Trade log 5/31

Shorted financials on today’s data drop in house buying. Remember our longs are all algo based. Our shorts are selected by algorithms but the quantity and details of the position is discretionary. Shorting financials by futures proxy may not be the most sophisticated vehicle. But it fits our current positions and tax needs the best. Makes a lower vol portfolio construction. In my guts I believe the market will test the courage of its players sometime between june-July. 

Position update

System back to full sail (max risk) as of Friday. But nq is so over bought short term I’m fully expecting some drawdown. So I’ve added max static hedging. So currently that means I’m long a zn contract for every nq contract. That may(should) buffer short term drawdown… but trading is humbling and I’ve had a very good run. Whenever one has enjoyed fortune one should prepare for sorrows. Regression applies to all mortals. 

Retrospective 5/27/17


Our trading style is to have market opinions, but not to trade directly upon them. We follow momentum. Price is truth. However, our hedging is discretionary. We hedge both dynamically (timing risk and taking positions) and statically (matching markets that usually move in opposition).

SPX finally broke above 2400. Took a lot of effort since all the momentum is in the NDX. As you can see below the breadth is acceptable. But we would rather see a broader market move. NYSE is our primary breadth watch. Nasdaq isn’t as good an insight into the broader market. AMEX is a waste of time.

NDX remains the place to be…

Yield curve is orderly with exception of shorter maturities clustering together.

Only a 45 basis point rise in the 2y to trigger an early recession warning.

As you can see below the market is all about technology stocks. Utilities comes in second. Which is an odd market structure. But certainly not unprecedented.

It is our current belief that Mr. Market is birthing an new technology bubble that will run multi-year. It is based upon the growing belief AI  will change the world in a new industrial revolution affecting transportation, health, and everything else. Currently, one can buy the leaders of this potential future simply by buying FANG + MSFT + NVDA and the like.

We do not believe this is the Trump bump. If it were a Trump-bump it would be infrastructure and development and regulated-resource plays that were leading. This is the next tech bubble, maybe bigger than the first one.  If you play it (and oh how we will! ) never believe the stories that the leaders sell. Pick a momentum filter, and with a heart like a stone, focus on that. The better the story gets, the bigger the name selling it, do not argue with them. Mutter to yourself, “Yes, please, take it higher! Bring in the true believers, Let them all buy!”

Trade Log

This blog is for entertainment only. I am NOT recommending you to trade futures. Hire a pro. Do not pay 2 and 20.

5/19/17 Partially closed /nq positions — booking profits — still long oriented. Breadth is thinning.

5/10/17 Bought some AAPL puts. Got to hedge. Mr. Market gets carried away with coke and strippers. Expect to lose $. Still. Don’t call it a hedge fund if it doesn’t hedge.

5/2/17 Long /zn as a static hedge against geopolitical craziness. Currently enjoying some return. But I don’t care if I lose here. I’ve got to sleep at night and America is in grip of an intemperate blowhard. Character is destiny.

3/28/17 Long /nq again. Back to max risk exposure

3/13/17 Partially closed /nq — booking profits

1/17/17 Long /nq — reentered after booking profits from early nov election rip, which I did not believe in and had to hold my nose to buy.



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