Hurricane Sandy

Today, would be a Great day, or at the very least day to trade energy products. VERY few commos trading. No equities, and most futures not trading. We can be seeing lots of pure price action of energy moves. Worth looking into.

Time to start revising old historical correlations. Will post back later if I get my correlation tool running again. Need to find a good place to pull decent historical data.

Stay safe if you are on the east coast, and hope everyone is prepared.

-Analyze Capital LLC

Open Books

After a year I open the books again. Feel free to browse during operations of 2011 since we no longer solicit investments.

Last week Daily Recaps - 2nd week DEC 2011

DEC 9, 2011

Last night I filled an order to short K200 (Kospi 200) at 251. I wanted to do this trade to take advantage of the Asian lag in equities. Double top confirmation. Very negative carry through from the ECB rate cut. Unfortunately interactive brokers was being very stupid and didn’t verify my trading permission for some reason. Kospi dropped 244. One contract would have given roughly around +2,600plus USD.

The general trend for today was some what typical:

1. Asian Hour consolidation from and slowly trading in a tight range continuing the trend (DX peaked of mid day yesterday then traded lower until asia opend, WTI traded lower small range, EURUSD traded a bit lower, USDCHF traded a bit higher).
2. European/UK hours hit and STRONG risk on trend. lots of covering perhaps since US hours seem strong in the opposite direction of europe. It seems a strong consolidating range before another big move to come.
3. US hours hit and completely reverses and erases most of European trading range.

USDCHF behavior inline with my expectations. What would seem to be going on is perhaps strong swiss franc buying during european hours and then strong treasury buying during US hours. At least rationally this would explain what we saw today.

The werid thing is, EURCHF has been tightly ranged bound. Perhaps not enough swiss franc buying has occured yet. Largely the effects of the USDCHF safe haven has all worn off or is priced in since its giant correction. Perhaps risk aversion seems to be the correct trend to play. People perhaps mostly are in cash. And its mostly USD driven price action. Though the swiss franc was ranged vs the EUR, the US treasuries were down today, indication perhaps short covering. Or new risk appetite coming in. Either way, it was clear this was what was driving the dollar weakness today. Not any flight to quality in the Swiss Franc. Perhaps people stopped with the swiss franc play due to the Central Bank warnings. 0.89 would be a good range to avoid getting spiked by central CHF selling.

Lowered the stop on the USD/CHF to about 10 pips above the previous high before todays European big drop. Hopefully the prices stay below and USD selling picks up or CHF buying starts up...





DEC 8, 2011

Markets are getting dominated by the news of the Eurozone rate cut. Again the risk affecting my USD/CHF trade materialized and is primarily driven from flight to quality trades + strong selling action due to interest rate impetus. The thesis of quantitative easing for the EU is no longer a viable rumor buying trade, past monetary policy has shown to be more hawkish in this respect (despite a ECB banking president change), and a general sentiment lack of credibility in the region.

The risk continuing is a prolonged risk aversion trend (signaled via 80+ DX), or if the whole EU region is deemed unsafe and the CHF will tank along with the region.

Conversely, what may save my trade is if 1.) the CHF is viable flight to quality assest class in the short run, and the relative interest rate variables add to the CHF inflows.

A good hedge to consider is short Crude on technicals. Fundamentally rumor risk from the EU/West/Iran situation remains. Early 2010 shows how dangerous and powerful rumors that materialize can be. The crude oil complex is highly financials post 2008. Rumor/Fundamentals/financials are definitely influencing crude in the short term.

A cleaner hedge may be to short equities

Another way to buffer the overall portfolio is to trade soft agri, or animal commodities, natural gas or uncorrelated equities.



DEC 7, 2011

USDCHF looking very ranged with little volume. Daily double top pattern is still in tact but is trading about 15 to 20 pips above my entry. Any uncertain data may stop me out. If that is the case I will have to wait for re-entry at the same levels. Possibly leverage a little more if the direction is correct.

Double top in Asian equity futures also looking attractive. Maybe a good hedge to risk on scenario if my ST play is not working out. Strong Double top on Australian and Korean equities (ASX KOSPI200). This is ST oriented, may be invalidated if prices can spike higher than previous resistance (and with possible pull back may mean buy the dip).

