DJIA failed to break through the January low last Friday and I took profit off my long position in the 10-Year Note by selling into the strength on Monday. I figured it was the right decision to make and I subsequently entered into a long position with the Australian Dollar. The Fed cut the Fed Funds rate 75 bps lower on Tuesday, stocks had a rally, just as what they did in the last 5 to 6 interest rate cuts, bonds went down while their yields went up. The Australian Dollar also had a bounce, to my advantage. Therefore, I have again managed to be 1-step ahead of the Fed, probably the biggest single player in the market.
As with Gold, which I hold, it was volatile. Gold went down from above 1,000 to an intraday low of 97X before making a moderate bounce towards the end of the trading day. For those who were chasing Gold above 1,000, which I always advice against, you are now either trapped or have already been washed out by the volatility. The 1,000 mark is a psychologically important resistance. It's the first time in mankind history that it has ever been hit. If the 1,000 mark can be broken and turned into a support, the upcoming progression in price of the yellow metal will become self-reinforcing and carried out with an even bigger forward momentum. However, there's no evidence that the 1,000 mark has indeed been breached -- we hit it, but we are now bouncing down from it. Either we continue to retest that resistance and subsequently breaching through or we could be reaching a seasonal peak which will be followed by a meaningful correction. I will consider hedging my risk against the latter by entering into a short position with the June contract, which is 2 months ahead of the continuous.
Within the space of Energy, I am anticipating something that most would consider unusual or even outrageous to happen in 2008 -- that Crude Oil and Natural Gas could defy their seasonal weakness during the shoulder months and making headline news. When this happens, the world will come to the realisation that we are indeed running out of cheap oil. Remember the boy who cried wolf? He cried about it before for a few times, and I believe we ought to take note about it this time. However, I am not betting my money on it yet.
2 comments:
hi boon,
once again you are right. It pains me to say that i was massacered by the reversal in gold.
this show how naive i am and how much more i need to learn before trading seriously...
Extreme optimism and pessimism are where markets put in a peak and bottom, respectively. You have to *constantly* ask youself: can the markets really go anymore higher/lower from here? Is such optimism/pessimism really projectable?
The markets are always right. You have to position yourself *before* they will prove you right, instead of following the mood of the general public, which is resulted *after* a market action.
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