- the source for market opinions


June 27, 2020 | Trading Desk Notes June 27, 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

I trade futures and options for my own account. My initial time horizon for a trade is usually a few days to a few weeks. Sometimes, if my view of the market is working I will maintain a position for months. I believe net profits over time come from disciplined risk management…not from having a great crystal ball. I don’t use much leverage and I know where/why I will kick out a losing trade before I initiate the trade. I manage risk by limiting size, using stops and trying to avoid too much concentration/correlation.

My trading P+L seems to be a little “streaky”…that is I’ll have a run of winning trades and then a run of losing trades. Losing trades outnumber winning trades over time but the average size of my losing trades is smaller than that of my winning trades. Every once in a while I have an outsized winning trade. My risk management process is designed to keep me from having any outsized losing trades…but sometimes I do. Trading is a marathon not a sprint. You have to find your own way to trade…but with every trade you make you have to know exactly what you are going to do if you’re wrong. You never know what’s going to happen.

In the early 1980’s I was the currency analyst for one of the largest American commodity brokerage firms. I provided “fundamental” research to our brokers over a telephone “broadcast” system and internal teletype system. I traded my own accounts very aggressively via that “broadcast” system so that all of our brokers in North America and Europe could hear what I was doing. I did daily market commentary on a popular radio station and the TV news people were regularly in my office to get my market opinions.

My thinking at that time was very much focused on “why” the market was moving. I developed research habits in those days that I still maintain…but these days I’m much less focused on “fundamental” research and I’m much more interested in what Jim Dines calls “Mass Psychology” because I believe that’s what really moves the markets.

Market Psychology (as I call it) seems to move in waves...not smooth symmetrical waves…but rather spiky waves…whereby, for instance, a market will rally with increasing momentum and then reverse…sometimes sharply.

Robert Prechter (Elliott Wave Principle) told me years ago that the “social mood” drives the market…not the other way round. And it seems to me that the “social mood” is turning these days…whether we are looking at the continuing spread of the virus and the knock on effects that go with that…or the current social/political unrest and how that may have its own knock on effects on the November elections.

One of the ways I try to get a “feel” for market psychology is by watching how a market reacts to “news.” A bullish market overlooks bad news and embraces good news. For instance, the recent “risk on” rally took the stock market sharply higher while the “news” was of massive job losses and a very weak economy.

I pay close attention to inter-market relationships. Lately I’ve been writing that “it’s all one market” as “risk on” market psychology took stocks (some more than others) and commodities higher while driving the US Dollar down. Inter-market relationships can give me a good “feel” for market psychology…especially when a number of different markets all reverse direction on or around the same date…something I call a Key Turn Date.

I’ve thought that the “risk on” rally from the March lows was a classic bear market rally...coming after the brutal month long “risk off” crash from the February All Time Highs. It lasted much longer than I thought…perhaps accelerated by millions of new retail accounts (and massive stimulus!) but the past couple of weeks I’ve been showing charts that may indicate that the bear market rally is over and a new down leg is beginning. I’ve been trading my accounts with that idea in mind. The major American stock indices closing Friday right on their lows adds to my bearish view.


I wrote last week about “M” shaped topping patterns (with lower right shoulder) being one of my favorite signs that a rally may be ending and a down leg developing. A “W” pattern works in reverse for market bottoms. The Weekly DJIA chart shows a “M” top in a monthly time frame while the daily chart shows a “M” top in shorter time frame.




Two weeks ago I showed a few examples of what I called Ominous Island Reversals which may also have been signaling an end to the bear market rally. Those Island Reversals seem to be working so far.



The Australian Dollar and the Canadian Dollar (and EM FX) have moved broadly in line with “risk on/off” sentiment the past few months…falling with the stock market in Feb/March and rallying thereafter. If that close relationship continues (and it doesn’t have to) and if the stock market takes another leg lower then there may be good trading opportunities buying the USD against commodity and EM currencies.






I could say much the same thing about crude oil.


The gold market has been very choppy within ~$100 range for the past couple of months but it broke out to a new multi-year high this week. It’s up ~$400 from last year’s lows and it seems to me that negative real interest rates, fears about the precarious political/social/financial environment and concerns about possible run-away future inflation / currency debasement have driven investors to take record sized long positions in global gold ETFs. I can’t disagree with that but the very choppy day-to-day price action has kept me from buying gold. Trading is not a game of perfect!


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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June 27th, 2020

Posted In: Victor Adair Blog

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