Following Thursday’s debacle in D.C. where, in issuing an ultimatum on the “repeal and replace” vote, Donald Trump has either made a ballsy move that will pay political dividends and boost his reputation as a shrewd dealmaker or crash and burn spectacularly should the “no’s” take it, we’re left wondering how much risk we should be willing to take into the weekend.
This isn’t a trivial question. We’re back to the “good” old days of summer 2015 when taking positions into Saturday and Sunday could be hazardous to your financial health depending on the headlines out of Athens and Brussels.
Well on Friday morning, former FX trader Richard Breslow is out doing his best Woody Hayes impression, noting that “three yards and a cloud of dust” may be the way to go when trading a market where confusion reigns.
I’m not here to pontificate on precisely where markets are going nor to criticize those who feel the need. Of course, I’m being somewhat disingenuous because I often indulge in the practice. And am quite sure that anyone making grand pronouncements has not been following the market’s price action. It’s a world that has required discipline and open-mindedness over relying on a soon-to-be-revealed overarching trend that will bail out bad trade location or indefinite stops.
- It’s a grinder’s world. When headwinds are raging and confusion is reigning, three yards and a cloud of dust rather than the flea flicker may indeed have a better chance of racking up points
- We just saw yet another premier hedge fund look at its high watermark hurdle and conclude that it was more than they had the trading opportunities and strength to surmount. It’s a reality faced by the entire industry and those that want to wait this current period out may well be far more risk- averse than commentators are used to. Booking profits, only selectively pressing bets and trying to remain as dispassionate as possible are probably what we should expect to see
- So as we end the week with everyone an expert on how Congressional whips do their work and no one talking about PMIs or today’s Fed speakers, it’s worth a quick level check. And to think about which positions traders might want to go home with
- Dollar bearishness seems to have reached a new level of intensity. Fair enough, I guess. But you can’t ignore that EUR/USD has simply not shown an ability to gain any traction above 1.08. We’ve seen this picture before. It’s not like Black Friday where you won’t be allowed to buy it if you didn’t queue up ahead of time
- Now USD/JPY is more interesting. It needs to get back above all those lows at 111.70 to prove it doesn’t want a look lower. But you had better not ignore that you have a one- week window until Japan’s fiscal year ends, with all its market distortions. Respect the technicals
- If there’s one market that’s broken the most hearts this year, it is Treasuries. Ranges have ruled. It isn’t failures, it’s a market condition to be traded. Use a 10- year pivot yield of 2.37% to decide what the current range is
- Lastly, as we watch the health-care vote, ask yourself if the markets are euphoric should it pass, at what price?