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November 23, 2019 | Trading Desk Notes November 23, 2019

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

The major American stock indices hit new ATHs Tuesday but turned modestly lower as trade optimism faltered. Bullish momentum has been inspired by easy monetary policy, FOMO and TINA…with little regard for WHY monetary policy has been easy. Investors have been handsomely rewarded for buying dips. Option volatility and put/call ratios signify complacency…the CNN Fear/Greed index signifies greed.



Bonds rallied the last two weeks…maybe just a bounce after hitting 3 month lows in early November…or maybe they are resuming their multi-year trend of lower and lower yields due to the 3 Dees…debt, deflation and demographics. In previous blogs I’ve proposed that long term interest rates hit a HUGELY important inflection point on the September 3rd KTD and yields are now in a rising trend. We’ll see.


I got back on the short side of the bond market this week. I’ve had success shorting bonds on and off since early September but I’ve been on the sidelines the last 2 weeks as prices rose. One of the risks to this trade would be if the stock market tumbles and capital seeks safety in the bond market. Another risk is that the market starts to fear a recession. It’s only a trade. Risk management stops are in the market.

I got short the Canadian Dollar this week and was happy to see the US Dollar end the week on a strong note. Net speculator bullish positioning in CAD is near a 2 year high…a break of the 75 cent support level could trigger liquidation.


I’m short the Mexican Peso thinking that there could be contagion from the political unrest in South America. MEX fell to a one month low Wednesday but bounced on USMCA hopes. Net speculator bullish positioning is near multi-year highs. Open interest increased ~40% as MEX rallied from early Oct lows to early Nov highs. A break of the Oct lows could trigger liquidation. The Mexican central bank has cut the overnight interbank rate 3x25bps this year to 7.5% to counter the slowing economy. The inflation rate is ~3%. With Mexican interest rates much higher that US rates currency forwards are at steep discounts…which means the clock works against a short MEX position.


The Swiss Franc (CHF) was under pressure all week...closing at a 5 month low…looking like it could break lower. CHF also fell against EUR this week even as EUR fell against USD. The Swiss Franc is the go-to currency in times of trouble…especially in times of trouble in Europe. It’s interesting to see that EURCHF made a 2 year low on the Sept 3rd KTD…as did GBPUSD…as Brexit fears dampened down. Maybe the weak Swiss Franc is signaling that European fears are receding.


I bought gold puts this week after being on the sidelines for 2 weeks while gold rallied from 3 month lows. I’ve been trading gold from the short side the past couple of months. My idea has been that gold rallied ~$350 from November 2018 to the Sept 3rd KTD as nominal and real interest rates fell…and if interest rates are now rising then gold may fall. Comex speculators have been hugely bullish gold and have maintained those positions as gold has dropped ~$100. If gold continues to drop speculators may decide to liquidate their positions.


One of the ways that I look for trading ideas is to imagine how something might change in the future and how markets would have to adjust if that change took place. For instance, interest rates have been trending lower for 38 years and are now at historically low levels. You have to think that a HUGE amount of “positioning” has been established on the basis of interest rates staying low. But if interest rates rose a lot of markets would be mispriced and there would be great trading opportunities as that mispricing was corrected.

Part of imagining how something might change in the future includes imagining a catalyst for that change. For instance, if a nationwide poll showed that a far left populist had a good chance of becoming the next President of the United States then that poll would be seen as the catalyst that precipitated huge changes in mispriced markets.  As a trader I want to get in front of those changes.

I use the futures market to trade currencies, metals, interest rates, stock indices, energy and other commodities. Please give us a call or send us an email if you’d like to know more about trading futures.


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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November 23rd, 2019

Posted In: Victor Adair Blog

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