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  • Tag Archives euro

  • NUGT

    Posted on May 2, 2012 by Administrator

    Our long options trade on May SLV is really pissing us off and may be a total loss. We are still looking for an exit where we can recover our costs or at least some of them. However op-ex is fast approaching and we can dare to dream that the Europeans will do some QE tomorrow (the euro and SLV have a high positive correlation), for example, but this is wishful thinking, which doesn’t make money. I also think the dollar is going to see a steady decline over the summer, but this will be too late to salvage our SLV position (SLV and the dollar have a high inverse correlation). We will jump out when we can. Bloody frakkin silver.

    There is a lot of talk that gold and silver markets are manipulated. I have always been skeptical, I dount they’re any more manipulated than any other stock, and this is partly because, contrary to popular perception, and as I point out rather constantly in this blog, gold and silver are not money, they are merely perceived as money. In truth they are just shiny metals and that’s it, and people who attribute other qualities are living back in the 1960s when there was a Gold Standard. However yesterday there was a very suspicious multi-million dollar trade in gold. It’s suspicious because it was made below value, immediately pushing prices down. It’s also suspicious because anybody trading millions of dollars does it in pieces, not wholesale. Even me, who only deals in thousands, even I stagger trades to cost average the price.

    I see gold miners at a historical low, presenting a great long-term investment. I’m going long NUGT today. I also see gold prices steadily rising over the summer despite seasonal factors which would suggest otherwise. This is primarily because gold is entering a new 13-1/2 month cycle. Further, the seasonal patterns are different in election years and the democratic election year pattern generally sees summer rallies. Gold as a speculative instrument should rise with the SPX, and gold miners (NUGT) along with it. I think we can recover our losses from this bloody SLV trade by Jul or so with NUGT. We will probably go long PHYS or GGN toward the end of May as well.

    This entry was posted in /SI, /YG, dollar, euro, gold, NUGT, silver, SLV, SPX and tagged , , , , , , , . Bookmark the permalink.

  • Sun 18 Mar 2012

    Posted on March 18, 2012 by Administrator

    Purchased TZA calls on Friday.

    Barrons suggests we buy palladium, which naturally as a precious metals trader gets me interested, but I see no logical basis behind this.

    Regarding my previous post on Goldman Sachs, I retract my comments about not buying it. On contemplation I see no moral problem with a bank trying to make as much money as possible from its clients and I’d say the GS scandal is a bunch of hokum. I do however think they should get their PR under control.

    Regarding silver, first, it has been in a long term uptrend for 10 years and a short term downtrend since last May:

    Commodities tend to crash up as people rush in, and then unwind in an orderly fashion. With silver there have been two unwindings and I think we’re in the third right now:

    Silver has an almost 100% correlation with the euro, and because the euro is imploding, we can anticipate the decline of silver in dollar terms. Further, Bernanke has made it clear there will be no more QE, and this is the primary driver of precious metal prices. Further, because other central banks around the world are implementing QE in one form or another, while the US is more-or-less tightening by not implementing another round of QE, we see a flight from capital destruction into the dollar. Precious metals have an inverse relation with the dollar and this, I’d say my friends, is the death toll for the silver bubble.

    Right now I worn ZSL paper but I’ll pick up Philharmonics at around $30 I’d say. I have growing physical holdings of silver, but I will hedge them with ZSL unless there is a clear resumption of the long term uptrend, which I seriously doubt. This is partly because silver has no intrinsic value and so price is fiat, and there is more paper than physical, which creates a debt cycle. Having lived through the recent crash and somehow managing to not end up completely broke, I am all about Armageddon planning and I will continue to buy Philharmonics even as the cost goes down, because this lowers my cost basis, and anyway these Philharmonics will be purchased with profits from ZSL so it’s all good.

    This entry was posted in Bernanke, dollar, euro, palladium, silver, SLV, ZSL and tagged , , , , , . Bookmark the permalink.

  • NoTitle

    Posted on March 2, 2012 by Administrator

    High probability of a violent downward move in silver. Let me just say I hold physical silver and have no intention whatsoever of selling it. My ZSL trade is (1) hedging and (2) simply taking advantage of the moment. In the long term I’d say hold silver. I’d love for silver and gold to both have a good drop so I can buy the physical cheaply.

    1. Seasonal patterns and moon cycle are bearish for silver, as discussed previously.

    2. Wednesday violent breakdown on news, forming ABC pattern.

    3. Silver has been trading in a downward channel since last April, hit the top of the channel this week and bounced right off that brick wall. The bottom of the channel is at 25 right now.

