Archives of “Analysis” category

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Learn from Past Trading Mistakes— #AnirudhSethi

  
Analysis, Education
Once you’ve realised your error, you’ll be in a great position to correct it.
One tragic loss was all it took to send me to my knees. 
Because of the magnitude of the loss, I stayed away from trading for close to two years. 
During that time, I was able to reflect on my successes and failures as a trader and gain valuable insight.
Famous soybean trader Roy Longstreet once said, “Your first mistake educates but your second error kills,” and I’ve always found it to be an inspiring and instructive saying.

Get Your Confidence From Good Trade Management— #AnirudhSethi

  
Analysis, Education
Many traders, in my opinion, assume that all they need is a run of good luck before they can move forward with confidence. 
Is it possible to maintain composure while on the losing end of a trade?
My “confidence” has taken me through many ups and downs, but I’ve now realised that the key to success is not having more winning transactions than losing ones and being able to manage both.
I realised that my optimistic outlook on life was directly related to the way I dealt with disappointment. 
I felt optimistic about my ability to recover from defeat.
If I lost more than I should have or went over my daily loss limit, I felt terrible about myself instantly. 
So I stopped doing the things that had been giving me that unpleasant sensation.
While I may not be able to influence market conditions, I do have complete say over my individual trades, including when and how much I enter and exit the market, how many positions I hold at once, and how much risk I am willing to take.

A winter storm hitting a large part of the US threatens exports of LNG from the Gulf Coast

  
  Analysis

Bloomberg (gated) carry the report on the wild US weather.

  • The arctic front, expected to continue for several days, is triggering warnings and advisories stretching from Maine to the Gulf of Mexico. The US is a major LNG exporter and a key supplier to Europe, which means port disruptions could have a global impact.

The link contains a little more info.

BOJ October monetary policy meeting minutes are out, no clue to December meeting bombshell

  
Analysis, Economy

Headlines from the release via Reuters:

  • Members agreed must maintain current easy policy to stably, sustainably hit price target
  • One member said effect of BOJ’s easing may be heightening as moderate increase in inflation expectations push down real interest rates
  • One member said rise in nominal wages crucial for inflation to stably hit 2%
  • A few members said ill-timed policy tweak could disrupt positive inflation-wage spiral
  • One member said while there is no immediate need to tweak policy, BOJ must keep eye out on side-effects of easing, examine how rising prices would affect households’ behaviour and wages
  • This member added BOJ must keep checking whether market players are prepared for when boj exits easy policy, scrutinise how a future exit could affect markets
  • A few members said BOJ must be mindful of how future interest rate rise may affect mortgage loans
  • One member said BOJ must deepen analyses on relationship between Japan’s inflation and wages
  • A few members said recent sharp yen falls heightening uncertainty for firms, have many demerits for japan’s economy
  • One member said fx rates must be determined by fundamentals

Nothing there of surprise. No hint to the move in December.

—

S&P and Nasdaq give back gains from yesterday

  
Analysis, US Market
  • S&P closed down -55.86 points or -1.44% at 3822.59
  • Nasdaq closed down -233.24 points or -2.18% at 10476.13
  • Dow closed down -348.28 points or -1.04% at 33028.21
  • Russell 2000 closed down -22.85 points or -1.29% at 1754.08

The markets were spooked initially by comments from legendary investor David Tepper who spoke more bearish about the stocks markets given the Fed and other central bank hawkish views on rates. When the GDP data for the 3Q came out better than expected with higher inflation it helped add to the bearish bias pre-market.

The good news, however, is things could have been worse. Intraday, the

  • Dow was down -803.06 points at the low.
  • S&P was down -113.96 points at the low
  • NASDAQ was down -396.05 at session lows

Tomorrow the stock market will have full day of trading but it will be closed on Monday in observance of the Christmas holiday (which falls on a Sunday this year).

Oil & gas revenue will dictate Russian FX intervention in FX in 2023, but in yuan, not USD

  
  Analysis

ICYMI, Reuters with the info overnight citing two anonymous sources.

  • Russia stopped intervening on the FX market in February due to restrictions imposed on its use of foreign exchange reserves after it sent tens of thousands of troops into Ukraine.
  • Interventions will resume next year in yuan, the two sources told Reuters, provided that revenues from oil and gas exports exceed 8 trillion roubles as set out in budget plans.
  • “The central bank can currently now buy yuan,” a banking source close to monetary authorities told Reuters. But the bank would not do so while the government continued, as now, to spend its oil and gas revenues.

This is part of Russia’s de-dollarisation drive. A goal shared by key ally China.

Bank of Japan pivot bombshell – widening 10yr JGB band to 0.5% (from 0.25). Yen up

  
  Analysis

Yen has surged and Nikkei (Japan shares) trashed.

The initial headlines were that the BOJ had left its policy unchanged, which they have.

  • to maintain a -0.1% target for short-term rates
  • and a 0% cap for the 10-year bond yield (around 0%)

BUT they widened that band in which they allow the 10 yr JGB to move from 0.25% to 0.5%. This, in effect, is a long-awaited ‘pivot’ from the BOJ. A mini pivot for sure, but given nothing was expected until April, its significant.

More significant items from the statement:

  • to increase bond purchases to JPY 9tln/month in Q1
  • will review operation of Yield Curve Control (YCC)
  • to conduct additional JGB purchases on December 22

In widening the band for the JGB target, the BOJ says that “the functioning of bond markets has deteriorated… If these market conditions persist, this could have a negative impact on financial conditions.”

JPY has surged, USD/JPY plunged to circa 134.30 while the Nikkei dropped (futures trade is active, down over 4%, physical is closed for the lunch break … traders getting indigestion as we speak)

usdyen boj pivot 20 December 2022
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