Global Macro Trading Journal

The big risk to brazil is that if investors globally do become more risk averse (as I expect), interest rates on brazilian debt will raise and this will put Brazil in a downward fiscal spiral. The the old self-fulfilling prophecy (or reflexitivity/multiple equilibria) issue. If interest rates come down the Brazilian fiscal situation is sustainable, if it doesn't, then it isn't. The government cant do much about it because of gridlock with congress. The fiscal deficit (not primary) is 9%.

The risk to these sorts of trades is when markets find a reason to be calm and they create the reality that they are betting on. Portugal, Spain, Italy, all these countries would be bankrupt if markets got nervous but they calmed down and created the solution to their own problem. If commodities were to rally this could happen. A no hike from the Fed might put some kind of bounce in commodities in the near-term. I rather wait for that before doing anything. If there is one thing that I learned from other short-term traders is that having a good entry point in a trade resolves a lot (if not most) of problems in terms of mismanaging trades, so I rather not chase the brazil fear trade
 
I added a bit on Qs after the Tepper comment. I think he is right that we gone from dips being bought to rallies being sold. I just wish I had done a better job of shorting those rallies. Because I didn't I will remain small on the shorts and hopefully there will be a Fed induced rally of some sort
 
Surprising strength in the Brazilian Real today. went from down 2.5% to down 0.8% now. I noticed that in the past week or so there has been a significant amount of bearishness by amateurs i know in the real, also the currency was going down no matter what the news was, that seem to have stopped over the previous few trading sessions. If anything, Brazil is a short-term buy now
 
The Brazilian bounce is underway, government is proprosing tax hikes and spending cuts to generate a primary fiscal surplus next year. Stocks and the currency are up. If they were smart, they could combine that with FX intervention and a rate hike. This would be a 'slap in the face' of momentum players and completely send the market in the other direction

Yes, its manipulative but markets create self-fulfilling propecies. If the government can break those cycles, its good policy
 
"In our view, the biggest issue for the bulls is the overhead supply. The SPX can certainly rally from here, as initial resistance doesn’t come in until 1993 (1-2% above current levels). Getting above that and there are another 40-50 handles of room to 2040 (3-4% above current levels). That area, however, is likely to represent formidable resistance as price spent over six months in that range. Meanwhile, the only clear support level on a downside break is the 1860-1867 area, which is nearly 5% lower. Therefore, we don’t think chasing rallies will prove to be very rewarding over the coming weeks."

http://www.businessinsider.com/stocks-may-never-totally-recover-in-2015-2015-9

I'm hoping the Fed pops the market closer to the 2000 level for adds to swing shorts
 
Switched short from QQQ to IVV. IVV is the less liquid S&P500 etf. this might flash crash if there is a correction in october. I also added a bit today. still saving bullets to the Fed pop thursday
 
I'm trying to add to the Fed futures position. I will lose money on the short stock side if the Fed doesn't raise rates and talks dovish. But in the case I will having offsetting gains on the Fed futures side. If they don't raise but talk hawkish (signaling a hike later, which is my baseline scenario), I make money on the futures side but might lose a little on the short stock side. Not much, I don't think the rally will have a lot of legs with Fed threating to kill the party. Maybe a pop to 201 or 202. I can probably put a stop for half my shorts there to cut down risk a bit

What I'm trying to say is that being short stocks at 200 SPY with a hedge on the super front end makes a lot of sense. You get killed in the front end if they hike but in that case stocks will get obliterated and you will make even more. I should probably size up a bit more
 
The idea is:
Fed hike: loss on fed futures more than offset by gains on shorts as stocks drop 10% over a month. This is actually a good scenario for the trade
Fed no hike but dovish talk. Gains on futures partially offset losses in stocks. The is the bad scenario
Fed no hike but hawkish talk. Gains on futures mostly offset losses in stocks. And these losses are likely to reverse as the rally might not last more than a day or two. This is the baseline. It will be a good scenario if the view that the rally won't last is right. Either because of the fear of a hike or because of buy the rumor sell the news type situation
 
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