    4. High volume sell-off. Volume is a strong leading indicator with silver.

    5. Euro has an 87% correlation with SLV and the euro has been in a downtrend since Jul 08 and on the monthly chart looks to be moving in for a lower low. There is however also an inverse head and shoulders pattern forming if you squint. However news out of Europe and their obvious inability to put their house in order strongly suggests a leg down for the euro. Silver will follow.

    6. Traditionally silver and gold are safe haven assets, but the world has changed a lot, and they have become speculative instruments, primarily thanks to GLD and SLV, which hold more physical than Fort Knox. People have been remarking for several years that gold and silver have gold parabolic and the bubble will burst. Looking at the weekly charts, gold has been in a downward channel since Aug and silver since May. Commodities tend to crash up rather than down, as people rush into commodities. Commodities tend to have orderly unwindings. This is what we are seeing with both gold and silver, I’d say. In other words, get ready for a leg down, and then another lower high, and then another lower low, etc.

    7. Silver and gold will stabilize at some price point but I don’t know what that will be and neither does anybody else. At the moment the relative valuations of gold, silver, and platinum are out of whack. For example gold is more expensive than platinum, which makes no sense. Expect high volatility as the metals market rebalances itself.

    8. I’m a contrarian and too many people are complacent about precious metals.

    9. Why do I say I will continue to hold my physical? Because the world is financially fucked and unlikely to solve this problem any time soon. Silver will stabilize and if I can buy more cheaply, I will bring down my cost basis. Physical is my savings account and my Armageddon insurance in a world where our currency is continually debased and where commodities such as food and gas are almost guaranteed to continue rising, while wages remain stagnant and unemployment is high. The political will to fix the situation is absent in both Washington and Brussels. Because of this rather unpleasant picture I see all around me, yes indeed, I’m holding my physical, even while I short silver on the market.

    10. SLV is below its 200EMA and bouncing on the 320EMA. Any movement downward will trigger margin calls and violent downward movement.

    This entry was posted in euro, FXE, platinum, silver, SLV, ZSL and tagged , , , , . Bookmark the permalink.

  • correlations

    Posted on November 2, 2011 by Administrator

    I rely heavily on correlations between market and asset classes to make decisions. Lately however the strength of correlations has got out of hand. The Wall Street Journal remarks today, “Most of us probably couldn’t find Slovakia on a map, yet it’s wagging the tail.”

    The emphasis on the Euro as a measure of risk has grown illogical. One would think the bailout plan, the current sovereign debt crises, etc, would weaken the euro. At least that would be the logical deduction. But that’s not the case at the moment, partly because of the almost total inverse correlation between the euro and the dollar.

    All correlations eventually break down and the current lock-step market will break down, because we do not have one global market. We have many markets with varying degrees of interdependency. These varying degrees will begin to re-express themselves.

    The market for the last 3 years or so has been driven primarily by political news, rather than financial fundamentals. This has made trading extremely challenging, because we are businessmen, and most of us are not tuned in to the flighty world of politics to the degree that we can make intelligent business decisions. The Wall Street Journal today remarks that “In the 1990s…traders thought the world ended at the Holland Tunnel… Now every… trader knows what Angela Merkel had for breakfast.”

    The thing with news as risk is that it’s always present (and always has been) and is by nature unpredictable, so the degree of risk is always there and is essentially always the same. We could do some complicated statistics to make a more precise statement than that but nevertheless I stand behind the simplistic statement and call your attention to Buffet’s maxim, which I’m paraphrasing I think, but he said basically “If you need a calculator to decide about the trade, don’t do it.” Statistically, news event risk is always there and its probability by nature is chaotic and so unpredictable. I think the European crisis etc will start to abate in traders’ minds soon as this reality sets in.

    Further I predict a bit of a decoupling of the euro and the US stock market in the near future. Europe needs to print money and devalue the euro, but the US stock market is heading up and only a fool is going to avoid jumping on that train.

    This entry was posted in dollar, euro and tagged , . Bookmark the permalink.

  • 22 Oct 11

    Posted on October 22, 2011 by Administrator

    1. Had to liquidate my RUT iron condor position at a loss as the RUT made its surprising rally. What’s irritating is the institutions jumped in about 3 hours after I made the play. What’s also irritating is that the whole position… well, the blunt fact is it went against my carefully made trade plans (below) and I got greedy and don’t like sitting on my hands and like an idiot violated my own plan. Mathematically when I made the trade, it was a sound trade, but the end result is I lost my Sept profits. Lesson? STICK TO THE FRAKKIN PLAN.

