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July 18, 2020 | Trading Desk Notes July 18, 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

You have to ask yourself, “What are we trading these days?” 50 million Americans have applied for first time jobless benefits since the  lockdowns began and the Nasdaq 100 has rallied >60% from the March lows to this week’s All Time Highs. For most of my trading life I’ve made a point of knowing when economic data was coming due because it could move markets…these days I don’t even look at the calendar…the data doesn’t seem to matter.  The Virus keeps spreading and the re-openings get reversed but the “thinking” seems to be that the Authorities will inject more and more stimulus so buy stocks that have been going up. FOMO and TINA. It’s just that simple.

China/USA tensions...indeed China/ROW tensions keep ticking higher but that doesn’t seem to matter. The Fed has the bond market sedated…under Yield Curve Control in all but name…so there are no Bond Vigilantes anymore…even with real yields at All Time Lows.

The U of Mich. consumer sentiment survey hit record highs in January, fell like a stone into the April lows, bounced a bit on the “re-opening” but is now rolling over again while 32 million Americans claim UE benefits…and the dis-connect between Main street and Wall street gets wider.

Some folks say that the dis-connect will have a day of reckoning...sometime…but if the political bubble of more and more government is just getting started…and if the Fed is on a mission to create a Command Economy with zero interest rates and full-on MMT is just around the corner…well, just keep buying stocks that are going up…use whatever leverage you can and ignore the buzzkill Old Boys who drone on about the put/call ratio extremes.

The November elections are just over 100 days away…the polls point to a possible Democratic trifecta…but the political debate is how aggressive does the stimulus need to be and when will the schools reopen. Meanwhile another million retail online accounts are opened.

So what are we trading these days? Market Psychology. Same as always. John Maynard Keynes told us 90 years ago that, “Markets can remain irrational longer than you can remain solvent.” Irrational markets are nothing new. Bubbles come and go. Soros tells us that when he sees a bubble forming he jumps in…it’s easy money.

Regular readers know we’ve been skeptical of the “risk on” rally...but we also understand that “over-valuation” is not a catalyst for change or a timing tool. We’ve been watching price action for clues about what to do when. We believe that making money over time comes more from good risk management than from trade selection…but having a good trade selection process is also a good idea.

We’ve been thinking that the S+P rally off the March lows was getting tired so we established an initial limited risk position that would profit if the S+P fell 200+ points between now and mid-September. Specifically we’re long a put spread…we bought a nearby put and sold a deeper OTM put. This is a bearish position but gave us some protection against time decay and Vol shrinkage. We continue to hold that trade.

We also have a bearish view on WTI. We’ve expressed that idea with a time spread…we’re short Dec WTI / long March thinking that if WTI falls the contangoes will steepen.


We shorted AUDUSD last week thinking that it had run up too far to fast (up ~27% from the March lows) and that it was rolling over in early July with a lower high than it had made in June. (The “M” shaped top…with a lower right shoulder…is one of our favorite topping patterns.) We were stopped with a small loss and remain aside for now….but still think that Aussy and other commodity currencies could take a good tumble if market psychology turns risk off.


This week we shorted the Nasdaq 100 on Monday when it raced to new All Tim Highs but then fell back below opening levels. We think NAZ is egregiously over-valued and ripe for a tumble…this has been the favorite market for online retail buyers…but we’ve really bided our time waiting for the right moment to get short. We covered the position for a small gain Friday…the market had a good opportunity to fall but didn’t…so we’ll take another look next week.


The US Dollar Index had its lowest weekly close in ~18 months this week. Recent “risk on” thinking has weakened USD against other FX. We’re agnostic but think USD will be bid if markets turn risk off.


Gold is up more than $500 from last year’s lows...highly correlated to falling real interest rates. The global gold ETF market is hugely All Time Record long. Our guess is that the time horizon of gold ETF buyers is longer than gold futures market spec accounts…but we really wonder if the “gold bullish news” isn’t fully priced in…leaving this market at risk if, say, the USD was to rally and/or the stock market took a tumble.


If you’d like to know more about using the futures and options market to trade currencies, metals, interest rates, stock indices, energy and other commodities please contact Drew Zimmerman at PI Financial Corp in Vancouver.

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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July 18th, 2020

Posted In: Victor Adair Blog

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