Not So Happy Red Monkey

Well it didn't take long for China and the rest of the equity world to tumble. In the spirit of the eternal optimist though, it may be nice to get any correction over with early so to move on with the rest of the year. From a FX point of view currencies behaved like they should over the last week with the commoditiy currencies coming off, Yen strengthening on back of poor equity markets and the $ holding its own due to diverging monetary policy. These weeks are good as it all falls into place even though from a holistic portfolio picture FX gains may only partially offset losses from equities it is far better then being completely down trodden.

Lessons from August 2015 tell us that once this rout is over the old elastic band is likely to come into play from the release of all the shorts but one thing is for sure it is going to be a very interesting year. The fiery red monkey is letting us know its coming !!

Happy New Year

Happy New Year and wishing you great success in 2016.

Just read a few articles which noted that its extremely difficult to predict the returns for the next 12 months, so I won't. But what is important in todays markets is to remain nimble and not tie yourself down to any long lasting belief, other than markets are very fluid (even if a lack of liquidity - ho ho) and can change at the flip of a coin.

Here at Hawk we translate that to mean; don't be greedy and take gains when they present themselves. The new paradigm is smaller notionals, keep take profit levels reasonable and leave no room for hope. Be early into any runs and early out and we should do just fine. We can use the algo traders/trades to our advantage knowing that their moves generally build on each other until they break as they move further away from economic reality - the short squeeze will be the play of the year.

There is only one prediction I will make for 2016 and that is its going to be a great year for my clients and I as we weave our way through the investment maze. Good luck to all and happy trading in 2016.

Christmas Week

As you can see from the Eco calendar there is not alot happening this week. I have a long $yen position open based on an expected Santa rally but what to do with WTI. Anyways I hope all and sundry have a great break, whatever the meaning to you, and a chance to refresh for what will be another exciting year ahead.

If there is anything of note I will let you know. Cheers The Hawk

Fed Lift Off

Well it finally happened and all the angst seem to dissappear. The Christmas gift arrived as expected in the form of 25bps and a US economy which is starting to show signs of recovery - just look at housing starts. Reaction nothing unexpected in the currency markets with most majors down but equities have had a great run and hopefully to continue for a while though with Christmas coming up can't see a lot of volume so time to relax and have time with the family.

2016 another year of volatility - yeap I think so - just watch commodities as they will keep as awake at night next year, yet again. Anyways remember if you must trade the next three weeks keep notionals small and keep control.

Did that just happen !

Well talk about excitement from trusted financial reporters getting it wrong to bears getting upset, the Euro took off. Everyone from Goldmans who saw a 200 to 300 point drop to the average punter expected the Euro to fall on some anticipated very bearish Draghi comments to come. But the markets said No; not today and the depo rate was only cut 10basis point and the euro flew north.

As mentioned last week every participant is hanging off the mere breath of Central Bankers and when the market is disappointed this time of year there is going to be a lot of pain including yours truly.

Lucky for me I heeded my own advice and overall I came out unscathed with my long aud/usd being able to offset my losses on a Euro short but could have played smarter. Anyways that's the game where in lose some win more.

I will be looking for some Euro short opportunities and build a position up but be careful as we are likely to see some volatility over the coming days especially if NFP pulls a big surprise.

EZ Financial Stability Review

A good read especially the considered risks to EZ recovery. Mainly external risks but reading between the lines the larger issue I see is the higher correlation of asset classes and the lack of liquidity. These days everyone including market makers (and their unwillingness to provide liquidity in a meaningful fashion) just don't react well to shocks exacerbating liquidity spirals and other disorderly market issues. From an investment point of view when you are a retail trader, you need to be extremely nimble in these markets and strictly adhere to trade plans. In my view profit targets should not be too aggressive as downside risks can be significant if caught on the wrong side of a market shock and liquidity disappears. Time in the market is now a heightened consideration.

How to counteract - keep an eye on fundamental catalysts and track the news a little more closely.

Financial Stability Review