    2. This week saw institutional follow-through after a brief dip. After the first dip (which I watch for on the CCI), mortgage the farm. We should see a good rally now. Yes indeed, I’m very bullish and I think the Company will make some nice profit…

    3. The Company is now long AA, BAC, C, and GE, all with Mar/Apr options OTM.

    4. GE was purchased primarily because it has almost a 100% correlation with the SPX and so is an economical way to invest in the SPX. The earnings report yesterday generated a drop but I think this is temporary, as the company is sound. Generally the market will have a knee-jerk reaction to news and then, a day or two later, begin moving in the opposite direction. This pattern manifests itself almost universally and I believe it will be the case with GE. If this talk of leverage with GE sparks a sell-off then I will be annoyed an cut my losses, but I doubt this will be the case.

    5.GE S&P profit target 1 yr=24. I’m holding Mar or Apr options (I forget) with the expectation of liquidating mid-Dec unless I see some reason not to. My target is 18-19, which will generate a good profit. GE has about 35% of Company assets.

    6. AA has been on my shopping list for a while. We saw a huge surge in buying one day this week, and there is also one case of insider buying. I’m holding Mar or Apr options (I forget) with the expectation of liquidating mid-Dec unless I see some reason not to. My target is 12. AA has about 50% of the company assets.

    7. BAC has about 15% of the Company assets. I’m holding Mar or Apr options (I forget) with the expectation of liquidating mid-Dec unless I see some reason not to. My target is 8-9. There is all this bad talk about BAC and the tainting touch of Buffett, so is the company’s CEO (me) insane? No, I expect some volatility in the stock and could liquidate at any time with a good profit. But note financials will rise with any rally. If we’re going to see a rally, BAC will rise in sympathy with the SPX. Also note, fair value for the company even in a very bad scenario (which I’m not sure we actually have) is 10-14 depending on how you calculate it. But most importantly, the Fed has demonstrated they will not allow big banks to fail, and has allowed BAC to shift bad Merill derivatives into a shell company. This is a key detail which should not be overlooked. Some idiotic essay on Seeking Alpha said “Is BAC Preparing for Chapter 11?” which I didn’t even bother to read because of the sheer stupidity of the hypothesis. The Fed has shown very clearly that the megga-banks will not be allowed to fail. This is also a key consideration.

    8. Short US$ COT is at a big big high which means the SPX should be having a big big rise.

    9. The Euro… there’s a lot of talk in Europe. It’s what they’re good at. But in the end the euro and European banks will be propped up. That’s just plain obvious. They might jaw about it for a month but there is no other choice but to prop the system up. The question is will there be a dilution of the euro, and would that result in a strengthening of the $, which could blunt an SPX rally.

    10. The Baltic index is up. Bullish, very bullish.

    11. I think the gloom and doom talk is going to evaporate pretty quickly and all the money on the sidelines is going to jump in. Like I said, I have a general plan to liquidate mid-Dec, this is a very high-probability seasonal play.

    12. I’m getting a bit bullish on GLD and SLV primarily because of the drop in the dollar.

    This entry was posted in AA, BAC, dollar, euro, GE, GLD, RUT, SLV, SPX and tagged , , , , , , . Bookmark the permalink.

  • 24 Sept 11

    Posted on September 24, 2011 by Administrator

    1. Bought some SDS options to cover myself to the downside. Will cash them in with some volatility. In the case of a big market drop of course I will liquidate my stock holdings and recoup losses with the SDS. Most likely however will get shorts and make them into verticals, as I will explain.

    2. It’s starting to seem more likely that Greece will default, which will be a relief for everyone, and was actually part of the catalyst toward bullishness on Friday, I think. I would expect a euro rally. I believe this will be the biggest sovereign default in history but I also believe the EU will step in and not allow any critical institutions to fail.

    3. I think we may have already bottomed for the year, which was partly why I bought in to stocks when I did on Thurs. I think this because copper is very oversold and likely to bounce, and also because seasonal declines came a bit early this year and so I’d think they may conclude a bit early. Further, McClellan’s eurodollar fractal, which has had robust predictive utility, suggests we are currently at bottom.

    4. If we anticipate a stock market rally developing, it follows that the dollar should decline and the euro should rise.

    5. COT are net long the euro.

    6. I am not a currency trader per se but rather pay attention to currency in so far as it affects my primary plays with the SPX or RUT. Thus I cannot really gauge the extent of any euro move and am not really willing to enter a euro position. The key detail is any rise in the euro should mean a decline for the rollar and thus a rise for the SPX.

