Dunning Kruger Journal

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It appears many markets are focused on trade talk progress. It seems likely to me trade deals will be reached over time between the US and all of its trading partners.

I presume we will have another trading range type of day and may look for scalps on SPY or IWM.

ZW is on the radar as of yesterday. ZW is at the lower end of a broad trading range on the daily charts. Australia's drought will likely cut into yields, but futures carry does not imply there is a wheat shortage. December wheat tends to have seasonal strength going into December at some point going forward. Wheat has come down in price over the last several weeks as trade frictions between China and the US have heated up. Today wheat has taken out the prior day's high basis the European session. A China and US trade deal will likely be bullish for wheat. Will look for long position today after seeing how the opening goes and subsequent trading during the US session.

cmegroup.com features several in depth articles involving fundamental analysis of its various products. New articles appear roughly once per week. I believe even if one is a short term trader, there is value to understanding what the drivers are in the market you are interested in.

 

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I see ZWZ is moving quite strongly to the upside now. I'm looking for a position trade. May buy a wheat option bull spread, say long Sept 21 540 call / short Sept 21 560 call for a debit of about 6.5 cents. My target in Dec Wheat is $6.00 to $6.10, or about the high of the last bull move. However, this option spread seems inefficient and there is no additional profit potential after $5.60. This may imply buying calls may yield a higher return. Will review my options. My stop loss would be triggered a little below the recent low around $5.15.

Update: Wheat is going crazy to the upside. Depending on action during US session, may have to adjust my option prices of wait (hope) for a correction.

 

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Bought 1 ZW option Bullspread: Long Sept 21 $5.40 call / Short Sept 21 $5.60 call at $.0675 debit. Stop is $.03 Debit. Target is $.18 debit over the next few weeks.

 

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In US premarket, I see FXI is down almost 2% taking out the low of the last several days. EEM is down as well. Nikkei futures are down about .6%, challenging the previous day's lows. Copper is showing weakness again, but crude is stronger on supply drawdowns.

I feel a strong Chinese equities market to be bullish for my wheat position because it may imply positive trade agreement speculation. The reverse seems to be happening, however. Some of the industrial commodities and overseas markets appear to be signaling economic growth concerns. People still have to eat, though.

Will only be looking at bearish positions on US equities and their derivatives today, if I have time to trade today. Selling the open and using a statistically validated threshold amount, such as .1% or so based on typical broad based index volatility, as a stop above the open might be a good play here. A good target might be yesterday's open or even yesterday's low.

 

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Bought 100 VXX at $28.81. Stop at $28.60. Objective TBD. This trade is based on short term S/R.

 

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Sold 50 VXX at $29.04 which seems to be stuborn resistance so far. New stop for remaining portion of trade is $28.85. Prices are still hanging around resistance which may be a good sign. May shoot for high of week, maybe more.

Closed remaining VXX at $29.08. I know it's lunchtime, but indexes seem to be recovering and am unable to watch it too much longer.

Will provide screenshots of account performance for the month of August this weekend.

 

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Risk sentiment seems slightly negative in European session. Probably will be a low volume day for US markets, especially after lunchtime due to three day weekend coming up.

Until various trade deals are finalized with the US, there are likely to be statements by various countries that should best be considered negotiating tactics. Although this may cause short term market volatility.

It will also be interesting to see if China and others try to delay agreeing to a trade deal until after the US Midterm elections for political purposes. Such a strategy seems like it is not without risk, as it is probably best to not be the last country left without a trade treaty. Also, enacted tariffs may start to increasingly weigh on trade and on economic performance. Terms may be less favorable, especially since the US appears to want to increase its manufacturing base as shown by lower tax rates, regulatory reforms, and the trade treaty with Mexico.

ZW is up in European session. I see $5.45 to $5.50, a high of the day area Wednesday and Thursday as short term resistance. It will be interesting to see if there is any short covering into the weekend.

No plans for trades today.

 

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Out of ZW bull spread at $.05. Big down day in wheat, it rallied back to open, which could be considered intraday resistance, I decided to get out there. Definitely not the kind of price action I am looking for.

Would have actually exited this trade earlier today on opening threshold violation against position, but was too busy at work.

Although I hit a new account high to close out last month, after today's hit, this performance is moot. I will go back to being flat at the end of each week as was originally planned for this account.

Copper is down sharply and crude had a intraday significant reversal almost completely filling the overnight gap. I feel the global economy depends on international cooperation. I believe trade agreements are important for global economy stability and growth, including the US. Trade as a percentage of global GDP has increased over the years. Disruptions in trade is likely to impact the US eventually. Economic slowdowns are particularly dangerous when Government, business, and consumer debt are near record highs. Unfavorable demographics due to aging baby boomers spending less and soon will be net sellers of assets of all kinds only increases economic risk and related equities market risk.

It is hard for me to get exicited, even in the short term, about the long side of the equities markets. Copper is down 3% as I write this and that is a continuation of a serious downtrend on the daily charts. Emerging market stock prices are not doing well, decreasing the viablitiy of emerging market businesses using the equities markets to fund expansion. Once transportation volumes starts showing signs of faltering, we are probably going to start hearing speculation involving the "R" word.

Our global leaders are playing with fire, economic fire, each day they delay in getting a deal done, in my opinion.

Long term, I would be considering risk reduction strategies, deleveraging, and maybe even some asset sales.

 

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Money flows are the most positive I've seen for a while. Still, without much progress on trade talks recently, it is hard for me to get too excited.

Will be looking for buy signals today in ES and ES dirivatives. I thinking of seeing how the open goes in the US RTS and may enter on a correction using the opening price area as a potential support and stop area. Target would be a new high on the day. Not looking for anything more than that today.

Spent part of the weekend going over options strategies. It seems there are several single name implied volatilitues that are very high versus historical volatilities and are high versus what seems to me, reasonable expectations.

Therefore, I will be looking at theta decay capturing strategies on these single names in the future. I will post these ideas in the future.

 

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With no long signal, and having a long bias, I missed decent short opportunity in ES at 2889. Now with ES below the open, will look to short rallies of about 6 points, yes I'm dreaming, before 1100 ET. My stop, if filled, would be 3 points and my target would be a test of the day's low.

With NQ decisively taking out yesterday's low it appears more aggressive action is warrented. Risk aversion seems to be finally increasing in US equities.

Since it is September, post Summer vacation low volatility ending and budget battles looming, maybe an increase in volatility is in order. A long VXX position, perhaps?

Chased and bought 40 VXX $30.56 as a little market melt down insurance. NQ is down over 1.3%, much higher range than typical. Stop to be determined. Target to be determined. Probably will look to add to this position later today.