Archives of “June 29, 2019” day

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There are only 3 types of traders.

  
Analysis, Education
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There are only three types of traders, they are defined by how well they execute their trading plan (rules applied to strategy).

A trader that performs worst than their trading plan.  These traders often have a weak understanding and belief in their trading plan.  How they feel is more or as important as making money.  They fail to see past the current trade.

A trader that performs the same as their trading plan.  These traders have a strong understanding and belief in their trading plan.  They get a majority of their satisfaction from making money.  They can see past the current trading day.

Those that perform better than their trading plan.  These traders have spent time in the previous two groups so they not only understand and believe their trading plan, they have 100’s or thousands of experiences that “prove” it to them.  The only satisfaction is following their plan and knowing that the money will follow. They can see past the current trading year.  They find areas and times to be aggressive and times to hold back.

The purpose of trading is to at least perform as well as your trading plan.  Any trader will tell you that he has spent time in all three and is always susceptible to be in any of the categories.  Each category is filled with important lessons, the lesson is often that I do not want to end up back there.

Those that under perform their trading plan are usually not honest with themselves about their level of belief in said trading plan.

Most Common Advice is Ineffective

  
Analysis, Education
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“Plan the trade, and trade the plan!” is perhaps the most common advice given to traders. As far as advice goes, it’s well meaning, but unfortunately falls well short of addressing the problem most traders actually face. 

Looking at the advice, it has two parts. The first part says you need a plan. No argument there. But the second part, about executing the plan, that’s where the problems appear. Why?

The two parts to the advice ‘plan the trade’ and the ‘trade the plan’ require two very different skill sets. Without understanding the different skills required, it’s highly likely that you will continue to regularly veer from your plan.

Here’s the disconnect. Planning the trade depends on your intellect. And most of the time, the development of the plan does not occur in the heat of battle.  It’s relatively easily to let your intellect guide you, to be the primary driver when you’re not in the heat of battle. But in the heat of battle, when we have to decide right now whether to enter or exit, an entirely different situation occurs.

At the time of execution, no longer are we cool, calm, and collected. Now, a whole slew of things enters the picture – and many of these things are subconscious to a degree. Our feelings about our P&L, our feelings about our performance, or concerns about how we appear in the eyes of others, etc.

And no matter how smart you are, how much you believe you are not an ‘emotional person’, modern brain science is telling us emotions, including subconscious emotions, are very much a part of our decision making that leads to actions whether we realize it or not. Viewed this way, you can see why the typical advice to ‘plan the trade and trade the plan’ may be well intentioned, but ineffective.

CFTC Commitments of Traders: Loonie shorts rush to the exits

  
Analysis, Forex
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Forex futures positioning data among non-commercial traders for the week ending June 25, 2019:

  • EUR short 56K vs 52K short last week. Shorts increased by 4K
  • GBP short 59K vs 53K short last week. Shorts increased by 6K
  • JPY short 10K vs 17K short last week. Short trimmed by 7K
  • CHF short 16k vs 15k short last week. Shorts increased by 1K
  • AUD short 66k vs 65k short last week. Shorts increased by 1K
  • NZD short 24K vs 24K short last week. Shorts unchanged
  • CAD short 15K vs 38K short last week.  Shorts decreased by 23K
That’s the second week in a row of GBP selling as the market sours on whatever might come from the Conservative change in leadership.
There was a big flight out of euro shorts a week ago but some waded back in this week. In the yen, however, they continued to get out of shorts, even with USD/JPY rebounding (although that came later in the week).
The big move was in the Canadian dollar where all the good news on Canadian data finally sank in and the shorts got out. That shift put the net at the narrowest since late December. I expect we will see more of the same when next week’s numbers are released.

Forex futures positioning data among non-commercial traders for the week ending June 25, 2019:

Trump relents on tariffs, Huawei as US-China trade talks set for a revival

  
  Analysis
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What to look out for when markets open next week?

Trump

Trump and Xi once again managed to use their affinity to help strike a compromise in getting trade talks back under way earlier today.

Of note, Trump said that the US will not be levying new tariffs against China while also allowing for Huawei to purchase equipment from US companies – saying that he and Xi have agred to leave the “complicated” Huawei issue until the end of what appears to be an open-ended trade truce between the two countries.

Although Trump relented on his stance, he didn’t give any firm commitment on whether or not Huawei will be pulled from the entity list and says that the Commerce Department will meet in the coming days to review what products can be sold to Huawei.
I reckon the very notion of trade talks being revived is likely to give markets a bit of a relief on Monday even though much of this has already been anticipated. The key now will be to measure whether or not this optimism can last the course as negotiations are set to continue in the coming weeks/months.
Besides that, just be on the look out for any official statement release by both the US and Chinese camps when markets open next week. So far, China has said that they hope that Trump will deliver on the Huawei issue but didn’t really elaborate on any details pertaining to what other details both sides will be discussing in future negotiations.
As for any official statements, the interpretation of the language will be key. There’s no doubt China will be the more cautious and less upbeat of the two in building up market optimism after the recent setback in trade talks in May but we’ll see.
For now, I reckon the ‘back on track’ sentiment should lend risk assets a tailwind in the opening sessions next week with the moves likely to be more evident among equities and gold. As for FX, a risk-on gap at the open is very much in the offing given all the anticipation last week and the dollar may also see some gains as traders will surely now further question odds of a 50 bps rate cut by the Fed next month.

