Uneventful Friday

Expected more from trading day today, however there was neither a capitulation to all time Global Pivot lows or a significant rally. I practically remain almost all in cash with the exception of a few short term call options on the equity indexes. Three times during the trading day I tried taking small long positions on the DJ Euro Stoxx and each time I got stopped out as they hit new lows. My biggest play is going to take place between the Forex Markets and the Nikkei. I have a predilection that the next short term wave is up, but I need markets to confirm, It appears they are performing a pendulum swing, coming to rest, and then they will indicate which way they are going. Bovespa says up, but I need markets to confirm that. Back to Nikkei on Sunday evening.

By Andrew Shawn – Recursive Investments in Global Financial Markets

Sold out longs USD/JPY

Was carrying heavy long position on USD/JPY. However I remain very disturbed by the correlation with the Nikkei. When the Nikkei finally opens it is going to tank Big time down towards the 10,000 level. Now NIkkei has lately moved in positive correlation to USD/JPY. So simply because USD/JPY is showing me a big profit why would I hold a long position on the USDJPY at this time. Chat below shows USD/JPY  parallel to Nikkei 225 Futures. Sold out longs on USD/JPY. Further from fractal move of USDX to 84.500 had me sell out longs on USDX.  Only exposure to markets are now my still heavy shorts on the Equity front (MSCI taiwan, SPI 200).

By Andrew Shawn – Recursive Investments in Global Financial Markets

Global Pivot Heuristic for Equities.

Using the Global Pivot Heuristic (Anchor as Points of attraction), the following can be deduced:

Western Markets:

GP(H) / GP(L)

• 1/11/2010 -> SMI: GP(H) 6602 ->   2/08/2010 GP(L) 6150   +> 2/26/2010 New GP(H)   ?>
• 1/11/2010 -> DAX: GP(H) 6100 ->  2/05/2010 GP(L) 5383   +> 3/25/2010 New GP(H)  ?>
• 1/14/2010 -> Dow: GP(H) 10672 -> 2/05/2010 GP(L) 9795   +> 3/22/2010 New GP(H)  ?>
• 1/11/2010 ->FTSE: GP(H) 5559  ->  2/05/2010 GP(L) 4975   +> 3/22/2010 New GP(H)  ?>

Oriental Markets:

• 1/15/2010 ->STW: GP(H) 302.60 -> 2/08/2010 GP(L) 257.70 +> Failed to make New GP(H) ->  Sell
• 1/12/2010 ->SPI: GP(H) 4958 -> 2/08/2010 GP(L) 4390 +> 4/06/2010 New GP(H) -> New GP(H) Negated – Sell
• 1/11/2010 -> HSI: GP(H) 22710 -> 2/08/2010 GP(L) 19380 +> Failed to make New GP(H) -> Sell
• 1/15/2010 -> SNI: GP(H) 10980 ->2/09/2010 GP(L) 9860 +> 3/29/2010 New GP(H) -> New GP(H) Negated – Sell

Commodity Markets:

• 1/11/2010 -> BVSP: GP(H) 71068 -> 2/05/2010 GP(L) 61341 +> 4/01/2010 New GP(H) -> 4/16/2010 New GP(H) Negated – Sell
• 1/11/2010 -> SPTSE: GP(H) 709.34 -> 2/05/2010 GP(L) 642.75 +> 4/01/2010 New GP(H) ->4/16/2010 New GP(H) Negated – Sell Short
• 1/11/2010 -> MXX: GP(H) 33047 -> 2/05/2010 GP(L) 29926 +> 4/10/2010 New GP(H) ?>

From Global Pivot heuristic as attraction points, Kospi 200 Futures show most expediency in shorting, together with SPI 200 futures (Australia). Commodity Equity countries negated short term bullish trend indicator given earlier. Likewise Oriental markets have done the same. The unknown remains the western markets. Should I get a reversal signals on all three fronts, will consider current market movements more than just a knee jerk reaction.

Will begin buying Nikkei futures again at 10600 level to test, if that support fails will try again at 10150.

