Trading the Indices on Fundamentals

[FXtrader8911]

As a follow-up to above, of the 129 Chinese companies listed on the US exchanges, none meet the accounting and reporting standards applicable to US companies. Apparently, the US gave some exemptions to standards to the developing countries, Trump now wants to remove those exemptions. I am all for that, if no other reason than investor protection. Trump's plan is to go further, he wants to prohibit ETF traded on the US exchanges and US pension funds from incorporating in their portfolio any Chinese company that does not meet US accounting standards... I think this is also a good move.

People forget that China is still a communist country, the state owns everything and manipulates everything to show the results it wants to show. It has given lead way to the likes of Alibaba, Huawei, Tencent, etc to enrich themselves with the party's support but what the party gives the party can take away (even to the point of making CEOs mysteriously go missing). Western investors do not belong inside that environment.

 

[FXtrader8911]

Do what you can ... It is most obvious they do not have the skills to make legislation around this. They do not understand the basics of how to use leverage.

You'd be pleased to know that have sent a 5-page submission Sat night. It mentioned (twice) the essence of what you said above and included all the mistakes FOS made when I reported broker's misconduct some time ago but they took no action, this was to emphasise that ASIC should concentrate on oversight of the provider, force removal of unfair clauses in the client agreement and in taking action when misconduct is reported. i.e. put in order their own house and ensure client agreements are not staked in favour of the provider before trying to limit the activity of the trader. I probably wasted my time, but its done even though my broker advised me on Fri that I will be exempt from the changes as my activity does not class me as a retail trader.

 

[NotKnown]

I will be exempt from the changes as my activity does not class me as a retail trader

That aside, it does not excuse a complete misunderstanding of how trading works and the advantages that leverage brings to us. I also protest to this big brother approach. I also pointed out to them that far more people play pokies (that really should not) and the losses incurred by these people far outstrip losses in CFD trading (easy to research). The pokies are designed to take money off you. I guess because it is state sanctioned then it is ok. You are correct in that ASIC should get there house in order (years ago I reported an incident of insider trading at a company I worked at and nothing was done) but as they are a Government Dept. they get their salary regardless of their performance. Thanks for putting in the effort!

 

[FXtrader8911]

it does not excuse a complete misunderstanding of how trading works and the advantages that leverage brings to us

Agree, I did include 6 examples of actual trades that could be profitable at low margins but would lose or even blow the account on high margins i.e. the prohibitive capital requirement to hedge would interfere with proper risk management, forcing to use STOPS rather than hedge and recover. Also gave 2 examples of a newbie (called him Mr Tim Fool, in reference to their example) blowing his account and incurring $500 loss on low margin but $12.5k loss on high margin. But, if the "complete misunderstanding of how trading works" applies to all of ASIC staff, I fear the examples will fly over their heads just as my complaint to FOS did... rather than consult an expert, FOS just did nothing. I appealed their inaction through a lawyer, cost me $10k to have the complaint re-written in proper legal terms and referencing the specific laws that were broken, FOS still did nothing... so who do you go to when the ombudsman does not understand the issues? Waste of tax money to have oversight institutions too ignorant in their field to be able to protect individual's rights. Unless the press takes an interest in your case and goes public, these people just go through the motions of doing things but do nothing.

 

[FXtrader8911]

My call for a correction in the US in Sept was wrong, stocks gained during the month despite a storm of escalated trade headlines and impeachment, slapping Trump in the face by going up on the news. But not all is clear, if history is any indication, October could be a different story, the month has historically been the most volatile and the fear index, tends to peak in October. Over the last 3 decades, the VIX has jumped more than 21 points in October. Despite the stronger sowing than expected in Sep, the DOW is 400pts below its peak, meanwhile, Europe beat the US in performance for the month, the CAC40 in particular hit an all-time high on the 20th and finished the month just 10pts below that. Germany, in comparison, is 1,000pts below its highs and steadily losing it's dominance with a PMI below 48 and falling... the move to electric vehicles is hitting German industry hard as Germany miscalculated the speed of the shift keeping its resource and R&D in the production of ICE vehicles. Engineering for the EV is vastly simpler than for ICE vehicles and requiring different skill-sets in chemistry and electronics, an industry-wide shift to EVs could cost Germany the lay-off of 3% or it's skilled work force and a frantic, costly rush to retrain these engineers.

I remain net short in the US and net long in Europe

 

[FXtrader8911]

I remain net short in the US and net long in Europe

It may be the start of when this strategy starts to pay. PMI at 47.8 (lowest since 2009), manufacturing is in contraction. Bots caused a 10pt down the gap on the release, humans then followed through. DOW had a 500pt slide, S&P powerd through the 2979 support

At each short that's unwould I'll be adding a long, currently I'm still net short

 

[FXtrader8911]

If anyone needed confirmation of the unpredictability of markets, look at the HSI... closed y'day during one of HKG's most violent demonstration, opens today to rally despite a major sell-off of all other markets.... unbelievable.

Would be interesting to know if any TA players saw to-day's rally in the analyses.

 

[FXtrader8911]

EU opened with a sharp sell-off, something is spooking them, probably Germany close or in recession is a worry, however, the Southern European markets were celebrating Germany's woes y'day with the MIB & IBEX falling less than half of the others, the MIB even had a bit of a rally before getting caught in the south-flowing current. US futures are not doing well either and the VIX has spiked.

 

[FXtrader8911]

Just bought some S&P and NDAQ to hedge some shorts, still net short in both. Also got limit long orders on the DOW at 26,255

 

[FXtrader8911]

Tue sell-off had many reasons (DOW closed some 1,500pts below its high, average of all markets lost 3.5% in 2 sessions), firstly, the worries over the global slowdown continue to build, second, protests in HongKong on the day that China celebrated it's transition to communism could result in a military occupation of HKG disrupting the "one country 2 systems" juggle that could disrupt the region, lastly, fear that Berny Sanders might pull-out of the race and Biden's problems could hand Warren the presidency if Trump gets impeached. Warren is known to be a hardcore socialist that is unfriendly to big business. Putting all the above together created an environment of "sell first, analyse the outcomes later" that could see the sell-off continue. The assumed culprit, the bad PMI figure that caused Mon sell-off, is all but forgotten. Friday's employment figures could be the last straw or cause a recovery, we need to wait and see.

As I was already net short in the US, the sell-off favoured my positions. I did some buying towards the bottom to hedge the shorts and to put me net long in the Russel2000, overall I remain net short in US and net long Europe.