Trade: Inaction and Action
Since the FOMC interest rate announcement, I put on the goldilocks trades and made the long bond call. This has worked out exceptionally well. The timing, market view, and execution worked perfectly.
Here are all the notes on them:
FOMC Trades: Link
Additional Trade Long CL: Link
Additional Trade Long NG: Link
Reaffirming Long Bonds: Link
Holding and Weekahead: Link
Do not become complacent though! I am not closing my laptop and going to the beach. I am still monitoring price action and running all of my models. At any moment, I am ready to take off risk.
This is how risk management works. There is no such thing as buying and then just walking away for a year.
The one thing you need to keep an eye on is how the forward curve is pricing cuts. Right now it’s incredibly aggressive:
This aggressive pricing has overlapped with the resistance in bonds:
However, the rest of the goldilock trades continue to work. The DXY made new lows this morning in confluence with the view. (The red arrow is when I published the article saying short the DXY):
This connects perfectly with the price action in gold:
I remain long ES:
I ran an additional short-term long on the red day we saw in ES on Wednesday. This is now positive as well:
Remember what I said, when goldilocks is the dominant regime and liquidity is pumping, the two main assets (stocks and bonds) in people’s portfolios are reflexively feeding on each other. When this happens, recklessness gets paid and conservative people begin to scoff at the “euphoria.”
Does it make more sense why BTC has been risk on?
If crypto is rallying, that is a signal! Here is an article breaking down how crypto fits into macro:
I would also encourage everyone to read the Japan Country Primer I wrote. In the new year, I will be running trades in Japanese individual names. There is a whole other world of alpha out there besides trading APPL earnings!
For now, we hold our winners. Inaction is just as important as action in markets.
(As a reminder, the free trial option will end January 1st so be sure to take advantage of it. There is no downside in checking everything out.)
The fight has only just begun!