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April 11, 2020 | Trading Desk Notes April 11, 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

It’s all about the Fed. If you wonder why we’re seeing such a HUGE divergence the past 3 weeks between the economy and where investor psychology has taken the market…just remember…the Fed said they would do whatever it takes…did you think they were bluffing? They were back in this morning with another $2 Trillion program to rescue the credit markets…including downgraded corporate debt and munis. Junk bonds soared on the news.



Market psychology is having a “V” shaped recovery from total panic while the economy still looks horrible. S+P futures implied Vol is down 50% from the “max panic” level it hit mid-March. People who are making investment decisions based on how they “see” the economy (for instance, they think the huge hit to GDP has got to be reflected in lower stock prices) must be pulling their hair out.



People who “see” what the Fed is doing are buying gold and the stock market and selling the USD.


Markets seek equilibrium. Sometimes the market psychology “pendulum” swings WAY too far in one direction (driven by extreme greed or fear) and then in the process of seeking equilibrium it swings back towards the “balance point” with so much momentum that it goes well past “center” in the other direction. In the FX market the currencies that were sold off the hardest were EM FX and Comdols. I see the AUD as “representative” of this space as it bounces hard after being sold off hard.


Can the “psychological rally” be sustained? Is this just a vicious Bear Market Rally? Will the “reality” of a devastated global economy pull the market back down? And if market price action shows us that investors are growing fearful again will the Fed just throw up their hands and say, “Sorry, we gave it our best shot and that’s all we could do?” I don’t think so. In for a penny…in for a pound.

I’m not trading the economy…I’m trading market psychology. At today’s high the DJIA was up ~3,000 points from last weeks close…and the market closed up Friday going into a long weekend. That’s pretty impressive. Looking at the chart (and not trying to confuse the market with the economy) I see a 3 day Island reversal last week…following the 1 day Island reversal at the Mar 23rd lows…that adds to the bullish case.


Front month WTI crude oil hit an 18 year low below $20 on extreme fear...the fear was that supply/demand was so out of balance that storage space would be filled in no time and the spot market would go “no bid.” The forward curve was in super contango and option vol was astonishingly high. Then prices rallied a bit on “hopes” of production cutbacks…from OPEC and as many other producers as they could round up. Going into the weekend the market is not impressed with the “cutback” news/rumors.



My short term trading: I traded CAD, EUR, MEX and S+P this week. These markets “generally” moved in sync from Monday through Thursday as “risk on” sentiment ruled. I faded “risk on” sentiment Tuesday (successfully) but joined the bullish bandwagon Wednesday/Thursday. I had some winning trades and some losers and made a little money on the week. My trading this week was proof positive that trading is not a game of perfect…it’s a grind and I honestly forget most of the trades I made.


My “big win” this week was just trading what I saw rather than fighting the tape with my opinions of what I thought the market “should” be doing. I’m long EUR into the weekend (could just as easily be CAD, MEX or S+P) because I think the “risk on” sentiment might have legs. I’ve got a small position on in case I’m wrong and of course I’ve got a stop in the machine.

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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April 11th, 2020

Posted In: Victor Adair Blog

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