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June 1, 2019 | Trading Desk Notes – June 1st

Victor Adair, author of The Trading Desk Notes, began trading penny mining shares while attending the University of Victoria in 1970. He worked in the mining business in Canada and the Western United States for the next several years and also founded a precious metals trading company in 1974. He became a commodity broker in 1977 and a stock broker in 1978. Between 1977 and his retirement from the brokerage business in 2020 Victor held a number of trading, analytical and senior management roles in Canada and the USA. Victor started writing market analysis in the late 1970’s and became a widely followed currency analyst in 1983. He started doing frequent media interviews in the early 1980’s and started speaking at financial conferences in the 1990’s. He actively trades his own accounts from The Trading Desk on Vancouver Island. His personal website is

Stocks, crude and bond yields fell in May…the USD inched higher. The S+P 500 hit a 2 ½ month low this week…down ~7% from All Time Highs reached May 1st…giving back ~1/3rd of the rally from the December lows…but still up ~10% YTD.  Bullish sentiment was near 90% (greed) at the May highs and is now ~22% (fear) but we haven’t seen any panic selling this month.


The bond market began to rally last November when the US 10 year Treasury yield was 3.20%…it’s now at a 2 year low of 2.15% while the German 10 year is at an All Time low of negative 21bps. Bonds rallied because the Fed had “gone too far”…because the global economy was slowing and because capital fled the stock market for the safety of the bond market. It’s interesting that the latest leg higher in the bond rally began in late April…just as the crude oil market was rolling over from the highs made on the back of tighter American sanctions on Iranian oil exports. Since then bond prices have soared and crude prices have tumbled.



WTI crude oil traded above $66 in late April…a 6 month high…and fell below $54 this week…down ~18%…giving back ~50% of the rally from the December lows. Many of the “oil” share indices are off more than 50%…the OIH oil services ETF is below last December lows. The 2nd derivative of the falling crude price is the huge amount of corporate debt issued by “oil” companies. If falling oil prices make it difficult for those companies to service or roll over their debt…and that drives up yields on corporate paper…that could be a big negative for the stock market. I’ve noted the “in sync” movements of crude and the major stock indices several times on this blog…they go up and down together…but crude has a higher beta!


The US Dollar soared against the Mexican Peso Friday following Trump’s decision to impose tariffs on Mexican imports. The 5% tariffs will amount to ~$17B annually…2/3 of US/Mexican trade flows are between factories owned by the same company…so we’re talking supply chains…and cars. The Yen jumped to 4 month highs, the Swiss Franc touched its best levels in 6 weeks and even the struggling Euro and British pound turned green on Friday (sterling had closed lower on 18 of the last 19 days) as the USDX looks toppy around 2 year highs. Futures market speculators are positioned extremely long US Dollars…if the USD starts to slide they could exacerbate a downtrend if they start selling.


Gold began to rally last November (like bonds) perhaps also sensing that the Fed had “gone too far” and ran up ~$140 to the February highs near $1340…but gold has trended lower since then…despite declining real interest rates…as the USD strengthened and stock markets rallied (who needs gold?)  Gold jumped to a 2 month high this week as Trump ratcheted up trade tensions…as the stock market fell…as the USD looked toppy and as investors sought “safe havens.”


My short term trading: I came into this week long a small basket of currencies against the USD…and liquidated those positions for a small loss early Monday. I took a bite out of the short side of the stock market mid-week and more than recovered my Monday losses. I’m going into this weekend long AUD as a play on the USD turning down. AUD has suffered a very steep fall the past few months and speculators are heavily short. I continue to lament not getting short crude…I’ve missed the bond rally…and now I wonder if the gold market is going to take off without me. Trading is certainly not a game of perfect…but I need to catch the occasional good move to make up for the many small losses I take. One of these days Alice…one of these days!


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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June 1st, 2019

Posted In: Victor Adair Blog

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