August 17, 2019 | Trading Desk Notes – August 17

Markets continue to aggressively reprice interest rates lower. There have been massive capital flows into bond funds, the US long bond has hit a record low yield and the sum of negative yield bonds continues to rise. Capital is seeking a safe haven not only because slowing global economies and rising recession risks are expected to push central banks into cutting rates….but also because the list of existential risk points seems to grow larger every day. Conditions are fragile.

The bond rally that began last November has been going parabolic the last 3 weeks…certainly in part due to a buying stampede but no doubt also due to aggressive short-covering by traders and dealers.

Gold, the Japanese Yen and the Swiss Franc have all rallied since the end of May for much the same reasons that bonds have rallied.

The Canadian dollar rallied almost 3 cents from the end of May to mid-July when it looked as though the Bank Of Canada would NOT match the Fed cut-for-cut…but CAD slipped lower the last 5 weeks as Canadian economic data has softened. Futures market speculators had been net short CAD for 15 months and actually turned net long CAD in early July. Those long positions are now under water and I expect to see those positions reversed.

The major American stock indices traded quietly near All Time Highs in July but have weakened a bit so far in August with some nasty inter-day price swings.

My short term trading: I began this week short TNotes and short OTM S+P puts (looking for stocks to rally and Vol to fall.) I covered both those positions at a profit early Monday and went on vacation. I expect to be back trading again next week.

Victor Adair August 17th, 2019

Posted In: Victor Adair Blog

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