Cane's trade journal

[Cane]

Hi everyone

A quick introduction - I work in investment research department for a multi-asset fund in Europe.The fund manager implements no more than two to three TAA views per year. While I think the process is appropriate for this fund's mandate, I've found that a lot of views and trade ideas I come up with do not get implemented because of their time-frame is too short.

As a means of implementing my views on the markets, I have decided to start trading in my own account. I will be using IG''s spreadbetting platform (account size is only c. £6000). A few more details:

• The trades will be taking place in the forex, rates, equities and commodities markets.
• Positioning will be based on the macroeconomic picture, fundamental analysis, and understanding of the prevailing sentiment. Technical analysis will be used to determine entry points and stop/TP levels.
• My thought process will be top-down 99% of the time, therefore I will rarely (if ever) trade individual securities.

That's it for now. I really look forward to this and I hope I'll get to know the people from this community and share ideas and knowledge.

Best
Cane

 

[Cane]

Not intending to trade today. Price action has been unusually unpredictable last week. On the one hand, some of the big recent moves are consolidating (e.g. DXY), while volatility has spiked in equity markets and bonds keep getting bid up.


On paper, the forthcoming quarter should be good for equities because earnings growth is likely to remain strong, with recent downward revisions likely to leave more room for an upside surprise. The strong US dollar and slower growth in Europe is unlikely to have made a significant impact on Q3 earnings already. However, price action and the spike in the VIX makes it risky to try to pick the bottom, although it would probably make sense to go long today with a stop @ 1878, targeting c. 1970/2010 over the coming weeks/months.


A long SPX short DAX relative value trade may be much more interesting at the moment, as I believe news flow is likely to turn more positive for the US economy and the traders would soon begin to downplay the impact of the slower Eurozone on the US economy. The downside risk is that the S&P 500 generates a substantial part of revenues abroad, The Russell 2000 would be a good candidate for the long leg, but it’s price action is just awful having completed several different topping patterns this year. Perhaps the most sensible alternative is the XLP ETF, but this trade already looks stretched. All in all, it’s probably best to sit and wait at the moment.


Open trades:


Stay short EURUSD, opened on 9 October @ 1.2737, TP @ 1.2500, S @ 1.2800, currently @ 1.2673

Stay long UST/Bund spread, opened on 9 October @ 156bps, TP@110bps, stop @ 160bps, currently @ 139bps


Important notices:
I do not provide personal investment advice and I am not a qualified licensed investment advisor. All information found here, including any ideas, opinions, views, predictions, forecasts, commentaries, suggestions, or stock picks, expressed or implied herein, are for informational, entertainment or educational purposes only and should not be construed as personal investment advice. While the information provided is believed to be accurate, it may include errors or inaccuracies. I will not and cannot be held liable for any actions you take as a result of anything you read here. Conduct your own due diligence, or consult a licensed financial advisor or broker before making any and all investment decisions. Any investments, trades, speculations, or decisions made on the basis of any information found in this email, expressed or implied herein, are committed at your own risk, financial or otherwise.

 

[Cane]

An interesting breakout emerged last week on the XLP/XLY chart:
https://www.tradingview.com/x/wzCcGPXr/

Longer-term chart for perspective:

One would obviously need to be bearish on the economy to enter this trade. I think it will range-trade over the following year or so - longer term chart attached for perspective:
https://www.tradingview.com/x/2ulmfYGp/

I will be monitoring this chart.

 

[Cane]

I've bought the VIX Oct future @ 22.03 as the SPX closed below 1879. Stop @ 19, TP@26. A rather poor reward/risk, but this is more of a hedge than a directional view as I still have a lot of capital tied in physical stocks.

My EURUSD position is in the red, currently trading at 1.2745.

No other changes.

 

[Cane]

EURUSD back in the black, currently trading at 1.2650

I'm closing the UST Bund trade, the spread has narrowed much more quickly than I had anticipated.
Will consider re-entering on pullbacks.

See chart:

I will be looking to short the 10 y USTs @ 2.1% or lower. I think news flow will gradually shift from "global growth scare" towards "strong US domestic growth" batch of data. This might help the R2K recoup some of the losses relative to SPX, give the XLP/XLY rally a breather, and push EURUSD lower. If these moves don't turn out to be impressive enough in magnitude, it may be worth dancing with deflation - short gold, long UST.

Cane

 

[Cane]

Near term bullish on DJIA, although not aiming for new highs in the near future. Motivation: Despite the weird Wednesday:
- the R2K looking more positive,
- HY spreads stable
- 10y yield picked up
- XLY outperformed XLP 2 days in a row.

The risks - well they're everywhere... The stop probably too tight in this volatile market but i think it's worth a shot.

Currently in the red and very close to being stopped out....

 

[Cane]

Looking slightly better now. I hate it how I bought at a relatively high level. Did this because I didn't want to miss the opportunity - the V shaped bounce looked like a very reliable signal. I need to learn to be more patient, though recognizing I will never pick the actual bottom...

 

[Cane]

Asian markets held up well, European markets opened up almost 1%. The trade was in the green briefly this morning and I reduced my position a little bit so I can have room for a wider stop - something I will be considering this morning. Bonds are getting a bit of a bid but nothing significant.

Eurozone CPI out in an hour or so, another ugly surprise is possible.
Later on we have Jobless Claims , where I expect an improvement. An improvement could be bad for stocks however, if the markets are hoping for more stimulus - however the recent price action in response to previous jobs data releases does not seem to suggest that.
Finally, the Philly Fed is coming out, I expect a consensus reading of 20.

The DAX is sliding down as i write, FTSE100 a bit firmer and the DJIA futures looking OK. I hope I'll get stopped out and learn not to try to pick the bottom with tight stops.

 

[Cane]

The DAX and FTSE are down c. 0.6% this morning. S&P 500 is hitting an important resistance levels today. I am generally bullish and expect a continued stream of earnings surprises, but I would need to see a break above this level to get in.

US CPI coming out today, the consensus expectation is 1.7% for the core and 1.6% for the headline figure. A higher reading would be bullish for USD. The EURUSD has broken down from something that looked like a developing uptrend, so I took the opportunity to short here.