7 dusty words of trading.

Be careful how you use the following words and phrases as they become road blocks or worse take you down the wrong path.

Should– Phrases include: “The market should have” and “I should have”. Those phrases are often used to socialize losses. They are a strong signal something is off. They should be used to aid you in correcting your vision not make you feel better.

Must– Phrases include: “The market must…”, “I must make money”, or “I must trade”. The market does not have to do anything and either do you. When you use the word “must” it is hardly ever from a position of strength. The market knows when you are desperate and will take full advantage of you. Keeping your expenses as low as possible will make it easier to not make those statements.

Will– Phrases include: “The market will..” and “I will make money”. Once again the market does not like to be told what to do. It is the bratty kid screaming at the tops of his lungs. The word “will” relaxes your mind, similar to “should”, people use it to be lazy instead of a black background in an otherwise light picture. You can do everything right and still lose money. That is why trading is so effective at diminishing confidence. In most every activity, if you do everything right you are going to get the desired result. Doing the “right” things is bare minimum. Of course, over time you will get paid for doing the right things but it is never when you think it should be and hardly how much you anticipated.

Won’t– Phrases include: “The market won’t…” or “I won’t make money”. Notice a theme here? You are part of the market, you are not the market. Not getting what you expect, even if it is positive, confuses the brain. If you expect to lose and don’t it is still a bad outcome. The market is a one way walkie talkie, you listen, it talks.

Can’t– Phrases include: “The market can’t..” or “I can’t…” or “I can’t lose anymore”. Yes the market can, go look at a chart. Go look at a Fed day or about any chart from 2008. Not only can it happen, it does happen. There are no more once in a lifetime moves in the market. There are and always have been life changing moves. No one ever said trading was easy but at least in the case of futures someone is taking your money. If you think you can’t, you probably wont. The market will take every penny you have. If can take every penny you put at risk. Fix the problem, when you run out of money it is too late.

Impossible– Phrase includes: “It is impossible to make money”. Once again someone, somewhere is making money. It may not end up being an efficient use of your time or capital but it is possible. You are substituting an excuse for execution.

Sense– Phrase includes: “The market does not make sense”. Many fortunes are made in an illogical market. Logic is a bigger driver than risk controls for most people. It is easier to ignore your P/L when you can see or touch the catalysis. For example, it is cold buy natural gas. By the time you change your view or are forced to change, the market flips. Logic will eventually prevail, with or without you.

EIA weekly US oil inventories +7928K vs -1911K expected

Weekly petroleum inventories:

  • Prior was -4982K
  • Gasoline -724K vs +150K expected
  • Distillates +5495K vs +2500K expected
  • Cushing -3395K vs -5587K prior
That’s a big build but it was largely foreshadowed by the API report late yesterday. Oil is under some modest pressure and down 37-cents on the day to $32.44.
API numbers from late yesterday:
  • Crude +8731K
  • Cushing -3370K
  • Gasoline +1120K
  • Distillates +6907K

China premier Li Keqiang: US-China ties face new problems, new challenges

Li sort of plays down the recent spat between the two countries

  • US, China decoupling will not be good for both sides or the world
  • US, China stand to gain from cooperation, lose from confrontation
  • Says that US, China should expand common interests
These aren’t anything that they haven’t said before but if anything, the repeated remarks show that the recent (mostly) verbal spat between the two countries are still part and parcel of their ongoing drama for the world to see.
The fact that Li doesn’t go into much details or draw up any harsh words besides saying that there are ‘new problems, new challenges’ can be argued as a little more toned down.
But we’ll see how the US chooses to respond later on in the week as Trump has hinted earlier.

Germany Ifo institute says that economy likely to shrink by 6.6% this year

Ifo weighs in with their view on the German economy

  • Economy likely to grow 10.2% next year
  • Q2 likely to see a contraction of 12.4% due to the coronavirus crisis
  • Some sectors including aviation, travel, hospitality and autos are expected to experience a longer recovery period
  • In case of slow normalisation lasting up to 16 months, economy could shrink 9.3% this year and growth 9.5% next year
  • In case of fast normalisation lasting up to 5 months, economy could shrink 3.9% this year and growth 7.4% next year
In other words, things are definitely bad this year with some expectation of getting better next year. But how bad things are or how quickly the recovery may be, is still rather uncertain. And that is reflected by their multiple forecast scenarios above.

Nikkei 225 closes higher by 2.32% at 21,916.31

The Nikkei closes at its highest level since 27 February


Japanese stocks are having yet another solid day, building on the gains from Wall Street overnight as the Nikkei now even breaks back above its 200-day moving average.

The close today is the highest since 27 February, as the index is now up by nearly 34% from the lows posted back in March.
Elsewhere in the region, the Hang Seng is having a rough time amid geopolitical tensions with the US having said that Hong Kong no longer warrants ‘special status’. The index is down by 1.4% but off earlier lows of over 2% after the lunch break.
In the currencies space, the mood is still rather mixed to start European trading. The dollar is sitting mixed across the board with little notable movement in general.
The aussie is mildly weaker and off earlier lows, with AUD/USD sitting just above 0.6600 now after also bouncing off its 100-hour moving average in overnight trading.
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