Tomorrow...Explosive?

Quote from trade-ya1:

At the risk of embarrassing myself, I'm feeling that tomorrow may be explosive in many markets. I think a lot of markets are at critical junctures, (ie. the $ has rallied to a point that much further rally might be considered a long term trend change, bonds have been steadily creeping up and could be explosive to the upside and equities are scitzo every other day). My bet is explosive rally in bonds after FOMC hike of 25 bps as market interprets this as one of the last hikes of the cycle, $/Eur takes out stops to the downside (of Eur) pre-FOMC and $ sells off hard after the decision (EUR range 1.2760-1.2980 closing at highs). Equities rally on higher bonds but selloff into the close on a weakening economy. I might buy some one-day vol. and forget my predicitions :).
More...

correct or incorrect.....
right or wrong....
on target or way off target...

at least you did the most important thing a trader has to do when dealing with risk, as we all have to deal with.

you quantified the issues that you have access to and can see or have observed and have framed trading actions based on either outcome.

you are prepared, and because you shared these thoughts, we too are now prepared.

thanks!
 
Quote from trade-ya1:

If you haven't guessed, I like to have a hypothesis and see it confirmed by market action before getting aggressive. I am ready to bite the ass off a bear if my thoughts are confirmed by market action, however, I try to stay in my shell and play defense prior to seeing confirmation that my ideas are correct. This way, I can't lose too much if I'm wrong.
More...

Nice, man. I try to trade under the same auspices. That is I have a main thesis, or preferred trade, and have a plan to profit from it. I also formulate a secondary thesis which is often a derivative of the first but with some minor changes. My “plan C” generally revolves around me having EVERYTHING wrong; which means I enact damage control and defensive trading until I figure out where I went wrong in my analysis and try to develop the psychological fortitude to profit in the short term although none of it makes sense to me. However, this is rare and when it comes to plan C I am lucky to get out with only minor financial losses and major loss of “time”.
 
Very interesting. The next evolution of my trading is trying to profit after being wrong and switching gears. Until now, I've been able to cut losses, however, I've never been able to stop-reverse and profit from "Plan C".
 
What's interesting is that when I do get "stopped out" it generally was a good decision as the market continues to move further in that direction. I always kick myself and say that if I had just "stop-reversed", I'd have recouped much if not all of my previous loss. Still can't pull the trigger with that though.
 
I'll play Devil's Advocate...

1.) Yes, very strong growth with relatively benign inflation. However, the Fed acted rather promptly when the pool of labor began to diminish in the late 90s. We are currently in a jobless (or jobloss depending on which stats you look at) recovery. Eventually the employment picture should strengthen and that should prompt the Fed to move from accommodative to restrictive.

2.) The Fed, though it won't admit it, dropped the ball when it came to recognizing the technology bubble in stocks. This time, however, the Fed seems determined to squash the growing prospects on speculation in the Real Estate market.

3.) Eventually those workers in China and India are going to demand higher wages. This will somewhat mitigate the deflationary impacts of "offshoring".

4.) Hard to argue with this one but I might opine that "dot.com" advertising rates may continue to increase as more and more marketing moves "online".

5.) Japan is probably reaching a demographic low. The youth in Japan are accustom to consuming, not saving like their predecessors. Relatively speaking, however, mature economies are <i>eventually</i> going to compete against emerging economies. If China, India or Russia get their banking centers in order; they may present a threat to mature economies like the US and threaten USD hegemony.

6.) The "soft patch" happened because rates AND oil spiked into mid-March; creating uncertainty amongst business leaders. These forces have since retreated, some rather significantly.

7.) Equities are reaching a %-retracement level that often predicates a rally; unless we are in a bear market.

8.) The "headlines" are very bearish on treasuries; just as they were the USD back in Nov. 2004.

9.) Can't argue with price action.

10.) Greenspan's legacy will be remembered as the Fed Chair that finally defeated inflation; so much so that DEFLATION is the greatest worry. Enter Bernanke; the architect of the reflationary period we are currently experiencing.

11.) Everyone is expecting higher rates but the forward Fed Funds futures continue to reflect a "measured" move. So while the "market" is anticipating higher rates it is reacting by pricing in a accomodative Fed.
 
You make some reasonable points but I have counter-rebuttals for most. It's too late in NY (2:30 AM) and I have to go to sleep now so I don't sleep through the Fed tomorrow :). Good luck tomorrow..Neal.
 
trade-ya:
the crowd is now expecting the FED to comment the much weaker economic numbers in their bias. So I guess even if the bias is changed towards a less agressive stance this is already priced in. Look at ZB the last weeks and you see that smart money has long ago already positioned for that move that you want to take now. So my best guess is a quick 1 point pop in ZB where I will place my SHORTS.

Top
 
Quote from trade-ya1:

Thanks, Ivan. It's always a risk to post BEFORE events take place. So many market observers/participants love to voice opinions how they had it nailed after the fact. I suppose no guts, no glory. This is my scenario and I'm sticking to it! :) Unless I change my mind...:)
More...

Yes, yes. You can be wrong frequently when you do this, and people will laugh and say "hah! He lost big", though none of them had put their neck out with a forecast. But the few times you're right, everyone will call you genius.

Isn't that actually an American proverb? The difference between insanity and genius is measured only in success?

-Ivan
 
This is the best thread I've seen on ET in a while. I'll agree w/ Trade-ya on at least one point - something is due to explode today. Well, other than oil ... that will have to be tomorrow.
 
You must log in or register to reply here.
Back
Top