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January 25, 2020 | Trading Desk Notes January 25, 2020

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 North American stock indices hit ATHs this week…initially shrugging off virus concerns…but when the virus headlines became increasingly scary ahead of the weekend stocks and commodities fell while bonds, bullion, the US Dollar and the Japanese Yen rallied.


Given the tremendous run in stock indices over the past few months this week’s correction has been very modest…so far. Warnings that stocks had rallied too far to fast have been ignored while Buying The Dip has been handsomely rewarded. But as prices raced higher “positioning risk” increased exponentially and left the market vulnerable to at least a correction…if not “something more.”

The bond market may be telling us that “something more” may be forthcoming.

On the January 11/20 blog I wrote that the very important “Pivot Points” created in stock indices, gold, crude and bonds following the Iranian missile attack on American bases in Iraq represented a price (and emotional) extreme that should “constrain” price action going forward. Regarding the S+P index I wrote:

The S+P Tuesday overnight low of 3181 basis March is now a Pivot point that “should” act as a serious support level for the market. Look at it this way…if that’s the worst hit the market could suffer when it looked like war was going to break out what would it take to drive the market below that level? Or…look at it this way…if that support level is broken then the S+P might be setting up for a much bigger tumble.

So far the pivot point highs in gold ($1613 basis Feb) and WTI ($6540 basis March) have not been challenged nor has the S+P pivot point low (3181 basis March.)…BUT the bond market has rallied through its January 7th pivot point high…a high that was made when TV commentators were talking about WW3.


So what’s going on with the bonds? First let’s drag out the old chestnut that the bond market is WAY smarter than the emotional stock market. So while the stock market was enjoying a giddy run for the roses the belt and suspender types in the bond market were seeing signs of slowing economic growth and were hunkering down. Maybe the bond market senses that a slowing economy increases the chances of a Democratic win come November.

In my Oct 26th blog I wrote about the Sept 3rd Key Turn Date when the US long bond touched it’s All Time Low yield…when the total of negative yielding bonds hit an ATH…when yield curves were max inverted and when the popular narrative was that a serious recession was coming. The Key Turn Date was all the more important because a number of global macro markets also reversed direction on or around that date.

Since the Sept 3rd KTD the popular narrative has been that the looming recession had been avoided (credit CB easing) so bond prices fell while commodities and stocks rallied…until recently.

Perhaps the bond market rally of the past few weeks and the breaking of its pivot point resistance level is telling us that an economic slowdown is looming…if that’s the case then the stock market may be at risk of “something more” than a very modest correction. My thought is that if the S+P index breaks its pivot point support level (3181 basis March) it will take a tumble.


The Canadian Dollar was the best performing G10 currency in 2019 and closed the year (in thin year end trading) at a 14 month high. I’ve been shorting CAD the past 3 weeks and the Bank of Canada helped out my positions this week. Weaker commodity prices have also pressured CAD…note that Western Canada Select crude has been trading around a $24 discount to WTI…that’s around $30 at present prices.


My short term trading: I came into the week short CAD and TNotes. I covered the short bond position as soon as trading began Monday afternoon at a breakeven, bought Japanese Yen and S+P puts. Regular readers will note (perhaps with some amusement) that I’ve recently been taking shots at the S+P and have occasionally been rewarded. I added to my short CAD and long Yen Tuesday and shorted MEX Thursday. I took profits on the S+P puts, and half of my CAD and Yen positions on Thursday. At the end of the week I’m short CAD, MEX and long YEN.



My son Drew Zimmerman and 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.

Victor Adair

SVP and Derivatives Portfolio Manager

PI Financial Corp


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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January 25th, 2020

Posted In: Victor Adair Blog

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