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European shares are beaten down. German DAX falls -2.5%. France’s CAC -2.9%

Ouch.  European shares take a beating.

The European major indices are closed and the provisional closes are not looking good. The major indices are all beaten down by 2%-3%  declines.
The provisional closes are showing:
  • German DAX, -2.5%
  • France’s CAC, -2.9%
  • UK’s FTSE, -3.2%
  • Spain’s Ibex, -2.7%
  • Italy’s FTSE MIB, -2.8%
In the European debt market, the benchmark 10 year yields are ending the session higher, but off the highest levels of the day.  Below is a snapshot of the current yields, changes and high low yields.
Ouch.  European shares take a beating.
US stocks are also down sharply and trading near lows.
  • S&P index, -1.91%
  • NASDAQ index, -1.75%
  • Dow industrial average, -2.0%

In other markets:

  • spot gold is surging and back above the $1500 level. The price is up $22.34 or 1.51% at $1501.50.
  • WTI crude oil futures is trading down $1.35 on expectations of slower growth. That is down 2.5% at $52.28. The inventory data showed a higher build then expectations today
In the forex, the JPY remains the strongest currency on flight to the relative safety of the JPY. The CAD has taken over as the weakest.  The USDCAD is now trading back above its 200 day moving average at 1.3288.

CFTC Commitments of Traders: Canadian dollar buyers bail

Forex futures positioning data for the week ending September 24, 2019 from the CFTC:

Forex futures positioning data for the week ending September 24, 2019 from the CFTC:
  • EUR short 61K vs 69K short last week. Shorts trimmed by 8K
  • GBP short 81K vs 86K short last week. Shorts trimmed by 5K
  • JPY long 13K vs 24K long last week. Longs trimmed by 11K
  • CHF short 11k vs 5k short last week. Shorts increased by 6K
  • AUD short 47k vs 54k short last week. Shorts trimmed by 7K
  • NZD short 36K vs 30K short last week. Shorts increased by 6K
  • CAD long 5K vs 20K long last week.  Longs trimmed by 15K

There were some substantial moves across the board in this week’s data. There was no overarching theme in the US dollar. The loonie has stubbornly held onto longs but I suspect the jump in oil prices and lack of a corresponding climb in the loonie may have sent some specs to the sidelines — that data certainty hasn’t eroded.

Nikkei 225 closes higher by 0.06% at 22,001.32

Tokyo’s main index returns from the long weekend to finish near flat levels today

Nikkei 17-09

It’s a bit of a mixed bag in Asia as Japanese stocks are playing catch up to the events in Saudi Arabia so we’re seeing O&G stocks do the heavy-lifting in Tokyo, offsetting geopolitical tensions that are weighing on risk sentiment elsewhere.

Meanwhile, Hong Kong and Chinese stocks were more pressured due to domestic factors with the city protests still causing some unrest in the former while the latter is dragged down by disappointment that China did not lower its one-year lending rate earlier today.
The Hang Seng is down by 1.5% while the Shanghai Composite is down by 1.7% currently. The risk mood overall remains more cautious but nothing suggestive of major flows as we begin European trading. USD/JPY sits just a tad higher at 108.20 currently.

CFTC commitment of traders: GBP shorts trimmed modestly. JPY longs increased.

Forex futures positioning data among noncommercial traders for the week ending August 13, 2019

  • EUR short 47K vs 44K short last week. Shorts increased by 3K
  • GBP short 96K vs 102K short last week. Shorts decreased by 6K
  • JPY long 25K vs 11K short last week. Longs increased by 14K
  • CHF short 13k vs 16k short last week. Shorts trimmed by 3K
  • AUD short 63k vs 55k short last week. Shorts increased by 8K
  • NZD short 13K vs 12K short last week. Shorts increased by 1K
  • CAD long 14K vs 24K long last week.  Longs trimmed by 10K

Highlights:

  • JPY and CAD remain long, while the other major currencies maintain short position
  • The JPY longs increased by 14K. That is the largest long position since November 2016 (see chart below).
  • CAD longs were trimmed by 10K.
  • GBP shorts were trimmed modestly in the current week to 96K but the position remains the largest speculative position. The GBP moved modestly higher in the week.

