Macro trading

[remogul92]

HolyMacro first thanks for sharing your journey with us. Good stuff and I wish you the best of luck.

Question: Seems like you are going to base your trades off of news based events. That being the case how will you anticipate the markets reaction to news?

Suppose the news in question is “good news” but didn’t meet the market’s expectations and prices fall? Or vice versa it’s “bad news” but not as bad as markets predicted and prices rise?

 

[HolyMacro]

Thank you remogul for your note and thought-provoking questions.

Let's say my view is: X will do Y next week. If the good news wasn't good enough for X to do Y, my view was wrong, simple as that. Another facet to this - if X indeed does Y, did I pick the right vehicle to monetize such a move? My view might be correct, but the monetization mechanism might be wrong.

Also, I would not necessarily characterize what I do as trading the news. This might just be semantics, but I see "trading the news" as acting immediately in response to a specific event. By contrast, I collate the information I internalize over the course of the week, and form a directional view for the upcoming week.

 

[HolyMacro]

This week's trade finished positive, but fell short of the benchmark. Next week's trades are: VWO and XLI: full set of global PMIs will be released Monday; expecting production numbers to start to turn globally and in the US. Here's the score to date:

None of my posts represent an investment advice, and are provided for entertainment purposes only.

 

[remogul92]

This week's trade finished positive, but fell short of the benchmark. Next week's trades are: VWO and XLI: full set of global PMIs will be released Monday; expecting production numbers to start to turn globally and in the US. Here's the score to date:

View attachment 212557

None of my posts represent an investment advice, and are provided for entertainment purposes only.

HM. Thanks for sharing. Question: How do you determine your Benchmark?

 

[Global OptionsTrades]

Interesting journal @HolyMacro

...My modest objective for this portfolio is to beat S&P 500 returns (not risk-adjusted) over any 12-month period...

The implication of this is that there is an expectation that your strategy will underperform risk-adjusted return from simply buying S&P500, and holding it.

If so, why would you bother trading this?

Also, I would be nervous of arbitrary timing such as open on Monday, close on Friday.

If a news item appears on a Wednesday, do you trade it but close on Friday to avoid holding a position over the weekend, or not trade it because your 5-day view would take you over a weekend?

 

[HolyMacro]

HM. Thanks for sharing. Question: How do you determine your Benchmark?

Hello Remogul

My benchmark is S&P500, as I said in the original post. Is that what you were asking? Or were you asking how am I calculating its returns?

 

[HolyMacro]

Interesting journal @HolyMacro
The implication of this is that there is an expectation that your strategy will underperform risk-adjusted return from simply buying S&P500, and holding it.

Can you please explain how you came up with this? I re-read my statement five times, but I don't see such an implication. It certainly was not intended.

Interesting journal @HolyMacro

Also, I would be nervous of arbitrary timing such as open on Monday, close on Friday.

As far as the time horizon of the trades, please see my post to Times on 10/27. As far as Monday and Friday specifically - the randomness you mention is a very good point, and the timings and execution in general can be undoubtedly optimized. But it is secondary to getting the big-picture directional views right at this point for this project.

Interesting journal @HolyMacro
If a news item appears on a Wednesday, do you trade it but close on Friday to avoid holding a position over the weekend, or not trade it because your 5-day view would take you over a weekend?

I don't trade the news, see my post to Remogul on 10/29 for more details. In the scenario you described, the Wednesday's item of news could contribute to forming a view for the following week, or it could become irrelevant by Friday. That being said, one of my self-imposed rules is "- these rules may be altered from time to time" so I might make exceptions or change the approach from time to time.

 

[HolyMacro]

Doing something different this week – will rotate my positions this afternoon, rather closing out for the weekend.

With yields rising, expecting USD to continue firming up: UUP

With an uptick in manufacturing, expressing cautious optimism over US economy through the Value ETF SLYV and consumer cyclicals XLY, and keeping the industrials XLI position for another week.

Approximate allocations: XLI 50%; UUP 40%; SLYV 6%, XLY 4%.

I’ll post the box score for this week over the weekend, but so far this week’s trade is up 0.31%: positive, but short of the benchmark.

 

[HolyMacro]

Here is the score for last week, and the entry leg for the next week, since I re-entered on Friday. Last week's portfolio return was 0.63%, compared to the benchmark's 0.85%.

Note - I corrected the benchmark calculation for weeks starting 10/21 and 10/28 in that I set the entry price equal to the Friday's close, rather than Monday's open. This change was slightly unfavorable towards my portfolio's performance relative to the benchmark, but did not change the overall over/under determination for those weeks.

None of my posts represent an investment advice, and are provided for entertainment purposes only.

 

[HolyMacro]

Like last week, I will be rotating the positions before 4pm today, rather than sitting out the weekend.

Although the US stock market is at the all-time high, I think that the signs that the global growth has bottomed out are not fully priced in, and S&P500 will continue its winning streak next week. The next week's trade is the benchmark, but leveraged: SSO at 100% allocation.

None of my posts represent an investment advice, and are provided for entertainment purposes only.