    7. I expect a fairly robust rally (starting soon) through Jan. I dont think you can really predict further than a quarter with any degree of accuracy so I don’t even try.

    This entry was posted in copper, euro, RUT, SDS, SPX and tagged , , , , , . Bookmark the permalink.

  • 22 Sept 11

    Posted on September 22, 2011 by Administrator

    1. Liquidated TZA before Bernanke’s speech because I wanted to minimize event risk. You can imagine I’ve thought a few times about how much money I would have made if I’d held it. 9.1% including commissions.

    2. Liquidated EUO today 66.30% profit.

    3. Bought AA, GE, XLF, F, EWG, EWL near the bottom of the trading range today.

    4. My thinking here is that support is being retested but will hold. If it doesn’t, I have reserved enough cash to jump in with TZA to hedge.

    5. These trades may be swing trades or may be long term. Generally after a big news event, the market has a knee-jerk reaction, and then reverses itself. I am thinking the market will do so here. Also with many of these stocks I am thinking they will rise up to fill the gap. Nevertheless these are also stocks I wish to hold long term, at least through January. My fractals and seasonal patterns as well would suggest a good rise mid-Oct to Jan. The question here, of course, is is this bottom going to hold? Impossible to say, but I think so.

    6. I do not think the euro is done with its decline, or the dollar with its rise, however I think the quick profits have been made. There may be some catastrophe in Europe and I’ll kick myself for liquidating EUO, but I doubt it. I think we will see a slow orderly unwinding of the euro and a slow orderly rise of the dollar. Operation Twist notably has no direct increase in the monetary base and people need a liquid safe haven for their money. Funny but it’s turning out to be the dollar.

    7. As remarked previously with EWL and EWG, weaker currency will mean stronger stock markets.

    8. As remarked previously, blue chips AA GE F are my current alternative to gold.

    9. XLF–I have remarked several times that I think the problems of the American financial sector are grossly overstated and certainly pale in comparison to Europe. Indeed our financial sector is in pretty good shape compared to previous years. I see the financials as grossly undervalued.

    10. I would have bought BAC but Warren Buffet seems to have tainted it. The fundamentals don’t matter here; what matters is investor emotion. The last few companies he has “bailed out”… well, it’s been a Midas touch for Buffet anyway.

    This entry was posted in AA, dollar, EUO, euro, EWG, EWL, F, trade system, XLF and tagged , , , , , , , , , . Bookmark the permalink.

  • 20 Sept 2011

    Posted on September 20, 2011 by Administrator

    1. European creditor nations, notably Germany, Netherlands, and Finland, remain hostile to continuing to bail out Southern European debtor nations, and this hostility is likely to increase.

    2. The euro was introduced in Germany (the primary European economy) without the consent of voters.

    3. There have been no good examples of currency union without political union, and European political union isn’t going to happen. There is no European “common identity.” The argument from Eurosceptics from the start has been that European identity is too weak to support the common currency, and current events seem to support this.

    4. Pro-euro faction argues that there is no way to go but political union, which is true, but this doesn’t mean that voters in Germany etc will actually accept it, nor is it likely that Germany etc. will be willing to cede sovereignty to Europe, especially given the fiscal irresponsibility of Southern Europe. Just because something is necessary doesn’t mean it will happen; indeed it  seems by all lights extremely unlikely.

    5. ECB’s bond buying is already controversial in Germany.

    6. Merkel’s government’s support of the euro is causing it deep political problems in Germany.

    7. A shrinking of the Eurozone seems the most likely solution.

    8. The current disparity between gold mining stocks and the price of gold nay be the result of the current market sell-off. Gold appears to be poised for a big sell-off as well, however, which would even out the disparity and negate the bullish stance many have on gold miners.

    9. Futures purchases mean that gold mining companies could guarantee gold prices for themselves at over $1800 for several years through hedging.

    10. GG and AUY are planning substantial production increase, though this doesn’t mean it will actually happen.

    11. Investors increasingly buy gold itself or GLD, which has cannibalized the demand for gold stocks.

    12. Gold stocks are subject to event risk which is not present with gold itself, such as strikes, accidents, taxes, inflation, etc.

    13. There is a lack of prospects for growth in the gold mining industry. The industry as a whole is struggling to maintain current production levels. Barrick’s acquisition of Equinox copper in April is a tacit admission that there are few growth prospects in gold mining.

