Kept long position on Equity markets (Nikkei, Euro Stoxx 50 and MSCI Taiwan Index futures). Despite fluctuations of the past 14 days markets have virtually remained trendless. Positive signals exhibited today by the SMI breaking the pattern to new temporary highs, giving credence to a nascent bull trend in formation.
The moment of truth however remains the “Aussie”. It has hit new all time highs against the Euro ( 1.500) and the Pound 1.6550. The market paradigm is the Australian Central Bank will continue to tighten interest rates mutatis mutandnis providing a positive yield for the Aussie against cross rates. I contend the Austrailan Central Bank’s hands are tied to China. China began and continues to tighten its monetary stimulus this year through Bank reserves, interest rates, curtailment of new loans. This has a direct causal effect on the Australian economy. The Australian economy is coupled to China and wouldn’t risk removing the punch bowl and water at the same time.
It however remains a heuristic yet to prove expedient. Increased long position on Euro against Aussie significantly, buying heavily at the 1.5030 level (Eur.Aud). Further began buying GBP.AUD also at the 1.6570 level. I have placed tight stop at two ATR’s below entry levels. The pivots are close, making my margin of error opportune.
By Andrew Shawn – Recursive Investments in Global Financial Markets
Jordan kellner often remarked “The market climbs on a wall of worries”. Many who look to the wall of worries missed the bull market. I learned this lesson in 1998. I felt the pain first hand of Greenspan’s put. This time around as my indicators: (Global Pivot’s, DJI/DJT, Forex) gave me confirmations, I leveraged to the tilt. I backed up the truck loading heavily long the NIkkei, the SPI 200, Aussie, Commodities (Dow Jones AIG index futures, Corn, Orange Juice), MSCI Taiwan and heavily short Eurodollar futures. I went for the works!
The effect on my N.A.V, unleashing unheard of returns However the excessive positive returns have given me pause for thought. Excessive returns normally indicates excessive risk. Just two days ago with the initial shock from China, fluctuations in my NAV’s reminded me of the excessive VAR I had out. 200% returns within 2 months are heady numbers, but there is logic behind my reason for having taken on such a significant exposure during the last 3 weeks. “During times of chaos different rules apply.”
Because we live in “Interesting times”, traders and investors are hesitant. Moves we are witnessing in Markets might not come around for a long time. The volatility in the markets provides the best opportunity to profit from such moves. I am carrying heavy tight stop positions (But this is not without risk because of draw downs), however all considered “I would rather be lucky than right”. As long as trend continues, I will remain its friend.
By Andrew Shawn – Recursive Investments in Global Financial Markets
Yen finally began dropping, Kept selling Yen short against dollar as it broke the 0.9450 level. Continued selling through 0.9700 carrying large short yen position against US Dollar. Further increased short position of yen against Aussie as it rallied through 0.7600 (AUDJPY). Overall I am heavily long the Aussie and Short the Yen.
Kept increasing short position on 2011 Eurodollar Interest rate futures. ED broke the critical 97.140 level only to bounce back above it. I need it closing meaningfully below it to leverage short position.
Increased longs on Nikkei and tightened stop positions.
By Andrew Shawn – Recursive Investments in Global Financial Markets
AUDJPY - Increased longs on Aussie with stops at 2 x ATR (64.95)
Japanese exports continue to give credence to the heuristic of a beggar-thy-neighbor policy as the only few alternatives to revive the economy. Despite the fallacy of illusion of alternatives the Forex charts and positive returns from shorts on JGB futures (negatively correlated to Yen) are further indications that the verdict might be in. Chart to the left of AUDJPY tells the story. Drastically increased long positions on the Aussie against the Yen as they broke past the 68.250 level.
By Andrew Shawn – Recursive Investments in Global Financial Markets
Overweight with the Aussie as underlying currency has finally produced expedient returns as it continued its rally with gusto almost touching 0.7000. The divergence with Gold seems finally to have ended and convergence began. Increased long position on Aussie against US Dollar.
Further Aussie / Yen underlying cross rates reached the critical 67.500. I plan to drastically increase position if Yen breaks lower against the Aussie past the 67.500 level.
Increased long position on Corn futures, doubled longs on MSCI Taiwan, Nikkei and DJ Euro Stoxx futures.
By Andrew Shawn – Recursive Investments in Global Financial Markets
Note: this post has been published in 2009. It's very likely, the information contained in this post are no more valid today. Please use the search system (or browse the archives) to see if I wrote something else about this subject since this post
The Million dollar question is whether the GBP/USD cross rates break to new lows or hold at the 1.3640 level. The investment world is now shifting from one about the credit worthiness of companies and financial institutions to that of Countries (Britain). This will give impetus to the notion “Too big to fail companies may equally be too big to rescue”. As far fetched as it may now seem it is a possibility I will have to keep in the back of my mind.
I continue to remain on the sidelines after my stops were hit this week, with the exception of my longs on Orange Juice Futures and Aussie. The Aussie position currently has a negative return as my average fills were at the 0.6600 level and it currently trades in the 0.6450 region. I continue to carry a long position on the Aussie.
With bulk of funds seating, I am closely monitoring movements of Corn and Equity markets (Nikkei , MSCI Taiwann, Kospi) and will jump in back on the long side when technicals permit. For now the best trades are none at all.
By Andrew Shawn – Recursive Investments in Global Financial Markets
Financial Markets | RefCapGroup | 
March 1, 2010 1:41 pm | 
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