Passion Of The Trader: Jesus, We’re Getting “Crucified” Out Here

If you follow Richard Breslow’s daily missives you can kind of figure out what tomorrow’s post is going to look like by reading today’s.

Which means we need to look back at Wednesday to introduce Thursday’s piece, entitled “Making Money By Following Someone Else’s Heart.”

Yesterday, Breslow bemoaned a market in which you can’t make money simply by being a liquidity provider. Now, the former FX trader said, all carbon-based lifeforms operating in markets are attached to “petty narratives that have become the crutch upon which all non-algorithmic activity seems to lean.” On Thursday, Breslow is out extending that analysis, swearing that “investing has been infused with an unhealthy dose of manic emotion, at the expense of dispassionate analysis.”

Ultimately that means two things for Breslow: i) you should have your stops in place, and ii) expressing a long-term view is likely to get you “crucified.”

Via Bloomberg

We’ve all been going through a period of re-evaluation. Not personally focused, to be sure. No evidence of self-doubt from any quarter. And never have people been more convinced that they can size up the next person within a matter of seconds. But there’s been plenty, and rapid, rethinks on what is, and should be, driving markets.

  • Is the economy running hot or catching a cold? Reflation: yes or no. Just what is the state of global trade? Fiscal policy in or out? Does it matter? And on and on. For big ticket items galore, that are meant to have long-term implications. And given that world views are changing back and forth in quick succession, investing has been infused with an unhealthy dose of manic emotion, at the expense of dispassionate analysis
  • And then throw in the fact that even if gifted with perfect knowledge of how supposedly binary events will be decided, no one has been getting the actual market implications right
  • All of which means traders have been getting crucified when trying to express long-term views. And undisciplined practitioners carried out on their shields. It’s unpleasant to be serially stopped-out, but this is no environment to have a view without explicit parameters
  • So at the risk of getting chopped up further, with all of the revolving zeitgeists and political risks, it pays to try to figure out asset price levels where you think emotions will swing rather than where traditional methods would suggest you are right or wrong. And for better or for worse, in today’s milieu, passion can be quick to come by
  • For all of the flying, crashing, rinse repeating, the S&P 500 has essentially done nothing for a couple of months. But I’d be willing to bet that a close below 2320 or above 2380 will get lots of people passionately excited. Depending on your view, they are both close enough for anyone to afford
  • The dollar index has shown a propensity, when it ran up and as its come off, of higher highs, higher lows, and the reverse. A close below 98.85 or above 101.30 will probably do the trick here. I could have tightened these up a bit, but it’s been a really messy trade and still cheap
  • Treasury levels have been so rehashed, that you should already know them. In any case, take a look at your charts and decide where you think emotions will swing and short- term momentum kick in for a trade. It’s a twisted world, so your horizons should be close
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