Volatility confirms this ranged scenario, the flat ST trend in the Russel Dow and Nasdaq volatility index. Once volatility spikes trend will start to go. I haven’t crunched specific probabilities, but it seems it can go either way with risk aversion or risk on.

ES - US Equities from Asian Hours started to break out to higher weekly ranges, but still needs to hold steady in the 1270 range to continue bullish momentum.

Crude Oil - WTI needs to break 102 to hold bullish momentum as well.

Good uncorrelated plays to consider trading right now would be NG/QG or Japanese Equities.




Trades Considering - DEC 05, 2011

Long EURUSD and Short USDCHF (long risk) - time frame next few weeks into Q1 2012 (EURUSD targets 1.40+ and 0.88 for USDCHF)

Long Crude on Pull back to 100 or below 99 even. If pullback is higher than previous low. Set tight stop.

ES seems a bit trickier since its HUGE jump on 11/30/2011. Prices seem to be superficial at these levels. Perhaps Dow will point to better clues. If YM fails at 12200 (current level) perhaps shorting ES would be a better idea in ST. If YM does fail along with ES this may give an opportunity to get long crude after the drop. Either ways equities do need to correct to sustain a healthy trend.

Risk positive indicators. Todays confirmation of DX trend down + 5,7,10,30 year treasury futures seem to continue to form bearish top patterns.

Risk to longing risk is that the EU uncertainty may rear its ugly head again. Short term sentiment seems elated to the bullish side (need to check across put/call ratios) but post NFP trend seems to indicate this. Any trip on significant Econ data or new shocking bad news from the EU can quickly turn back to risk aversion. Volatility expect to be high in ST.

Maybe time to start scaling in small NG positions for long term trade. Bottoming may be on the way... supply needs to stabilize or demand needs to significantly pick up. Need to check research on this.

In general, I want to play contrarian going into 2012. There seems to be lots of negative built up sentiment from MACRO issues. There is plenty of room for upside surprises. Though the uncertainty and instability from the EU + US and possibly Asia now all point to choppy waters ahead. Expect lots of volatility. Also, maybe time to look for bottoming action in Asian equities for short term squeeze up. Chinese easing is an interesting thesis to develop around. Superficial growth may lead to over inflated prices a good opportunity to short some time in later 2012.

Market Update: Dec 7, 2011

Dec 6 for US still.

Lesson learned today, despite what you are seeing stick to your initial point of entry.

Today entered USDCHF at 0.924 and prices already shot up to 0.927. Originally I was thinking below 0.927 as a good entry point but was worried I wouldn't get the fill. I roughly have a 100 pip margin until a stop is triggered, so I should be ok.

DX is ideally inline with my trade, but EURUSD still under pressure despite DX continuing to keep ST pressure under 78.7.

There is a dislocation with ES as well with prices failing to scientifically push higher. In my trading notes, I point out that a bigger correction for equities is needed first before a bigger move up. If that is the case my USDCHF is in danger in the ST. YM (mini dow) and NQ (mini nasadaq) confirm bearish pattern development on the ST daily charts.

CL (WTI) is pushing up but still is below ST resistance. Bigger catalyst are needed for a full risk on scenario. The pressures from the EU and uncertainty looming is still allowing for risk aversion to linger and cause this relative range environment.

Ideally EURUSD needs to push above 1.34 and ES needs to some how push higher back into the 1270 range. if my USDCHF doens't work out I may have to 1) short ES ST or 2) Buy ES at more attractive levels.

Ideally a hedge may work better.

More tomorrow. liquidity is a bit slow

Tommorow:

• GBP USD unofficial estimates
• NZD rate announcement
• AUD employment situation

Consider GBPUSD position before THURSDAY

Shame Shame 2 months no post - Old GBPUSD Chart updated - Nov 19, 2011

Pretty crazy, I've been extremely busy trying to transition to Asia. I think I'm getting used to the new structure and hopefully things start getting rolling again. In the mean time here is an old GBPUSD chart I found:

Originally this chart was drawn in June 2010. It was later tweaked some time in early NOV 2010. In general my long term read was quite good on the pound. I had targeted higher in the 1.70 range with a comfortable trading range developing with a strong return to growth. UK Austerity and the EU debt crisis has made this impossible in the short term. But the resilience of the pound remained. Despite a large drop in mid to late NOV 2010 the pound continued to rally on inflation hawkish fears all the way to 1.67 in early April 2011. Of course this over exuberance burst with slow growth and weak economic data. 

