2009-06-07

General Musings : Markets Review of key levels for position trades : 2009-06-07

My Development as a Commodities Trader: General Musings : Markets Review of key levels for position trades


I have closed or trimmed most of my long term positions at the start of June 2009 as commented on the previous post and I am now sitting on sidelines on most markets looking for new trends or setup to establish new positions. The market seems to be divided between two camps now. Those who got on the turn from March 2009 and now torn between hanging on or getting out and those who missed the whole turn and now waiting for second chance. The breakout from the ranges so far has been on the upside so that seems to be the prevailing trend but there are signs that the bull might be getting tired and may be setting up for a bear ambush. I am watching, safe from my perched up position before deciding on jumping on bulls back or joining the bear attack.

INDICES:

There is no doubt that equity indices have shown a great bounce from March 2009 bottom and in case of Asian Indices (HSI/China H Share/India) the bottom was marked in October 2008. The prevailing trend is still bullish and breakout have been on the long side of the range. That indicates that there is still a further run pending. Therefore I will still trade them from long side. 

HSI:

Based upon fib and Elliot waves, I feel we are possibly in middle leg (wave 3 of wave 3) of the bull move from March 2009 and I see that culminating at 23790 sort of level. HSI is likely to show stronger move compared to US indices given that HongKong dollar is pegged to USD but the economy is pegged to China/Asia. So a small pop in US can be a full blown bubble in HongKong (on the same like a small gust in US turns to a full blown typhoon in HongKong.

Current Position - Small Long

Bias : Add on dips or breakout.

Buy : Breakout of 19000 stop 1500 pt below or pullback to 17000-16000 region
Stop : Below 14000
Target : 23790 with 21300 res.

INDIA NIFTY50:

Indian markets have shot up a lot after the election results and held up strongly on those gains. That is a bullish sign and I am quite certain that India could be the first market to take out its all time high established at the peak of bull market. However in the current level, I am not able to come with a sensible risk/reward setup for entry. 

Current Position - Flat

Bias : Looking to buy small long on dips if other markets are holding up.


CHINA H-Shares:

The Chinese markets are in a short ambush zone and any wobble in world markets can derail current rally. However the fundamental trend looks strong and we should be able to see 14200-14600 if the breakout occurs from current levels. 

Current Position - Flat
Bias : Stay out and watch.

Short Korean Market can be good market neutral hedge if Long other Asian markets.


FTSE:

FTSE's attempts to breach out of 4500 have so far been thwarted by aggressive selling. The MacAllan is also not looking great in FTSE. For bullish trend to continue, 4500 needs to be convincingly breached. I would expect FTSE to see 5240 - 5280 upon breakout. But as of now, I am out.

Current Position: Small long with trailing stop (below 4250)

Bias : Wait for breakout above 4500.

ES:

S&P500 has at least broken to the upside consistently from its ranges and put on a good performance so far. However it is getting closed to ambush short levels and momentum appears to be getting tired. The rally from March 2009 is without a significant pullback and some players would be watching for that before the start of next bull wave.

Current Position - Small long via June 950/1000 Call options.

Bias : Stay out and watch.

NQ:

Of all US indices, Nasdaq 100 appears to be most strong and with strongest trend. I would remain on long side of NQ for sometime. MacAllan is in danger zone for long but still not turned negative so I feel there will be one more leg up, possibly to 1553-1642 level. 

Current Position : Long with trailing stops below 1437 and a large risk free butterfly to protect 1300-1500 range.

Bias : Trail stops to lock profit. Small add long on day trading basis with break even runners to build current position.


GRAINS:

With the fall in dollar since March 2009, commodities have taken off, especially Soybeans. Other grains complex is catching up with this bull move. All grains complex has now crossed 200d MA which is usually a bullish setup.

ZC:

Corn (and Oats) are the laggard of the grains but they are now above their 200d MA which is bullish for them. 

current position : Flat

Bias : Small long on dips. Wait for breakout of 450 for next set of longs.


ZW:

Wheat look a bit extended at current level and I would stay out or look for small time shorts. I will also watch 600 level. Any break below 600 could mean end of current bull run for ZW and possibly opportunity for some shorts.

Current position : Small long with stop (below 600)

Bias : On sideline with view for possible short.

ZS:

Soybeans are quite overbought and also into a medium term short ambush zone. The old crop contracts have shot up as if there is no tomorrow but new crop (nov) contracts are struggling and not participating. 

Current position : long spread (short July/long Nov)

Bias : on sideline and look for possibly short in July contracts.

I view Soymeal (ZM) in the same light. I am long biased on soyoil (ZL)


ENERGY:

The drop in dollar and perceived recovery in world economy has shot oil prices back up and built a sort of enthusiasm in the energy markets. However the current rally does not appear to be demand driven and the inventories are still high in oil markets. 

CL:

If the economies are improving or inflation increasing, the oil market is likely to go much higher. The near term targets are 80 - 90 within sight of current level. However the market can fall equally quickly. I usually play oil market as insurance policies to my other trading positions with very limited risk. If some drastic moves happen I will be happy. Otherwise I will lose my risk premium but would possibly make money on other markets.

