We are in the ” Trading what’s in front of us business” and translating that into returns. So we’ll just let the board unfold and do the same things that made us successful last year and the prior 37 years. We’re always attuned to where, rather than why in our work. Why? Because ” Where” has to do with managing risk, and “Why” tends to keep you in a trade that’s working because you got the where ( Trade Location) correct.
Model Trading Portfolio…Current Holdings
No positions
Medium Term View…
The 1160-70 SPU’s area “S&P 500 Futures” would provide an area for good risk reward for the Bulls early in the qtr. The first time down has the potential to be a great Bear trap.
We’ll be using 1220 ish for our new pivot area going into the first qtr. We’re looking to buy the hard breaks in the equities and sell the 30 Yr. Bonds when the opportunity presents itself early in the 1st qtr.
It is our view that the political and economic risks are still skewed to a largely cash portfolio over the medium term. Look for the “talking head’s” chatter to revolve around Reflation/Deflation vs. Risk On/Risk Off as the new buzz words this year. Same deal/new terminology/same result with a different banter.
This upcoming Quarter will be one of patiently waiting for strategic opportunities. In other words, another year of limiting your downside risk and taking your money on your winners. Only trade ,either Long or short, when you can codify your risk.
We don’t believe the market volatility is going away anytime soon. This year should shape up to be another Trader’s Market. We’re particularly focused on opportunity in individual Commodities as well as the Commodity currencies in the first Qtr. It’s all about trade location!
30 Yr. Bonds …147 is the all time high in the front month futures. We will watch price action off this level for any potential surrogate moves in the Currencies or Stock Indices. 144.20 ish now becomes our macro pivot. All new closing strength over 145.20 would have us looking for more upside in the Bonds. Closing above this level would be short term positive the Bonds and negative the Equities.
Australian Dollar ( AUD/USD)…100-100.30 is the cash level we are using to match up with general Risk On bias in the overall market. Closing below this level, should mirror short term weakness in the stock indices. Remaining above, should have the opposite effect. “It will be a big macro pivot this qtr”. 102.33 & 102.08 AUD/USD are the past 2 yearly closes.
The big fly in the ointment this year will be Oil risk. Oil has become the risk commodity/ surrogate currency Du Jour, replacing the precious metals late last year. How high will Oil go before imploding the equities as in 2008?
All short term trading in any instrument should be gauged by Friday’s close, which was year end. Above, you buy before you sell…below, you sell before you buy with a tight stop.
Keep the first week mindless and simple! Everybody will be looking to go “all in” directionally!!
This will Not be our our strategy…We are going to do exactly what we did last year…Be patient! Take trades on our terms with limited risk… then take the money!
Everyone will come into the year mouse happy ( clicking as fast as they can). Spare yourself the aggravation!
Take it slow…If you learned anything from last year, it was “you’ll get another shot at a trade” and on your terms! Do not chase market moves!
Our view is that the beginning of this this year will be a High Volatility, Highly Technical, Rumor Driven, Time Frame, Lemming Effect Day Trade, on very thin volume just like most of 2011. The question is who’s day? Right now it’s still Europe’s.