By Andrew Shawn – Recursive Investments in Global Financial Markets

Japan /Nikkei /Yen

Sold Yen short against US Dollar and kept increasing short position on Yen as Nikkei rallied. Besides myself for having not taken a long position on the Nikkei at the 9900 level. I stupidly remained on the sidelines expecting a further drop to the 9700 level. This focus on the retracement fractal blinded me from meta signals rest of global markets were sending (Swiss Market Index, Euro Stoxx 50, Dax, Bovespa … all hit Global pivot and rallied.) I should have been taking my queue from iterated market bottom. I am consequently late to the Nikkei rally. As I accumulate position it is not without risk as a recoil would be double whammy.  Placed tight stops at the 10100 level.

By Andrew Shawn – Recursive Investments in Global Financial Markets

Pivot Broken

Pivot broken through on DJ Euro Stoxx. Shows markets heading further south. Expect Nikkei to sell off further to the 9630 level. Placed limit buy orders at 9640 through 9600. Sold out long position on USDJPY as expect Yen to follow with a further rally.

By Andrew Shawn – Recursive Investments in Global Financial Markets

Commodities / Forex/ Equities

Fractals point to completion of commodity correction. Accumulated a large long position on  GSCI futures (Goldman Sachs Commodity Index Futures). Will keep pyramiding up as markets rally. Took on a small long position again in corn futures with a tight stop at the 353 level.  Continue to carry a timid long position on the Nikkei futures which shows some promising signs. Overall my largest positions and exposure is in the forex markets were volatility continues to rise with the uncertainty surrounding Greece. Might open up a pandora’s box for the EU with Portugal, Spain and italy next on the list.

Forex: Long GBP/AUD, Short EUR/SEK, long USD/JPY, long US Dollar Index futures

Interest Rates:

Eurodollar December 2011 perceived fractal has not proven as expedient as I had hoped. I however continue to carry a short position. If these markets can touch the 97.300 level I will increase shorts to over 100 contracts.

By Andrew Shawn – Recursive Investments in Global Financial Markets

Equities | Eurodollar Futures (Interest rates) | Nikkei

Covered short position on MSCI Taiwan Index futures as fractals near confirmation. Covered short position on Hang Seng futures as well. Began buying Nikkei futures at the 10320 level, ideal would be the Nikkei under 10200. Will slowly increase at those levels.

Eurodollar futures moment of truth appears to have arrived. Began building a short position on December 2011 Eurodollar futures. Ideal fills of 97.650. However will take what I can get.

By Andrew Shawn – Recursive Investments in Global Financial Markets

Where does the Nikkei go From here

Nikkei futures seem to exhibit iterated pattern from rally in May of 2003.  Zooming on market fractal from 10/21/2003 to 2/10/2004 following chart pattern emerged.

Extrapolated Pattern: (Down wave a-b-c then up wave A-B-C-1-2-3-4-5 then retracement back to B before breakout)

Fast Forward to Current Nikkei movement:

We experience the down wave a-b-c Which sent Nikkei from  10770 on 8/31/2009 down to 9005 on 11/30/2009

This has been followed by an up wave A-B-C-1-2-3-4-5 which has sent Nikkei From 9005 up to  10800 (closed today on the SGX Futures).

Nikkei has three times struggled to break resistance only to close below highs.

If iterated fractal is valid Nikkei should sell back to the  10200 level before gaining gusto to break through 10770 barrier taking us to at least the 12,000 level.

Caveat:

Should NIkkei however simply breakout higher, will consider above heuristic flawed and just buy back in to rally. However indications of strength in the Yen point to a correction.

By Andrew Shawn – Recursive Investments in Global Financial Markets

Nikkei Warning Indicator / Taiwan / OJ Futures

Nikkei:

Indicators began flashing red lights as Hang Seng failed to break new highs yet Nikkei presented a fake breakout to 10660. Further divergent indicators has been the Yen which has rallied to 93.40 against the dollar and the further rally in Japan 10 Yr Govt bonds.

Significantly reduced my long Nikkei futures position to single digits, with further tight stops at the 10300 level. The Nikkei has a tendency to open with major gap downs on retracements.

MSCI Taiwan:

Has produced mixed messages. Fractal which appeared to signify bullish rally petered out. A move below 240.00 will have me out of long position

Orange Juice:

Retracement nears an end. Expect the 90.00 level to hold, and Orange Juice to make new highs of 120.00

By Andrew Shawn – Recursive Investments in Global Financial Markets

The markets climb on a wall of worries

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