HO HUM

NFP report does not move market much, or did it?

Above is my position in the Ten Year I took yesterday as you can see the annoying red arrow on the chart that Trade Station displays. You can also see my stop resting above, the STM which stands for stop market in their jargon. Although the equity indexes did not move much, that Russell short I have on is still on, bonds did move a decent amount.

There is alot of talk out there about future inflation etc. I mentioned the other day that you should certainly be looking to short bonds if you believe in that scenario. Of course the hint there was that I was also looking to do so, although I did not specifically state that. I am not going to give up every single trade in advance that I do in a free blog. At some point in the future if I decide to ressurect my trading service, that will be the only way for anyone to get all the trades I do in advance. I do still give a fair number of them up in advance exactly as I am playing them, which is more than most places will do. I also am a real trader, and put real money behind the trades unlike many paper champions who do not actually do the trades they recommend.

Getting back to Bonds, I did not go short because of an inflation view or lack thereof. To me the market is in a short term downtrend and had bounced, with the structure of the trend still being in place. As a result I basically just shorted a pullback. As to whether or not the bonds move down alot or not at all, I have no idea. The pattern was there so I took the trade.

It does logically follow to me as I listened to the suits on CNBC this morning reviewing the NFP numbers, that for the time being things are better. We can debate how this can possibly last being that it is all based on government stimulus, but why bother. The trend is up in equities and who is to say where it might stop. If it continues, it is likely bonds will decline into their typical seasonal low period of May - July. Since that is when equities will probably reach the 1229 - 1235 area, we may very well have some confluence of things at that time for a reversal in both bonds and stocks. May is the operative word. There have been a few other junctures one being a couple of weeks back, where we also had some confluence of things for a reversal and it did not happen. All it did is result in a sideways ledge type of correction, that barely retraced at all.

One of the best lessons I have ever learned and continue unfortunately to have to re-learn, is that making investment or trading decisions on a strong believe in something that MAY happen, is a terrible mistake. There is a great deal of random activity that we all try to classify into some order, so that we can profit from it. That order is nothing more than our own self imposition on random events, and it has no effect on the ultimate outcome. The best way to trade is to study patterns in things that HAVE occurred previously, not that MIGHT occur. If A has caused or resulted in B X % of the time, that is how to trade. Do not get caught into the "well if A, then theoritically B" especially if that sequence has never occurred before. Fiat currency etc is an example of this. You are betting on something that has never happened before having to occur for the premise of your investment to be proven correct. It might happen for the first time ever and you will be right, but it is not a wise way to bet. I like probabilities on my side, not randomness hoping for the one outlier event to have to occur, for me to make money.

I keep harping on this because I keep seeing people making this mistake and it is one I have also made earlier in my trading life. You cannot take a macroecnomic view of things and try and impose that on shorter term investments. If you think for whatever reasons, that the economy may not be as strong as all the "experts" are saying it is you are probably right. It certainly appears to be talking point spin. However, look at the stock market rally we have had. These larger picture macro views do not directly correlate to shorter term market movement. In the case of stocks, these two things can diverge for extended periods of time and we are seeing one right now. Alot of money has been made on the long side of this market, and there is still no reason to get too jacked up on the short side of this monster, just because you might think that the rally is bogus due to government intervention.

I do think a day or reckoning is ahead at some point and once it does start and gets some legs, it might be a bit scary how fast the decline happens. However, until we get a trend change, that is just noise.