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April 2, 2018 | Trading Desk Notes – March 31

Senior Vice President and Derivatives Portfolio Manager. Victor began trading financial markets over 45 years ago and has held a number of senior executive positions during his career as a commodity and stockbroker. Over the years he has provided considerable market analysis via radio and television and at financial conferences. His primary brokerage business is providing corporate accounts with risk management services using exchange traded derivatives. He actively trades currencies, interest rates, precious metals, stock indices and commodities for his own accounts.

From the Desk of Victor Adair

My short term trading:

  1. I started this week short the stock market via a bear spread in S+P options. I created the bear spread by first buying S+P puts on Mar 13 when the market rolled over and then the following week I sold OTM S+P puts to lock in profits. I became more aggressively short this past Tuesday morning after Monday’s relief rally ran out of steam. I took profits Wednesday when the market refused to break to new lows. I currently have no positions.
  2. I bought WTI puts Tuesday after the market made new multi-year highs on Monday and then turned lower. I had written the previous week that my gut instinct and the chart patterns told me that this was NOT the time to be short WTI…but Monday’s market action convinced me to take a small position! The market broke nearly $3 to Wednesday’s lows but then rallied back to close only marginally lower on the week. I still own the puts but my confidence is low.
  3. I shorted CAD on Tuesday after CAD and several other currencies and gold rallied against USD on Monday and Tuesday and then turned lower. I remain short.
  4. I shorted NZD Wednesday for the same reasons. I remain short.

Positioning creates opportunities: Markets go up and down in different time frames as they go in and out of favor. When a market makes an extended move in one direction investors become heavily positioned in line with the trend on the assumption that the trend will continue. After a 9 year bull market in stocks it seems reasonable to assume that investors are heavily positioned for the market to keep going up.

On rare occasions markets go to extreme highs on the back of greed and hope…or to extreme lows on the back of fear and despair. After reaching an extreme a market doesn’t just stop…it moves hard in the opposite direction.

My trading plan for the stock market is based on the assumption that the hard break from the January All Time Highs was not just another “Buy The Dip” opportunity but rather was an “extreme” high (at least in Market Psychology) and that the market is in the process of reversing from that top. I’m looking for opportunities to short “relief rallies” that run out of steam.

Opportunities in other markets: Speculators are now heavily positioned short the US Dollar and long crude oil. I’ve made some limited risk trades against that positioning and I’m looking for opportunities to become more aggressive, if the markets move in my favor, on the assumption that a “positioning unwind” will accelerate a USD rally and/or a WTI decline.

PI Financial Corp. is a Member of the Canadian Investor Protection Fund. The risk of loss in trading commodity interests can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. In considering whether to trade or the authorize someone else to trade for you, you should be aware of the following. If you purchase a commodity option you may sustain a total loss of the premium and of all transaction costs. If you purchase or sell a commodity futures contract or sell a commodity option or engage in off-exchange foreign currency trading you may sustain a total loss of the initial margin funds or security deposit and any additional fund that you deposit with your broker to establish or maintain your position. You may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice, in order to maintain your position. If you do not provide the requested funds within the prescribe time, your position may be liquidated at a loss, and you will be liable for any resulting deficit in your account. Under certain market conditions, you may find it difficult to impossible to liquidate a position. This is intended for distribution in those jurisdictions where PI Financial Corp. is registered as an advisor or a dealer in securities and/or futures and options. Any distribution or dissemination of this in any other jurisdiction is strictly prohibited. Past performance is not necessarily indicative of future results

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April 2nd, 2018

Posted In: Victor Adair Blog

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