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Sell EUR/USD

March 19, 2020 / / No Comments

About half a year ago I wrote a post FX markets about to get interesting again!. The main point I was trying to deliver is that volatility in forex space could shoot up significantly. Since then this is exactly what has happened in most currency pairs against the dollar. I believe it’s not over yet, in fact it could only be starting. We could say there was one exception, that was EUR/USD. Until now.

The same post could have been written for any almost other currency some time ago, let that be GBP, JPY, AUD, CAD,… But as a European I am for obvious reasons focusing on the EUR/USD pair.

The goal of this post is not to bore you with details. If you’d wish to discuss the topic, give me a shout. But now let’s get straight into it.

Here is a monthly chart of EUR/USD currency pair dating back to 1980s.

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This Is Not a Drill

March 12, 2020 / / No Comments

The intent of this post is not to make any additional panic. I’ve been on the defense since the first half of February, and I hope you were too after posts Bonds, buy Bonds and Bumpy road ahead were published.

But things are getting serious, the virus is affecting the economy and the markets greatly as you have probably already noticed. I’m not an expert on viruses, but the markets are telling us this situation is not to be taken lightly. As I tweeted a few times in the past couple of weeks I prefer to “panic” sooner rather than later. Majority does the opposite, rather than prevent they’re forced to deal with the consequences.

As of writing the S&P 500 stock index is down more than 8% just today, or down more than 25% from the peak. This is on record the fastest 20% correction measured from the peak, including the 1929 meltdown.

We might be due for a snap back, a face ripper, rally. This may also be a historic buying opportunity, but as things stand, I wouldn’t exclude more downside further down the road, or, in best case scenario, a period of very high volatility with a range bound trading. There’s just an overwhelming supply waiting at higher prices.

I’ve been seeing so many “buy the dip” calls during this selloff. Everybody is so eager to buy the bottom because they’re sure the market will be higher a few weeks, months or years from now. But what if we don’t see a repeat of 2019? What if the EU and the US get into a complete lockdown? What if the selling is not over yet? What if the exchanges are forced to shut down for a prolonged period of time? Could you handle that?

However you might want to turn this around, this is a period when cash is king.

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Crash of 2020

March 9, 2020 / / No Comments

What a historic times! After relentless selling and the fastest correction on record according to Deutsche Bank, we’re seeing some crazy after-weekend moves in the over-night session. S&P 500 index futures are limit down (meaning, after a quick -5% move trading has been halted until the US opens), bond prices are surging and that oil… man, crude oil was down -30% from Friday’s close in just a matter of minutes!

Brent oil’s move at the moment stands as the 2nd largest one day move ever. On Jan 17th, 1991 Brent closed down -34.8% in a day. Let’s see where it closes at today, but the next largest move is -13.5%, so today’s move will be either the largest or second largest on record. Here’s a chart of WTI oil.

I don’t know how the stock market will react once the US session starts. Will we see a bounce, or a continuation of selling is anyone’s guess at this point. However, I hope you took precautionary measures in February when I posted Bumpy road ahead and Bonds, buy Bonds. Hope you’re safe and were able to limit you losses.

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Bonds, buy Bonds

February 18, 2020 / / No Comments

Earlier this month I wrote a post Bumpy road ahead. Short term traders probably think what a foolish call that was, because the stock market went nowhere but up since then. While the intention of the post was not to call the top, it was to warn you that volatility could pick up. Riding up trends in low volatility environment is nice, and while calling tops is not sensible, we must ensure we not become complacent. Easy times can last longer than most anticipate, but they can be escorted by volatile moments too.

You might want to try to play heightened volatility by buying puts or by executing some other options strategy, shorting stocks, or by doing something else. However, I think the best risk reward opportunity right now is to be long bonds.

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Bumpy road ahead

February 2, 2020 / / No Comments

Markets fluctuate, they go up and they go down too. Our job is to make the most out of these fluctuations by going with, and not fighting, the tape.

