As another trading week draws to a close, I’m going to run through some markets from a global macro perspective and note how we’ve been playing them lately, analyze how our model has been performing, and provide some thoughts on what I see happening into next week.
We shorted Oil today in our live room. We’ve previously said $55 was the top of our range, using a 2-standard deviation regression channel to identify that target, and we’re getting back up towards the top of the range again.
We’ve been having success being long the Dow lately. The great thing about having a fractal model is that we’re able to trade opportunities in the markets both ways, even though our outlook is bearish in the big picture. Specifically, even though we have been bearish coming into the end of last year as far as risk and the global economy, covering US equity shorts before Christmas was very timely. When this intermediate-term uptrend emerged, our bearish outlook did not change, but we have been able to buy intra-day dips and not remain fixated on only being short.
This has translated into some good performance; the model has a 90% win rate year-to-date.
I haven’t shorted the Russell yet but I am starting to think about it because the chart is potentially setting up for it into next week.
The daily chart shows that the market has cycled all the way back up to our Pi Line after such a strong V-bottom, the RSI is overbought, and implied volatility remains low. I think there is good edge to be short up here and that would most likely be expressed via buying Puts when the time is right.
I’m a little bit out-of-the-money and down year-to-date, but we just recently started shorting the Nasdaq. I’ve been slowly building into a core short position, looking for the bigger picture move to the downside. We sold this morning and covered some profits, and I’ll continue adding and reducing as I work a core position.
We bought the dip on Treasuries this morning using our Pi Line concept and covered some back with gains. We have liked the long side of this market and have been trading it accordingly. The model has been performing well and has a strong win rate year-to-date.
We’ve been trading around a core long position on the Euro in the cash market, but with futures we have been playing near-term (or intra-day) short opportunities.
Again, the model has a great win rate here.
Gold has been breaking out of the intermediate-term range trade we’ve been in all week. We bought Calls and gold futures yesterday and the day before, this morning we booked some gains on those long positions, and now we are witnessing another rally. As the week comes to a close, I think we could see gold retest $1330 in short order, and beyond that $1360-1370 is not far-fetched.
We turned bullish on gold in November, and since then our model has returned near-90% performance on the E-mini’s alone. This result is simply due to buying dips in the market timed up with the cycles within our trading model.
Here’s a Video run down of the same thinking and market update from today…