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January 4, 2020 | Trading Desk Notes January 4, 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

Can we “trust” price action during low-volume holiday markets? That’s a tricky question…my best answer is that low-volume holiday markets are usually less “valuable” than regular markets in terms of “validating” price action. Look at it the other way round…most traders believe that price action is much more significant if it is accompanied by HIGH volume.

I ask this question about “trusting” price action because we’ve seen some interesting moves during the late December holiday period…including an up-side break out in gold and some currencies against the USD, new highs in the major stock indices and continuing gains in crude oil.

A lot of traders stop trading during the holidays…for good reasons…they want to avoid getting chopped up in “weird” price action and they “take a break” from the grind of trading to rest and refresh. I didn’t stop trading through the Christmas/New Year’s holiday but I did trade smaller size and had the good fortune of having thin volume conditions work to my advantage.

In the week before Christmas I thought gold might rally. It had refused to break down in early December (see Dec 21/19 Trading Desk Notes) so I took a small long position…anticipating that gold might rally out of its 3 month downtrend. Gold rallied…popping to 6 week highs…rising more than $35 in 3 days over Christmas. I took profits on the trade after that rally even though open interest was rising along with prices…usually a bullish sign…because I thought the gains could evaporate in a heartbeat once the “bigger players” came back to work. You might say I was wrong to do so given that prices have risen sharply since I got out but at the time my goal was to protect my capital…and trading is not a game of perfect!


I took a small long position in the Euro the day before Christmas. It had found support during the 3 previous days and I’d been noticing that the US Dollar was weakening (especially against some of the non-major and EM currencies…a condition I call “stealth” weakness in the USD.) I was able to take a long Euro position with limited risk relative to the gains I thought it might achieve if it rallied in thin holiday conditions. That’s exactly what happened going into the weekend so I stayed with the trade. The Euro rallied further on Monday and Tuesday of this week and I took profits ahead of yearend with the Euro at 5 month highs…fearing that it might get knock down once the New Year started…which is exactly what happened.


I also took a small long position in the Australian Dollar just before Christmas for much the same reasons I bought the Euro…but unlike the EUR the AUD had been rallying since the beginning of December (AUD and NZD often trade in harmony with the non-major/EM currencies) and it looked like it could “breakout” to new 5 month highs. Just like the Euro trade I was able to take a position with a limited risk relative to the gains I thought could develop “if” the AUD rallied in low volume conditions. AUD rallied over a full cent during the next 4 days and I took profits on the last day of 2019. At that point AUD had rallied for 9 consecutive days and I thought that was too far too fast…that it could get knocked down once the New Year started…which is exactly what happened.


With those trades I was 3 for 3 in terms of benefiting from US Dollar weakness in thin market conditions. I was also flat…held no positions…at the end of the year.

Now for the other side of the “trading holiday markets” story:

For the past month or so I’ve thought that the major stock indices were increasingly due for a sharp correction. I bought S+P puts in early December when the market looked like it was failing at the November highs but covered the trade for a small loss the following week…reminding myself that an over-valued market can easily get WAY MORE over-valued…and it was best to stand aside.

The stock market continued to rally through mid and late December…in my Dec 21 Trading Desk Notes I pointed to Tesla…up over 100% in just 6 months…as the poster child for the market’s current exuberance…while the CNN Fear & Greed index climbed into the 90’s. My thinking was to be patient and let the exuberance run its course…maybe in the New Year something would trigger a correction.

On January 2nd I bought S+P puts looking to take advantage of the “exuberant mispricing” that had occurred during the December holidays. The market sold off for a few hours but then…once again…started to rally and I covered the puts for a small loss. It was the right thing to do at the time…protecting my capital before the market rallied to new ATH. I could not possibly know that a few hours later the S+P would tumble 55 points on reports of an American military strike against Iran.


Going back to my opening question about “trusting” price action in low volume holiday markets…maybe the better answer is to (usually) trust low volume price action that continues a trend while (usually) being suspicious of low volume price action that is counter-trend…while always seeing price action accompanied by HUGE volume as especially important.

One of the key reasons I pay so much attention to the charts…to price action…is that I believe there are people trading these markets that I cannot know. I cannot know what they know or believe and I have no idea what is motivating them to do what they do…no idea about the time horizon they are using and no idea about what size they bring to the market. In other words the markets I trade are subject to “influences” I know nothing about…even if I think I know “something” about the markets I trade.

One of the classic descriptions of this idea about unknown influences is that they leave their “footprints” on the charts. Therefore I pay attention to the charts…if the charts are telling one story and the “news” is telling another I’ll go with the charts.

I don’t see these unknown influences as a “conspiracy” of dark forces aligned against me…I just think it’s being realistic…if my objective is to try to make money by taking risks in the market. Therefore…in risk management terms…I cannot argue that I’m right and the market is wrong. If the market moves against me I take a loss and get out. I limit my position sizing to a level where I can be dead wrong on a trade and live to play another day. I never add to a losing trade…and I’ve got to get better at staying with a winning trade!

Let me leave you with this chart of the gold market…have a look at the blue line at the bottom of the chart which tracks open interest (OI.) Since May of last year it has been rising as new buyers came into the market and stayed with their positions…even as gold fell ~$100 from September highs to November lows. Since mid-October OI kept making new ATHs on more new buying. Prices jumped ~$75 in low volume holiday trading the last 3 weeks with OI rising to new ATHs. If we close this week at current levels it will be highest weekly close in over 6 years. What are these “footprints” telling us?


I’ve been trading futures markets since the mid-1970’s and I’m more excited about the trading opportunities I see coming than at any other  time in my life. If we get some of the big swings I anticipate then the hardest thing to do may be to adjust to the volatility and to “stay” with the moves once they are under way.

Best wishes for success next year.

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 4th, 2020

Posted In: Victor Adair Blog

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