JPY longs are the largest since November 2016

CFTC Commitment of Traders: Positions are marginally changed

Forex futures positioning data among noncommercial traders for the week ending July 23, 2019

  • EUR short 39K vs 31K short last week. Shorts increased by 8K
  • GBP short 79K vs 76K short last week. Shorts increased by 3K
  • JPY short 9K vs 11K short last week. Short trimmed by 2K
  • CHF short 13k vs 12k short last week. Shorts increased by 1K
  • AUD short 48 k vs 53k short last week. Shorts trimmed by 5K
  • NZD short 12K vs 17K short last week. Shorts trimmed by 5K
  • CAD long 31K vs 21K long last week.  Longs increased by 10K
  • Prior week

Highlights:

  • GBP shorts remain as the largest position. The GBPUSD moved to new 27 month lows today rewarding those traders.
  • AUD shorts are the 2nd largest position and the AUD moved to new month lows today retracing the run higher from the June 10 low
  • The EUR shorts increased by 8K. The EURUSD moved modestly lower this week. The EUR short has been cut from over -100K short to 31K (the fall in short positions seems to have slowed over the last month.
  • Speculators remain long the CAD. It is the only major foreign-currency long position versus the US dollar

Forex futures positioning data among noncommercial traders for the week ending July 23, 2019

CFTC Commitments of Traders: Loonie shorts rush to the exits

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:

Avoid the pitfalls of ‘over trading’ and ‘under trading.’

* There are basically two types of over trading. Trading too often and trading too many shares/contracts.

* Remember that there really is no good reason to trade constantly, since extreme over-trading creates stress, produces high commissions and can often lead to more losses.

* Market forces do not last forever and time has shown various examples of the law of gravity in the trading market- that whatever comes up must go down. – and vice versa.

* Instead of grabbing every opportunity that comes along (or thinking that it is an opportunity) make sure each trade setup meets the criteria of your trading plan, don’t be over confident or scared of making trades.

* Utilizing a risk calculator to determine the appropriate position size before you enter a trade can help you determine how many shares/contracts you initially buy. You can start off with a small position and add as the trade continues in your favor. It relieves stress to know that the amount at risk for each position you hold is well proportioned to the size of your entire account and this is great asset management.

* Whenever you feel that you did not stick to your trading plan and made a mistake, quickly learn from that and let it go.

RISK MANAGEMENT

1.Never enter a trade before you know where you will exit if proven wrong.
2.    First find the right stop loss level that will show you that you’re wrong about a trade then set your positions size based on that price level.
3.    Focus like a laser on how much capital can be lost on any trade first before you enter not on how much profit you could make.
4.    Structure your trades through position sizing and stop losses so you never lose more than 1% of your trading capital on one losing trade.
5.    Never expose your trading account to more than 5% total risk at any one time.
6.    Understand the nature of volatility and adjust your position size for the increased risk with volatility spikes.
7.    Never, ever, ever, add to a losing trade. Eventually that will destroy your trading account when you eventually fight the wrong trend.
8.    All your trades should end in one of four ways: a small win, a big win, a small loss, or break even, but never a big loss. If you can get rid of big losses you have a great chance of eventually trading success.
9.    Be incredibly stubborn in your risk management rules don’t give up an inch. Defense wins championships in sports and profits in trading.
10.    Most of the time trailing stops are more profitable than profit targets. We need the big wins to pay for the losing trades. Trends tend to go farther than anyone anticipates.

10 Things Traders Must Quantify

  1. What exactly is your entry signal going to be? What technical indicators will trigger you to enter a trade?
  2. What will the perceived edge for your entries be based on? Will you quantify your entries edge with back testing of through trading principles?
  3. Will you wait for an initial move in the direction of your trade entry or will you enter based on a technical indicator trigger?
  4. How will you trade in different market environments and trends? Will you have better odds of success buying dips in bull markets and shorting strength in down trends?
  5. What is the risk/reward ratio for the trade you want to take? How much are you willing to risk if the trade is a loser? How much could you make if you are right? Is it worth it?
  6. What are the probabilities that this entry will be a winning trade based on past historical price data and charts? With the winning percentage in mind how big do the winners have to be and how small do you have to keep the losers for the trading system to be profitable?
  7. Where should your stop loss be? At what price level will your entry be wrong and signal you to exit the trade with a loss?
  8. How big of a position size should you take based on your stop level and total capital you are willing to risk on this one trade?
  9. Is your position size small enough to enable you to hold the trade without emotions effecting your ability to follow your trading plan?
  10. When you open this trade in addition to your other positions, how much of your total trading capital is now exposed to loss if all trades went against you at the same time?

Risk Management

  1.  Risk of Ruin-Never risk more than 1% of your total account capital on any one trade.
  2. Position Sizing-Use your capital at risk to understand the right amount to trade based on the securities volatility.
  3. Capital at risk: Never put more than 6% of your total capital at risk at any given time on all positions.
  4. Trailing stops- Always have an exit strategy to lock in your winners.