June 21, 2011 - Market update

The second week of June predominately characterized with risk aversion. Risk was coming off the table left and right. The financial market conditions dominated and was the catalyst across the majority of markets. Despite any S/D issues, the dollar weighed heavily on crude prices pushing it below key 97 support. The USDX index was touch high into 76 but quickly retraced. Of course this was me with wild EUR/USD moves and the majority of majors tanking vs the USD. The US treasuries quickly paired back losses they experienced in the first weeks of June as equities continued to tank (clear indication risk aversion).

Last week June 13 - June 17

EUR/USD:

• 4:6 total risk on/risk off  Europe and American sessions
• 2 of 5 trading days were above the weekly High-Low average
• 4:1 up/down days. 

Sentiment is definitely was negative all last week. Despite there being more up days the up day ranges are not volatile at all. This signals caution going into this week despite the end week and monday day risk on action. It is cautious at best.  Significant down side risk remains in the pair, much of the sentiment/fundamental risk coming from the Sovereign debt crisis. If relief is truly here we will see 1.445 in sight for the next resistance (this coincides with a 50 RSI break on the daily). Fail's at the 50 RSI on the daily can mean back to strong risk off and flooding the USD again. Look for confirmation of US treasuries falling this week and equities up. 

GBP/USD

• same risk on/risk off stats as EUR/USD - Same catalyst
• However, the number of up/down days is 2:3 slightly higher than the EUR/USD 
• There is higher volatility as well in the price high low ranges as  3 out 5 days were above the weekly average.

A lot of the volatility and negative price action has to do with soft Economic data coming from the UK, which was exacerbated by the Sovereign debt worries. Where as the EUR/USD generally experienced all its volatility in one day and crawled back up.  Though generally prices remained buoyant against the strong historical and psychological 1.60 level. A move down down this week at the previous weekly high low range would bring it right above 1.60 support. A break below this could be devastating for the pair and see lower price action and strong risk aversion. 

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QM trade July 15, 2010 - Three Straight Days of Losses

3 days of trading losses adding up. Getting to be too much will step away from markets and reassess what the hell is going on. 

Saw price reach above last nights top and entered at 100.2 +  and it was most definitely a bad idea to enter at this level. As the EUR/USD is leading everything, the dollar is leading everything. Equities left in flood and pour straight into bonds. Risk aversion rampant and I was betting risk on (everyone pouring into the dollar $DX magnificent erection mode). A fool trade in a clearly risk off environment. If prices don't break lower than 97.5 again I have set my stop too tight, or I should have set it tighter. Too much bleeding will need to re strategies after loosing so much.

Long term support is holding, but it seems I am not account for volatility too well. I tried to buy on breaks in each case above and ended up on the wrong side. Long term view did not match short term sentiment. Each day we were seeing over 3 dollars covered. Despite the ranged environment on the daily chart the volatility has been high. The key drivers have been the dollar and the European Sovereign Debt crisis. 

I will be doing analysis and forming a proper thesis to trade next week. This week was a total disaster hopefully the last two weeks I can correct this.

Analyze Capital LLC

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Can't Catch a Break - QM trade June 15, 2011

Can't catch a break on QM made two bad trades this week. Overall not doing well. Still believe prices can move higher. Last night towards the close into overnight trading I tried to play the break on the 76.4% fib. I entered at 99.7 and was up about 50 cents however as soon as Asia volume picked up they did exactly the opposite of the EUROPEAN/US hour trading. I will try to play the break again today, so many other distracting possibilities. 

Everywhere bearish sentiment is rampant from the EUR/USD sovereign debt issues, to weak GBP/USD data, and risk off equity move from London hours. Currently we are getting some stability at support/resistance levels. 

Possible trades:

Short EUR/USD if we get strong move below 1.4325

ES June is tempting to buy back up to 1290

QM wait for break at 100.2 (above last nights top)

Analyze Capital LLC

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June 13th Bad Trade - June 14, 2011

1. I believe I would not have been out so much money had I had a lower stop. 1 ATR obviously was not enough to account for volatility for the time frame of my trade. Looking at the red circle it seems pretty clear I was hit by algorithms set to take out stops.
2. Alas also my second blunder, or shall I say the greatest blunder of the year so far was entering an over leveraged position by accident. Though the trade was well executed and was the correct underlying asset it was the wrong size. As soon as I realized this I should have exited my position.
3. Thirdly, my strategy was this, expect price jump on open on Sunday. Since that jump never happend and prices continued to taper off on anemic volume I should have exited right away. 
4. This trade did not follow my specific guideline. 

Got to get back to the basics, this experience was a bit surreal. It has been awhile since I seriously traded which is bad and good. The safest thing for me to do is wait for a strong break to the upside at 100.09 level and target 2.00s. The intraday volatilty on the DX really really killed me. Not being aware of that volatility really ended up hurting. Overall the DX ended up lower which should have helped me but crude ended up much lower because of it. 

Pound seems to be approaching psychological level of 1.65 and EUR/USD can move to 1.45 before its big test. Actually the UK inflation was met with 4.5% inflation inline expectations. Currently GBP/USD is up on the hour.

The GBP vs the Asian pairs seems fit to bounce off support, while there is consolidation on the GBP/CHF. The GBP/USD uptrend seems still in tact. Overall it seems the pound is technically fit for broadbase rally. 

