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December 1, 2018 | Trading Desk Notes – December 1st

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.

Markets are bracing for a possible huge “gap” opening…up or down…Monday morning following the Trump/Xi dinner at the G20 meeting in Buenos Aires Saturday evening. I expect to see a tsunami of political/market analysis Sunday. The major US stock indices have closed higher every day this week…perhaps hoping that Trump and Xi will  “tone down” trade tensions at their meeting this weekend.

The major US stock indices rallied and the USD fell Wednesday on the “story” that Powell’s speech surprised the market by signaling that the Fed might not be raising interest rates as much or as fast as had previously been expected. I thought that the dramatic price action in the stock and currency markets was more the result of “positioning adjustments” rather than a reaction to the “Fed news.” (“Positioning adjustments” means that the hedgies were VERY long USD and “not long enough” stocks and scrambled to “adjust” those positions as the markets moved hard against them as the headlines flashed the key parts of Powell’s speech.)

Two weeks ago I noted that both the Fed Chairman and Vice-Chairman were signaling that Fed tightening might “slow.” Since November 9 US interest rate markets have been rallying on the expectation that Fed tightening would be slower next year than had been previously expected…and the credit markets moved very little following Powell’s speech…compared to the dramatic price action in stocks and FX. So the credit markets “saw it coming” while the stock market and FX market were concerned with other things.

The US Dollar Index closed this week at its highest level since June 2017 despite registering a Daily Key Reversal Down Wednesday.

The DJIA had its lowest close last Friday since June but bounced back more than 1,200 points this week.

WTI crude oil prices chopped up and down by more than $2 a barrel every day this week…mostly between $50 and $52…and managed to close slightly higher on the week after closing lower for 7 weeks in a row. OPEC’s major annual meeting in Vienna will be next weekend and headlines have been “will they / won’t they” agree to production cutbacks.

The Canadian Dollar hit a 5 month low this week just under 75 cents as the announced closure of the GM plant in Oshawa added to the accumulation of CAD bearish news…which includes WCS remaining around $15 BBL and 2 year US/Canada interest rate spreads widening in favor of the USD.

My short term trading: I started this week long S+P calls and long Gold puts. I shorted CAD early Monday. I out-smarted myself and covered my S+P calls for a small profit on Tuesday and just couldn’t find a spot to buy’em back as the market rallied Wednesday through Friday. I covered my short CAD for a small gain ahead of Powell’s speech “just in case” he said something that would cause the USD to fall (he did) and I covered my gold puts after his speech for a small loss as gold rallied on the weak USD. I made a little money on the week (while trying to ignore that I’d left a bunch on the table) and I’m prudently flat ahead of this weekend’s Trump/Xi meeting.

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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December 1st, 2018

Posted In: Victor Adair Blog

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