Month end. Time for Perspective.

 

 

To coin a sporting phrase the Championship is never won in January (Unless you're a tennis fan) but it can sure be lost! So its important to build a solid foundation in the first month of the year & grow in confidence from then on. Many things happen over this period. Fresh enthusiasm can lead to trigger happy investors forgetting about value & timing.  For example...I've never been more prepared for a year than this     And so bloody wrong. I guess thats why I'm who I am and why Bill Gross is Pimco!

See I was blinded by the whole Taper thing and the great Bond bubble. Watching the Treasuries rally in the first week of Jan excited me no end. I couldn't wait to get back from holiday and start putting on steepeners.

I do remember reading articles last summer by Jesse @TheBubbleBubble(Enjoying his finest hour right now) about the impact of reduction in QE on emerging market currencies. I bored my wife about it and everyone else who cared to listen(or pretend...sorry mum). Especially the people singing the praises of the great british recovery. Yet I still ignore it and started putting on the old "risk on" trades. Its a testament to my risk, money & me managment skills that with a day and a half left of the month I'm gonna actually finish up PnL. 

 

Its clear to see that the Emerging markets are this years Cyprus/Greece/Euro/USbanking Gray Swan event. Yes its grey not black. Black Swan events are the unpredictable ones far less frequent than grey and almost impossible to anticipate. Most of the recent events as bad as their impact was or is, could've been predicted and prevented but for the frail human emotions of fear & greed.

So we're all EM traders now. Bring on the Hungarian Florint! I might even start looking at my old favorite the Malaysian Ringgit!

 

Who Am I trying to kid? This year as with all years, I will fade the bad news then fade the good news. I've learnt my lesson trying to trade with the theme.

 

That peskey Bund keeps making new highs which means I need to look at my Daily continuation chart to find resistences to the momentum.

Anecdotally there is has been congestion around this 143.05 to 143.30 area. So whilst all news has been factored in for now this appears a nice place to rest - around my 0.618fib area. Above here we have 143.44 to 85. On the downside 142.90 break could see some longs reducing into month end but I'd be suprised if we see a break below 142.50. 

 

 

Bund Daily Continuation

 

 

bund 30min

 

 

€ curve

Trend is your friend. Well this late in the month I wont be selling any of these spreads till they are much higher. That is however, where I see the opportunities for the coming months. Sell the spread rallies. With one eye on EM currencies & equity indices for the change in big picture sentiment.

 

€ Teds

Refreshingly range bound during this current crisis period. I'm sure it wont be long till Europes banks strange fixings & LTRO conditions take precedent. Last year  we saw the long slow up move in Euribor over bonds as the overall trend. Quite clearly that has been turned over. Likely to find shorting rallies as best risk reward until further notice.

 

 

 

Euribor spreads

Eurodollar Spreads

 

Laters

Lee