Current position : small long via options (Dec'09 Dec '10 100 calls). Also some Dec'09 30/20 puts.
Bias : Long with short holding period (mostly 1 - 2 days)

NG:

Out of the energy complex, NG has been the poor cousin so far for inexplicable reasons. So much so that now every one seems to be talking about it. The chart has started showing important signals which swing traders like and take up long position.

I have a small long position in NG and so far I am looking for a big move up. I will evaluate certain option position or butterfly structures if I find good price.

Current Position : Small long
Bias : Buy dip until lows are supported. Possibly look for option positions in Dec'09 6.5/7.5/8.5 calls with a view to establish a butterfly (long 6.5/8.5 calls short 2x 7.5 calls).

RB:

Gasoline achieved my medium term target and I am out of this market for now. I still see possible move towards 2.11 but as of now I will look for a better entry point.

Current Position : Flat
Bias : Sideline 


CURRENCIES:

Since March, the play has been short dollar and buy every thing else. However start of June saw a shift change in that trade and a possible indication of change coming in other markets.


USD has moved down to achieve my first target level but it has bounced from a possible double bottom area. I would think that this reversal is for real and we could possibly see a move towards 82/84 region before taking next dip again. I am not overly bullish on USD and would see this up turn to establish some good position in other safer currencies.

Current position : Small runner long.
Bias : Short but wait for pullback to run through until 82/84 region. Day trade on long side during the pullback.


EC:

EUR fell quite hard and on weekly it appears to have topped. It is also in possible short ambush zone and dollar reversal seems to confirm that. I will be cautious on EC longs here and instead look for possible test of 1.37 - 1.33 area before taking next long term position. I do however believe that EC would be ripe for all time highs against DX sometime this year and I will watch for right entry point for that trade.

Current Position : Flat
Bias : Sideline. Watch dollar.



BP could be one to play the USD strength because the currency rose without much fundamentals and has much to fall in case of dollar strength. Need to watch any breakout below 200d MA. 1.55 - 1.50 area still remain support for the longs.

Current position : Short with risk free butterfly protection on top (1.5-1.65-1.8)
Bias : Trade on day/short term basis on short side. Generally on sideline and watch dollar.


BONDS:

Bonds have broken decisively to downside and this is the most important indication of the time to come. The long interest rates are definitely on the way up and it is generally not bad for markets, in fact inflation could be the cure for the debt burden of western society. However inflation like cholesterol is of two kind. Good and Bad. Good kind raises assets prices, bad kind raises consumer prices. I am not so secure about our governments ability to manage inflation in such a way that only the good kind filters through. And that will be the key for all my long term trades.


Current Position : Small Short and certain option positions.
Bias : Add shorts on day basis with runners and target 112 - 110 area. Keep tight stops as fed can still surprise the markets.


METALS:


Dollar rise has brought GOLD down sharply with nearly 2 20$ moves in 3 days. That is extreme. However in the high inflation environment, I prefer to keep gold as insurance policy. A good way to build position in Gold is via long dated options on such dips. I have built position in Dec'09-Dec'10 1500 - 2000 Calls and would add to them over the period for dips towards 920.

Current position : Long via options
Bias : Add on dips towards 940. Stop below 920.

SI:

Silver has been stronger than gold and Gold:Silver ratio has dipped all the way to 62.54. If metals remain in bull markets, this ratio is likely to be squeezed further down as silver is a much smaller market. 

Current position : Flat with Dec 09 risk free butterfly top (16-18-20)
Bias : Buy on pullbacks towards 14.50-14.00


6 comments:

  1. I have closed my shorts on BP around 1.5978 area.

    ReplyDelete
  2. deeinthejungle8 Jun 2009, 22:06:00

    VS - this is amazing work. It's very didactic of you to share and very much appreciated. you have me looking at world markets again, which were my bread and butter for the past years. Thanks for making me think. :)

    ReplyDelete
  3. Thank you Dee, also thanks for throwing the surprise word "didactic" - I used to use that on professors who were too keen, to the point of being pushy, to teach. So I had to see chambers to make sure if this was indeed a compliment.

    "didactic adj 1 intended to teach or instruct. 2 derog too eager or too obviously intended to instruct, in a way resented by the reader, listener, etc."

    well, as you can see, this leaves me in doubt but I will still accept your compliments if that was intended.

    Another update, I was stopped on ZW position so mostly I am flat on grains or long some beans spread which are not doing too good as of now. Will see what Wednesday report brings before taking new positions.

    Can you trade these world markets from US? Usually there are restrictions on trading on US person. I use IB as one of my account so I am able to access these futures via them.

    ReplyDelete
  4. deeinthejungle9 Jun 2009, 18:02:00

    lol VS. I meant it in the best way possible, meaning no. 1.

    The only way to trade world market is through ETFs, i use the Barclays iShares. They're not funky crazy etfs and i never had problems with them. Granted though they are more stuck to the US market since they are open same hours. But I had a good experience with them. Haven't traded them in a year.

    And yes, I can only trade the Nikkei in the US. Annoying.

    ReplyDelete
  5. I am now long INDIA NIFTY 50 small at 4650 and I am now switched to buy dips

    I am also long HSI at 17994 and again switched to buy at dip.

    I am short Korea as a hedge.

    ReplyDelete
  6. Out of HSI at 18462 and most other long position. Keeping Korea Short and India Long and see what brings.

    ReplyDelete

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-VS