Even though you could have pointed out many reasons why one should have been expecting a correction, or even a crash, we’ve been bullish for the most part of last year up until now. Looking back, that was the only right decision to be made.

However, we think now could be the time for becoming cautious going forward. We’re not becoming ‘the end of the world’ bearish yet, but the ride could become bumpier.

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Manage money. Plan the future. We can help.

January 20, 2020 / / No Comments

After years of professional involvement in the financial markets, writing a blog, and organizing educational workshops, I decided to help people in a more direct way.

I have set up an alternative fund, through which the investors in the fund will have an opportunity to the make the same returns I’m making. In the past I have achieved above average returns and the goal is to transfer my performance to the fund as well.

The purpose of the fund is to maintain the value of investors’ assets while achieving positive returns regardless of market or economic conditions. Unlike most other funds, the investment objective is the pursuit of absolute returns. This means that the goal is to achieve positive returns even in times of crisis, when most stocks and indices are losing value.

The investment objective is pursued through the active management of the fund’s assets. The assets will be invested in those investment classes and products that offer the best potential return to the lowest risk level at any given moment. In doing so, the fund’s assets can be invested not only in stocks or bonds, but also in other investment classes, such as commodities, which include precious metals and energies, cryptocurrencies, and more.

If you are interested in investing in the fund, please contact me here or through CT Capital Ltd.

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Time for a value play

December 10, 2019 / / No Comments

I keep reading news that this stock market is over extended and we’re due for a major correction as if we didn’t have one just 12 months ago. It’s really hard to escape this trap, especially for a retail investor. People always find something why this market has to go everywhere but up, and if you present them some positive arguments, such as improving breadth worldwide, sentiment, not to mention record stock outflows among many others, they just disregard them.

In the previous post, Continuation of strength, I was focusing on the outperforming regions and sectors, those that continue to be in an up trend. Some are real beasts, such as health sector or $XLV ETF. In this one I’d like to present two value ideas that could start catching a bid after years of under-performance.

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Continuation of strength

November 26, 2019 / / No Comments

This time around last year I was warning that we could get a stock market sell-off into year end. How right it was to be selling stocks ahead of it. Many investors were caught off guard and became, consequently, very negative and fearful going forward. Despite the markets having rebounded nicely since then, sentiment didn’t change much even though we’re just starting to see breadth expansion with more and more breakouts higher out of roughly two year long bases, see Are you ready for a stock market rally?.

So, what if this year will be the total opposite of last Q4? Meaning, could we see a broad based rally into holiday season? Let’s dive straight into it.

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What does this surge in Bitcoin price mean?

October 27, 2019 / / No Comments

We’ve seen a very strong move in Bitcoin this Friday. The price moved up by good 16 and a half percent measured from the opening to the closing price. However, the move continued into Saturday and in less than a day, measured from low to high, rallied by almost 40 percent. Let’s try to put this into perspective and answer a couple of questions. For example we are interested how does the magnitude of such a move rank since 2010 and what does this mean for future expectations.

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Are you ready for a stock market rally?

October 22, 2019 / / No Comments

Most are not. Well, except buy and hold crowd. And sentiment is reflecting that. Many sentiment measures and indicators are, with some variations, showing that people are sceptical about future expectations at best, where majority is very concerned and some are expecting a 2008 crisis style repeat.

I was talking to a director of a company the other day. Their business is closely linked to German industry, so he’s feeling the numbers coming from there. What fascinated me most was not his outlook, but the conviction he has. He’s absolutely sure we’re going down, there’s no doubt about it. He was pounding the table the markets will crash and not one single person could prove him wrong. Man, the conviction level was mind blowing.

If the meeting’s circumstances would be different, I’d invite him to take, under some conditions, an opposite side of a trade with me.

It’s hard to deny the current weak economic data coming from different parts of the world. There’s no doubt we are/were seeing an economic slowdown. However I’m trying to be open minded and am wondering if this was it, if data is about to start improving contrary to the popular belief that it’s going to get drastically worse.

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