Monday, June 12, 2006

I am so bearish the US...so I need to be short...selling S&P:

Selling £50/point of the Sep '06 S&P500...1248.1 is the level, £50 per
big figure. Will look to double the size of this position if it starts
to fall say 15-20 points.

The FED has already gone too far, and looks like it will keep going. I
am no economist, merely a lowly trader, but even I see that the FED is
in the middle of a massive error with its rate rises. The slowdown is in
place from previous hikes, and the last year of hikes still has to work
its way into the system (e.g the Bank of England here in the UK reckon
rates take TWO years to fully work their way in...if that's the case in
the US, that's a lot of hikes!). Housing is going to get crushed, the
consumer is going down, GDP growth will slow massively, and corporate
earnings will fall away drastically from current record levels. And that
will take stocks down. I can't stand to not have the position on, so am
selling now, not waiting for a "bounce" like so many
commentators/strategists/morons advise.

Other trades I have an eye on is long Japan/short US, now that Japan
seems to be emerging from deflations, and also short 10y Treasuries
against long July '06 FED FUND Futures...if you can put this one on,
this is a no-brainer. 10y T = 4.99%. FF July'06 = 5.21% (94.79). You buy
FF, if they hike you lose 4bps, and so need the 10y to widen at least
4bps. If the FED is at 5.25, you can be sure the 10y will not be lower
than 5.03%!! And if the Fed doesn't hike, you make 21bps on the FF, and
as long as Treasuries don't rally further than 4.78% you'll be in the
money...with the FED at 5.00%, I think 10y struggle to trade over 20bps
through. Hope that made sense, as it's easy money.

Also looking at trying long DAX/short FTSE again, now the DAX is 200pts
below the FTSE. This one is volatile, but should work as the German
economy continues its expansion, and the UK continues its slowdown due
to over-reliance on slowing Government spending.

And finally, for all you traders out there, one of the errors I have
definitely made this year is in the sizing of my trades, with a few
trades having P+L swings of almost £10,000, and others only having
swings of £1,000 or less, despite the underlyings having large moves.
I'll try to be consistently a bit bigger in my trades where I have a
belief, and be more methodical about trade sizes.

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