Monday, March 21, 2011

Third week Performance of March 2011

Long WTI @ 100.56 22:00 GMT Sunday - End week 102.28

Long NZD/USD @ 0.7375 March 14, 2011, 8:37 GMT - Close @ 0.72086 March 16, 2011 19:17 GMT

Long GBP/USD @ 1.6109 March 14, 2011 8:38 GMT - End Week 1.6233 March 18th close

WTINZD/USDGBP/USDTotal CentsTotal Pips
+170 cents-166 pips+124 pip+170 Cents-42 pips

The Good
  • Going Long WTI beginning week was the correct move. From two weeks ago the initial slide from 108 highs reach low as 97 by mid week. Mid week I maintained and called support at 97 which held and made a quick bounce back to end week close.
  • GBP/USD - held 1.60 even though some hourly volatility bounced below. This has been a strong key level in the past 6 months and remained. I played it and stuck through and it is paying off into this week. 
The Bad

  • Trading Technicals on the NZD/USD when fundamentals were obviously the driver. I tried to catch a short term lower high reversal, which happened end week. Entry was pre-mature and closing was pre-mature. Lesson is don't trade against the trend. Though however, my target area to buy of 0.70+ was good as the a lower high currently in play was formed. The question is if this will consolidate or we will see the down trend continue. If trend continues once it reverses on lower support, on the way back up 0.70 + will be a buy. If it consolidates long enough, 2 months +, I will consider a buy in the third month.
All in all I would say any rationale anyone could come up should be thrown out the window. The volatility has been ridiculous and moves very irrational to rational to irrational etc... Trading basic technicals helped me get through the past two weeks, while trading technicals on the NZD/USD didn't' work out since its clearly a fundamental play right now. 

Though, through this volatility my Dollar view helped give more structure to my trades. Fundamentally if the correlations were holding, If the dollar did drop it would only be natural for for major's in the basket to follow along with stronger WTI. 

Another Good view I had was on the SPX 5% plus correction that occured. 

The bad views I had so far were:
  • Long Ibex/Cac on performance spreads to decrease with the Dax from 1 year ago.(Euro equities moving in tandem)
  • Trying to play a short term long NZD/USD
  • Mid Month Performance on WTI (though somewhat recovered from this)

Things to consider moving forward:

  • Softer Global Demand for crude going into Q2 and the relative supply in regards to softer demand
    • Over production from OPEC?
    • Under production due to continued MENA geo/political volatility?
  • Will the dollar continue fall on inflation based thesis? Or will risk aversion send people flooding back to the dollar?
Expectations are set at global demand softening. If this is the case (in terms of WTI $'s);
  • with softer demand if softer demand < over production  = prices probably trading in low 90's
  • with softer demand if softer demand < softer demand = prices continue above 100
However if Demand stays steady with the same level of Q1 Demand;

  • with same demand + over production will probably lead to 95+ possibly leading to a range bound Q2
  • with same demand + under production = prices continue to trend higher 100+
The dollar index is poised to break through the next level of mid term support, the big question is if longer term support of 72 is in view or will prices bottom and consolidate. 


For now I am short term biased dollar short and short term crude long. I'm looking for short term prices to get squeezed at least to 105 + and then exit for the month. I will continue to monitor Major pair positions accordingly...

Alexander Lê
Managing Partner
Analyze Capital LLC

No comments:

Post a Comment

This Blog has been developed by Analyze Capital LLC, and as an independent organization we provide “AS IS” information without warranty. The ideas and opinions expressed by the contributers of this blog are personal and do not represent the actions or policies of Analyze Capital LLC. The contents of this blog do not intend to assert recommendations or to offer advice of any kind. We are not responsible the consequences, be they gains or losses, that may result from using any of the information from this blog.