But it won’t be too long before traders and investors start asking themselves whether or not the concessions made here can lead towards a deal in the bigger picture.

In my view, the more structural issues remain a difficult gap to bridge for both countries unless they’re willing to move their red lines. We’ll see if that changes but I highly doubt a trade deal is imminent despite talks being revived. As such, it’ll only be a matter of time before markets – and any optimism from today – have to deal with that reality as well.

Beijing says US will not impose new tariffs on China exports

  
  Analysis
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The U.S. will not levy new tariffs on Chinese exports, Chinese state media said after bilateral talks between Donald Trump and Xi Jinping on the sidelines of the Group of 20 summit in Osaka.

The world’s two biggest economies have agreed to restart trade talks, Xinhua news said, adding that the two sides will have discussions on “specific” issues.

The two leaders met for the first time in nearly seven months on Saturday, again on the sidelines of a global meeting, in an attempt to turn the heat down on a boiling trade war.

Trump is angry at the trade imbalance between the two countries, and has imposed rounds of tariffs on goods the U.S. imports from China. China retaliated by raising tariffs.

As the bilateral meeting began, Xi said he is prepared to exchange his thoughts and that he hopes to set the direction of China-U.S. relations “based on coordination, cooperation and stability.”

He added, “cooperation and dialogue are better than friction and confrontation.”

Trump responded by saying, “It would be historic if we can do a fair trade deal.”

“This could be a very productive meeting,” he said. (more…)

Week ahead: US jobs, China trade, Opec ,Wimbledon

  
  Analysis
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A high-stakes meeting between the presidents of the US and China will set the tone for markets heading into the new week, as the world’s two most important economies seek a resolution to a long-running trade dispute.

Also on tap in the US, investors await data on the labour market and manufacturing sector in a holiday-shortened week. Elsewhere, Opec members will meet to iron out oil production plans.

Here’s what to watch.

Economic data and the Fed

A fresh round of key US economic data due next week will probably factor into the Federal Reserve’s decision on interest rates in late July.

At the top of the list is the labour department’s monthly jobs report. Economists polled by Thomson Reuters anticipate an increase of 158,000 non-farm payrolls in June, which would reflect an uptick in hiring compared to the 75,000 jobs added in the prior month. The unemployment rate is expected to remain at a near 50-year low of 3.6 per cent.

Investors will also be able to parse the latest surveys from the Institute for Supply Management on the US manufacturing and services sectors, as well as reports on auto sales, factory orders and the nation’s trade balance.

The Fed’s policy-setting committee will reconvene on July 30-31, and investors expect the central bank to lower its target rate for the first time since the 2008 financial crisis amid soft inflation and uncertainty over global trade. The market has priced in a 100 per cent chance of a rate cut, with 30.2 per cent odds that officials will approve a cut of 50 basis points, according to CME Group’s FedWatch Tool which monitors Fed funds futures.

New York Fed president John Williams and Cleveland Fed president Loretta Mester — a non-voting member of the Federal Open Market Committee — are scheduled to speak at separate events on July 2. (more…)

Bitcoin catches a late-Friday bid as the wild ride continues

  
Analysis, BITCOIN

Bitcoin up $1600 today

A week like this has to make Bitcoin traders wish they had a weekend to catch their breaths.
That doesn’t look like it will be the case as Bitcoin jumped $350 in the past 30 minutes to $12,270.
It made the parabolic move to $13900 on Wedneday, crashed down to 10330 yesterday but has now jumped nearly 20% from the low.
Bitcoin up $1600 today
June CME Bitcoin futures expired earlier today but the volume had already moved over to the July contract so I don’t see the roll as a real factor.
Craig Wright is in court today trying to prove that he’s Satoshi but lost his early-Bitcoin addresses. In theory you could argue that’s bullish but no one believes he’s Satoshi and everyone already assumed those accounts were lost.

It was the best June for the S&P 500 since 1958

  
Analysis, US Market

June usually isn’t a great month to buy stocks

June usually isn't a great month to buy stocks
Changes for the S&P 500:
  • Daily +0.6% (+17 points to 2941)
  • Monthly +6.9%
  • Quarterly +3.8%
All the US indexes performed roughly in-line over the month, with gains around 7% and slight outperformance in the Nasdaq (+7.4%).
This was really about the reversal of the Mexican tariffs. The market was up 3.0% from where they were on May 22 before the tariff talk started
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