specially grains.
    CRB Commodity Index is almost at a historical lows
  5. EM, AUD, CAD fx will get destroyed vs USD and YEN.
    Major movements down on last week open and through last week, I expect this week to be the same.

For the trading week:
It will be another crazy week.
The only plays I see and I am willing to take are on the FX market.
AUD,CAD and EM currencies are weakening against de USD and JPY.
They are a very oversold and DXY are a bit extended so I expect DXY to retrace a little providing a better shorting opportunities. I am eying specially CADJPY, AUDJPY,USDCAD.

Special note for GBP, this week we have a BOE rate decision on Thursday. A new cut and with DXY strengh it could take 1985 lows of 1.10

CNY – CB Leading Index
EUR – Consumer Confidence
AUD – Flash PMIs

JPY – Flash PMIs / CPI
EUR – Flash PMIs
GBP – Flash PMIs / CB Industrial Expcectations
USD – Flash PMIs / Richmond Man. Index

CHF – Credit Suisse Economic Expecations
EUR – German Final IFO Climate
USD – Core durable goods / Durable goods orders

EUR – Gfk Consumer Climate
GBP – Retail Sales / Rates
USD – Unemplyment Claims / Final GDP
JPY – Tokyo core CPI

USD – Core PCE Price Index / UoM data

16 -20 Mar 2020 Trading week preparation

The content is now separated between markets/folders I track. It´s easier for me and I hope it´s easier clear for you too.

What I am looking at:
From last week:
I had to cut my longs on gold. The position was making me uncomfortable and I think gold is heading lower. I was wrong on my assessment the market wouldn’t do the same as 2008.
I shorted CADJPY again on Tuesday pump and closed on 74.883 retest.

For this week, I have to be completely honest. I feel disconnected with the market.
I can´t figure out the movements, this is the first “recession” on my trading journey and I am trying to figure out whats what and its not easy.
I don’t trade on instinct and this market conditions are making me uncomfortable, so I am opting out not to trade(real capital) and study market movements and behavior.
This being said, It´s an easy way to practice and learn without loosing capital.

This isn’t taking the week of, I am still working on my trading journey. Sometimes embodying the “You don’t know what you don’t know” is the best thing you can do. Apart from paper trading, I will re-watch this:
Brushing up on my macro indicators and studying on how to correlate them.

My macro opinions for long term:
We are heading lower, much lower on stocks.
US bond yields are going to zero.
Gold and silver will go a little bit lower before acting as safe heavens.
Commodities will behave like gold, specially grins.
EM, AUD, CAD fx will get destroyed vs USD and YEN.

I will update my opinions on the next trading week prep

CNY – Industrial production y_y / Fixed Asset Investiment ytd_y /Retail sales / Unemployment rate
USD – Empire State Man. Index

CHF – Seco Economic forecast
GBP – Avg. Earnings index 3m_y /Unemployment rate
EUR – ZEW German Economic Sentiment/ ZEW Economic Sentiment
USD – Core retail sales / Retail sales /Industrial production / Business Inventories / Jolts Job openings NAHB Housing Index

EUR – Final CPI / Final core CPI
CAD – CPI / Core CPI
USD – Building Permits / FOMC

AUD – Jobs data
JPY – Rates
CHF – Rates
USD – Fed Philly Man. Index / Unemployment claims / CB Leading Index

EUR – German PPI
CAD – Core Retail Sales

Knowledge Up Ticks #3

This week I came across a few articles, a podcast and a video worth sharing

1- Bloomberg article about what happens if US bond yields go to zero

2- New article from Guggenheim Partners, very interesting point of view about this “corona virus” market environment and effect

3- A new article from Kevin Muir, as always a very different perspective about the world

4- Special Saxo Market Call, market perspectives and future

5 – Real Vision Market Fault Lines Exposed by Oil Shock | The Big Conversation | Refinitiv. Some perspectives about what´s next for only

9 -13 Mar 2020 Trading week preparation

The content is now separated between markets/folders I track. It´s easier for me and I hope it´s easier clear for you too.

Special Note: Market prep post will be posted on Sundays around 9 pm GMT.

What I am looking at:
Again, crazy week. More corona virus news and things are escalating.
(Coronavirus COVID-19 Global Cases by Johns Hopkins CSSE)

GBPUSD, I closed my short for +248 pips. I will explain more later in the post.
Gold / Silver, I am still long and strong things are shaping up fundamentally although some correlations are being made with early 2008 precious metals market I do believe the market learned from Its 2008 mistakes.
CAD, I opted to play CADJPY It was the safe play and after Mondays fake rally It was a great opportunity to short. I closed the short because holding trough the weekend was making me unease. I will reevaluate on Monday.
EUR, Special attention on the EUR this week. On Thursday ECB decides if it cuts rates or not. If ECB cuts all EUR gains from previous week might be erased. It´s a risky play.