There was a strong correction to 1.60 with a strong bounce off support. With the first fail to break higher than 1.67 the move to support should have lead to move the stop to 1.60 on a long LT trade. The fail to break 1.67/1.65 higher on the second time should have been confirmation of the long term trend being over. 

Overall a pyramid trade on this chart would have been very successful theoretically. The main issue I had with my read of the markets was not understanding how long it would take my read to unfold. Risk certain was there, but only in the long term. The interim for risk was also very choppy and sticking to ones guns would have been very hard. Trading long term would require deep pockets of liquidity or very low leverage and the confidence to stick through the big drops or at least lighten the leverage load and pyramid back on strong moves up. 

Again, this is a classic case where I was right but not profitable. I believe my GBPUSD trades for 2011 mostly resulted in negative territory. Time to take a fresh look at the pound for 2012 and try and be consistent and read and trading. 

Alexander Le

Managing Partner

Analyze Captial LLC

Quick Update Post Fed Action Sept 22, 2011

Panic seems to be the theme. No pause in bearish trend.

• US treasury futures behaving exactly as the twist was defined. 10Y price breakouts to the upside. 30Y steady but yet to break out. 2Y and 7Y tanked.
• DX 78 was key, and break out led to full out USDCHF breakout (broken confidence in Eurozeone). Next test 80 in sight. Fail at 80 = possible risk on correction. Perhaps try to fade 00's
• USDCAD extending bullish breakout to top fibs. USDNOK Extending bullish break out to top fibs. Yen tried to unwind but went all wild; USDYEN rallied 700+ pips and has pared back all those gains since then.
• EURUSD 1.38 --> 1.35 300 pips post fed. Pound no pause continues downward fall to 1.54
• NZDUSD below previous historical breakout resistance level. AUDUSD below parity.
• Currencies erased all gains for 2011 pretty much.
• Interesting gold is very quiet; this seems to be more FED related than panic possibly or gold has been priced in or is correcting from it overvalued highs. If risk aversion is really hear 2000 target is in sights.
• ES technically can be still considered bull trend.Prints that stick below 1140 can reverse this.
• NG making new all time lows ahead of supply numbers
• Shorting crude at 85 was correct (short 84.9 ---> 83). Seems trend can extend. Look to re-enter on bounces.

It seems that 2011 will be a slightly bearish year if we can get the risk rally/risk correction before the year ends. If not this year will be bearish overall. Its possible that all this bearish sentiment can create a self fulfilling prophecy that will lead the world back in to recession. At this point both scenarios seem very possible.

Analyze Capital LLC

AnalyzeCapital(at)gmail.com

Market Update September 2011

It took almost 2 and half years before European Equities started to reflect some true fundamental value in share prices. The DAX has almost erased all of its gains from mid 2009. And almost 30% down from its yearly highs seen at the end of June 2011. Also, Italian equities are not too far behind German equities close to 30% down from the end of June. This is reflecting a collapse in confidence in the sustainability of the Eurozone (Spanish and French equities almost 23% - 24% down from July highs). This is compared to UK and and US equities which have dropped only about 11% to 12% of prices. 

The question for US and UK equities is if these indices will continue diverge and bottom or continue to drop in the face of continued  uncertainty. My thesis for the end of 2011 is way off at this point though my time frames may have been off. 

If the SPX can consolidate at 1150 its a possibility for a strong price recovery into 2012 to 1300. Its possible the equities will continue to rally up until the November elections. However, if prices fail at 1150 below 1000 is possible if no certainty is returned. It is more than likely though some pyseudo QE3 would come into play helping a rally thesis. 

Analyze Capital LLC

Http://AnalyzeCapital.com