EUR in general all pairs seem fit to continue strength on a technical basis. Despite slight volatility from the Greek downgrade from B to CCC, which messed up my crude position and was shrugged off by investors... the EUR strength is still in play. 

Lastly, the ES despite back and forth yesterday ended slightly positive giving it enough of a base to rally overnight. Overall environment seems favorable for what I was looking for early in the week but poor volatility considerations stopped me from participating. 

Analyze Capital LLC

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Perhaps a fatal flaw - June 13, 2011

Entered CL_Q1 at 99.8 Friday June 9th

After May's drop off Crude has been range bound. To me this was through rising price support. I figured that after the first week of June if prices held above support we would get a big jump on the following week open considering the aggressive risk off on June 9th Friday. 

Unfortunately it seems that risk off trend hasn't completely worn off. Equities are quite key in this environment. The SPX cash has fallen about 7-8% from 1370 peak and dollar has been rising with the sell off. Crude has been range bound between supply/demand contentions with Opec countries. 

Sunday into Monday trading, June 13, Crude dropped over a dollar in over night trading and is floating in the 99 range into US hours. My reasoning of support holding seems less reasonable as the price action is anemic. Though, possibly volume is less due to Europe markets are closed. 

On the UK session the dollar was weak $DX fell from just below 75 to mid 74.5 with $ES_U1 having a decent recovery. Going into 12:00 it seems uncertainty  and risk off is coming back into play as the dollar is fluctuating and the Majors/USD are slightly pulling back. 

Fundamentally if crude oil markets are to be tight price direction would be naturally up, but OPEC indecision is making prices ranged. Prices will take if the Saudi's do increase production by 1.5 million barrels per day, and if markets ignore decrease in spare capacity. If this is the case 98.00 will be broken and I will be out a lot of money. 

I'm hoping that there will be a squeeze on dollar weakness before the end of Wednesday trading back up to the upper BB's, which would also require a break in 76.4% fib which is acting as a short term resistance.

Currently looking for continued dollar weakness, US equities to have some relief from the past few weeks of aggressive selling and crude to get squeezed at least up to 100 - 101 range.  

Analyze Capital LLC

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HF Industry Update

http://www.hedgeweek.com/2011/06/07/117432/hedge-funds-see-inflows-usd175bn-april

• Positive inflows for the Month of April USD17.5B
• Assets currently at 1.8 trillion (via trim tab and BarClayhedge)
• Multi-Strat USD 5.3B, Macro USD 3.0B, Fixed Income USD 1.3B
• 4 straight months of inflows 

Quote from article above:

“The appetite for bonds appears to be insatiable,” says Vincent Deluard, Executive Vice President at TrimTabs. “Hedge fund investors, ETF investors, mutual fund investors, and speculative traders are piling into the space. This enthusiasm explains why the yield on the 10-year Treasury has plunged to a six-month low.”
The TrimTabs/BarclayHedge Survey of Hedge Fund Managers for May 2011 reveals that managers have turned neutral on US equities. About 30% of managers are bullish on the S&P 500, up from 23% in April, while 29% are bearish, down from 34%. Meanwhile, managers have turned marginally bullish on the U.S. dollar, and 34% plain to increase leverage in the near term."

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AC Take:

• Maintains short term bear on US equities
• Short term bear on crude long term bear Crude (waiting for production shock - buy on lower support)
• Dollar definitely has room to fall further; short term bear

Analyze Capital LLC

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Visualization of Fed's April Consumer Credit Report

Consumer credit trend overall has significantly decreased from the sub-prime crisis. The rate of outstanding credit falling less in 2009 signaled a bottom to come. At the start of 2010 consumer credit bottomed and tight credit eased off. Through 2010 and into 2011 credit has started to come back into the markets.

A breakdown in the the total trend shows the huge drop in outstanding credit came from the unwinding of pools of securitized assets from mortgage related institutions along with small drop in financial companies. The only substantial growth in consumer credit can be seen from the Government and Commericial Banks. Interestingly though at the start of 2010 Commercial lending activity seems to have started to decline all the way into 2011, and government support continues to rise. 

We can see the decline in the Commercial Bank is coming from revolving credit. Obama's regulation on consumer protection could be putting a dent on this. We see in the second chart that Commercial Banks benefited greatly from revolving credit. The commercial banks switched to a fee based model vs. a loaning model hence the huge jump in 2008 in consumer credit. Throughout this period loaning has contributed to little consumer credit growth at all. 

Banks are getting kicked left and right on how they can make profits. Its only a matter of time before non-revolving credit starts to add more value for banks again. It has been 3 to 4 years since the start of sub-prime. I believe in another 1 - 2 years commercial bank portfolios should be clean enough to start healthy lending in in non-revolving credit which could spark much needed investment and perhaps be the catalyst to allow for corporates to unless their pent up cash. 

Much of this slow growth has been in opinion, due to a lack of banks willingness to lend due to tighter regulation, fear, uncertainty in growth, cleaning up lending portfolios etc... Once this huge hump can be passed, we should see a stronger pick up to growth and the jobs market. 

Percentage of Total Change 2006 - 2011

(Percentages)

Analyze Capital LLC

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