    CONCLUSIONS:

    1. Strength in the euro should be sold.

    2. After the market bottoms and gold has a significant correction, there may be bargains to be had in gold mining stocks, but they are not likely to produce a very attractive risk/reward scenario whatever the case may be. There are only a few exceptions I can see to this statement. A significant correction in ABX or BHP where the stock is very cheap might present an attractive buying opportunity. But the current vogue for snapping up gold mining stocks is ill-advised at the moment.

    This entry was posted in ABX, BHP, euro, gold and tagged , , , . Bookmark the permalink.

  • EUO

    Posted on September 16, 2011 by Administrator

    Small speculative trade. This may be a swing trade of a few days, specifically until FOMC announcement, or it might be until Oct op-ex. Bought 10 EUO @19 @ .30.

    I expect the euro to make another leg down soon. First I anticipate the SPX will retrace in its range, which should mean strength for the dollar, and conversely weakness for the euro. Second, seasonal patterns make me anticipate an SPX low mid-Oct, which is why I bought the Oct options. Third, fair value for the euro is 1.17. Fourth, the euro is in a clear downtrend and has appeared to have topped this wave. Sixth, there is little good to say about the euro. Basically I’d say any strength in the euro should be sold.

    I may well liquidate next week before the FOMC announcement if I have a decent profit, because any hint of easing will cause dollar weakness and hence euro strength.

    This entry was posted in EUO, euro and tagged , . Bookmark the permalink.

  • Support/resistance levels

    Posted on September 9, 2011 by Administrator

    1. For the euro, EUO has major resistance at around 18.8-18.9. /E7 has major support around 1.34.

    2. For the dollar, /DX is poking its head against major resistance right now.

    3. For the franc, FXF has major support at 1.10 and 1.05

    These relations are highly interdependent so profit-taking with my FXF puts is tricky. For example, the franc largely reacts to the euro, but FXF is priced in dollars.

    Under normal circumstances I’d be scaling out, but the trend is very strong right now.

    This entry was posted in /DX, EUO, euro, FXF, Swiss franc and tagged , , , . Bookmark the permalink.


  • PLEASE NOTE

    We are not day traders. We trade options with a 1-3 month window. Our discussion here reflects this.

  • The Cloud

    /SI AA BAC Bank of America C Citibank Copper COT CRB dollar EUO euro Eurozone crisis EWG EWL F financials FOMC FXF GE GLD gold GoldMoney GS Hang Seng ichimoku iron condor IWM NDX oil PALL palladium platinum QE3 RUT S Shanghai Composite silver SLV SPX Swiss franc TZA UUP XOM ZSL

  • Quotes

    "I'm a great believer in luck, and I find the harder I work the more I have of it." --Thomas Jefferson

    "Markets are constantly in a state of uncertainty and money is made by discounting the obvious and betting on the unexpected." --George Soros

    “The United States debt, foreign and domestic, was the price of liberty.” – Alexander Hamilton, 1790, First Report on the Public Credit

    "There must be a beginning to any great matter, but the continuing unto the end until it be thoroughly finished yields the true glory." --Sir Francis Drake 1587

    "War was where a brave man found his truest sense of life." --Guy G Kay, Lion of Al Rassan

    "No! Try not. Do, or do not. There is no try." ---Yoda

    "Own nothing. Control everything."---John D Rockefeller

    “The game is rigged. But you cannot lose if you don't play.” –The Wire (the reason to play iron condors and butterflies)

    "Capitalism is the legitimate racket of the ruling class." —Al Capone

    "Only those who risk going too far find out how far they can go."---Fringe

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  • Philosophy

    Our basic theory of investing is that markets are chaotic, in that prices are not necessarily an efficient reflection of value; rather, prices of assets depend largely on the emotional reactions of traders who buy and sell them.

    We generally trade options to minimize capital risked. Our primary aim is to preserve our capital. We trade with a 1-3 month window generally; we focus on the macro picture and are not interested in hourly movements or short term trades.

    Opportunities can be found by carefully studying value; by this we mean both undervalued (buy calls) or overvalued (buy puts).

    Psychology is predictable and pattern-based. People are very slow to change. Thus in the markets, history often repeats itself, and the market can be predicted by carefully studying past performance, including correlating the performance of other asset classes or other markets; this is the repetitive geometry of markets. Patterns tend to replicate across or between assets, asset classes, and time frames.

    If everybody on Wall Street is saying something, it's probably wrong. We are contrarians.

    We generally advocate heavily concentrated positions in which we are extremely confident, rather than wide diversification.

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