ROLLER COASTER

The life of a trader is rarely a contented one

I talked about an upcoming short opportunity in the Dollar and I took that trade the day after the holiday, marked above. When we had the big up day in stocks it obviously drove down the dollar and I had a very large one day gain. I had also delved into the Swiss Franc and went long some Grain markets. Since every trade is so highly correlated right now and completely dependent on the stock market, I adjusted my risk accordingly.

In this ass backwards world we line in, long the Swiss Franc and long Soybeans is the same trade. Makes no sense at all, or does it? Let's get to this in a minute. I had a very large one day gain, what I call a one day wonder. Yesterday it all got reversed and taken away. Even though I trade short term, I am not a scalper, so at times this happens. It was a bummer to see 20k evaporate and turn into a 1k loss. However, I trade setups that I expect to run for 3 to 10 days or more. I cannot modify what I do for these odd circumstances as much as I would have loved to have that money in my accounts to pay all the medical  bills I have for my dogs at the moment.

The Euro/Swiss on the long side and the Dollar on the short side still remain very solid setups for big moves, so I will play them again any day now once the bar patterns setup properly. This is what trading is, probing areas of opportunity. In the old days when I traded mechanically I almost never had losses. Some of my systems were 85% accurate in real time trading, so it was odd to have more than a loss here or there. However, one of the negatives was I never caught large moves, just constantly trapped small ones and eventually the patterns I used broke down and stopped working. Now at times I may have to take 3 swings at something to hit it. This is rare but it does happen. So the above scenario is business as usual as much as it ticks me off.

It is hard to tell but the DX loss above was very small only $150 per contract. As you have seen my wins generally are over $3000 per contract, so you can do the math on how well overall that works out. I will short the DX again today if yesterdays low goes but that is highly unlikely. That potential entry is one the chart with a large red arrow.

As to the correlations I mentioned above. These have now persisted for a long enough time where something is going on here. I think even the biggest wise guy has to be aware at this point of the government manipulation of the stock market. They are almost making no effort to conceal it at this point. What I suspect is happening is also a coordinated inflation attempt. The only way out of the mess being created is either massive default on everything or huge inflation. Readers here know I am in the deflation camp, but we also know the PPT has created one bubble after another in recent years to allow people places to go to make money. I think behind the scenes this is going on again in a frantic attempt to fight off deflation for the time being which is the prevailing force at hand.

Since the prime market they are manipulating is stocks, when they rise everything else goes with them. Funds with pools of very smart  people I suspect have written trading programs to take advantage of this. They go all in or all out. There have certainly been enough spectacular hedge fund debacles for us to know they do not honor normal risk paramaters at times. If you just watch the screen intraday it is very clear, stocks move first, then everything else follows about 30 seconds to a minute behind. Net net, I do not believe this is a conspiratorial effort, the PPT is just doing this in stocks. However, they know the trickle down effect it is having, and they do want some inflation to fight off the deflationary pressure that is underlying. This trickle down effect is what they want.

As a result, I do not expect these correlations to decouple until we get out of this mess which could be quite some time in spite of Barry's recent BS about jobs created etc. He should be nicknamed Pinocchio, we have never had such a dishonest president. In the end you have to take these correlations into account when determining risks in the trades you place.