The amount of noise on the daily chart is insane, so much pump by news and weird stuff.
The weekly chart is providing a cleaner look. The red box i showed last week is holding strong. SPX couldn’t close above it. Bright side ~2900 is holding strong.
I do think the path is lower but I think one last pump might occur providing a better short opportunity.
VIX is telling the story, market sentiment is bearish and people are looking for protection.

This tweet says it all

Things are looking really bad for WTI, that ~$30 level seems more obvious by the day.

I still think the pound is going lowerm I closed my short on the retest of the ytd mean reversion.
A retest of the redbox is possible, GBP numbers will be released on Wednesday. For now is watch and see how they will play out.

This is looking bad. If this breaks down, It could trigger a spiral of stop losses and bring the SPX / USDJPY correlation to interesting levels.

I will just leave the charts, I think I have been making my bullish case for a few weeks.

Despite having a long way to go down, a relief rally is due, CAD might retest the breakdown ~74.9 and CADJPY ~79.249.

JPY – Economy Watchers Sentiment
CHF – Unemployment rate
EUR – Germany Industrial Production / Sentix Investor Confidence

JPY – Prelim Machinery tool orders
EUR – Man. production / Revised GDP
AUD – Westpack Consumer Sentiment

GBP – GDP / Man. Production / Index Service / Industrial Production
USD – CPI / Core CPI
JPY – BSI Man. Index / PPI

EUR – Industrial Production
USD – PPI/Core PPI / Unemployment claims
EUR – Rates Decision

EUR – German CPI / Italian CPI
GBP – CB Leading Index
USD – Prelim. UoM consumer Sentiment / Prelim. UoM Inflation Expectation

2 – 6 Mar 2020 Trading week preparation

The content is now separated between markets/folders I track. It´s easier for me and I hope it´s easier clear for you too.

What I am looking at:
What a crazy week, markets took a hell of a dive and last Fridays rebound was insane.
I pretended to take last week off, but I had to keep an eye on Mr. Market because things were insane.
Positions from last week:
Gold/Silver longs took a dive. I am still holding them.
GBP Short still a go, this week GBP reports a lot of numbers such us PMIs and they should start decaying.

The Canadian dollar took a dive last week, breaking the symmetrical triangle and triggering a H&S.
I am planning to play this buy longing USDCAD or shorting CADJPY. I need to see how the market will open Sunday night.
USDCAD looks juicier, It broke out a triangle and momentum is on It´s side, although due to It´s high correlation with the price of WTI, It´s riskier to play.
CADJPY should be the safe play, Yen rebounded and looks strong.

CNY – Chinese Yuan
The Chinese Yuan took a dive for January. The numbers on Saturday started a lot of buzz. I would be looking to long USDCNH, not at the open but wait.
The weekly closed rested on the cloud.
Caixin PMIs are going to be released Monday and Wednesday. This could be a rocket.

To be completely honest, I wont be trading the SPX next week.
It will be a crazy week, a lot of economic numbers, more corona virus news,global slowdown and If Chinese numbers are as bad as people think this will be and elevator down.
What I am seeing on the chart.
It closed and the same level as the lagging span, 0.50 Fibonacci was a strong bounce for the week and 0.38 closed strong.
Weekly MACD printed a bear cross.
The weekly cloud is holding such as the 100DMA.
All this being said, I am eying a retest to the “red box”, even though I am not that confident about this. My read on SPX doesn’t convince me this time.

OPEC! Finally we will see how the cartel will sort this drop of price.
The meme buy zone of ~44 is holding strong and a rebound might be provided if OPEC cuts.
I might take a long on WTI , It will depends on how It closed on Monday before the manufacturing PMIs numbers. And If I take or not the USDCAD long.

JPY – Man. PMI
CNY – Caixin Man. PMI
EUR – Man. PMI
CHF – Man. PMI
GBP – Man. PMI
CAD – Man. PMI
USD – Man. PMI / ISM PMI / ISM Prices

GBP – Construction PMI
EUR – CPI / PPI /Unemployment rate
AUD – Cash rates

CNY – Caixin Services PMI
EUR – Services PMI / German retail sales / EUR retail sales
GBP – Services PMI
USD – Services PMI / ADP-Non Farm employment change / ISM Non-manufacturing
CAD – Cash rates

OIL – OPEC Meeting
USD – Unemployment claims / factory orders m_m
AUD – AIG Services Index

JPY – Leading indicators
EUR – Germany factory orders m_m
CAD – Unemployment change
USD – Avg. hourly earnings / Non farm employment change / Unemployment rate / Consumer credit
CAD – Ivey PMI