Jonathan A Parker's  Instablog

Jonathan A Parker
Send Message
  • Under The HEDGE - March 26, 2012 1 comment
    Apr 3, 2012 1:55 PM | about stocks: GLD, SLV, VXX

    The Dow, S&P and NASDAQ finished the week with the worse loss of 2012, which leads us to a strong point in Market Psychology. What do we do from here and what should I do with the profits we have already made for 2012? In this, the very first weekly update letter, we will aim to give you some strategies to prepare for the upcoming trading days and some ideas on profiting from this rise in volatility. The markets are ALWAYS right, and it is true that they have a mind of their own. However, using certain strategies and history as a guide, we believe that we can profit in any environment. The structure of this weekly update will change, the instruments we examine will change, but our dedication to the pursuit of the perfect strategy will never stop.

    Commodity Chatter

    There is a lot moving in the pits of the Merck, but there is an overwhelming theme coming out: Oil prices want to move higher. The Brent chart is setting up for a full bull pattern and The WTI chart is looking neutral. We will call this the tail of two trades, but we think that there is a winner here. We are looking at shorting WTI in the short term, and hedging with a long term LONG trade in Brent. Brent, with a little help from Iran and its friends, may push up to the 140 range in the next couple of weeks. This trade is a weighted strategy by 2:1, so for every one WTI contract you place, make sure that you have two long Brent contracts on to hedge. Also as a side note, Corn trades with oil, so I would be buying some July contracts in Corn and looking to exit around 780 for the yellow lighting. There is always talk about Gold and Silver, and I will be honest, I like them both long. If you are a trader that has limited funds or time horizons, I would purchase one Silver contract for December 2012. But for the more beefy investors and traders, I would back the truck up all over the GLD and SLV. These are the buys I recommend here at this point. Our call on Gold is simple, 2200 and oz. and Silver will touch 50 this year, so go rent a truck, and get ready to profit from the precious metals if you want to make some serious profit. In next week's open letter, we will address owning commodities in different currencies to maximize out your profit and mitigate your risk.

    Fed Fun in Fixed Finance

    It was a strange week last week, with Bernanke and Geithner both testifying before congress, but what did they really say? The Bernanke has single handedly killed the gold rally for the minute; however, the fed cannot control the true inflation so it is a buying opportunity for the precious metals. What the Bernanke said that is more important is that they are taking notice of the rise in treasuries. The Fed cannot loan money at almost zero, but allow the 10 year to hit 3%. This would be a disaster for Ben, but would be nice and juicy for the banks that thrive on a steep yield curve. I am NOT a fan of the FED policy, but I believe there is a way to make money on this failed approach, which is to sell the 2 year notes (please be advised, this is an in your face, anti-American and fed trade) and buy the 10 year notes right here at 2.25%. This can give you some real upside in the short term and especially next week with the possibility of Spain begging for some Greek like bailout. Next week we will dive into some very interesting European trades that could make your portfolio come alive with massive profits.

    Currency Corner

    The past 18 months have been some of the best and most exciting EURUSD trading we have ever seen, but brace yourself, this ride isn't over yet. Enter what we are calling, "The Spanish Twist" to the party. Next week Spain is set to pass, or try to pass a budget and the likelihood of that passing is slim. Also, we believe on Friday that Spain will be forced to request a 'Greek Styled' bailout which should set the Euro sellers back out to hunt longs. Here is the trade as we see it, SHORT EUR against everything except the CHF. We are short Euro, with a stop at 1.3324 and are targeting 1.3085. We are Long the EURCHF, as the floor is in at 1.20 and its current level is 1.2050. China kind of kicked me over the past couple of weeks and I am seeking a rebound in short term data to cause the AUDUSD to raise back to the 1.06 level. We have a stop at 1.0310 and are looking for a rise of 130 pips from its current level. China will be around 7.5% GDP growth and this is far from a hard landing. Also as OIL rises the AUD benefits, which is synchronized with our long Brent position.

    Equities Evolution

    We are bearish on the short term equities markets and we are ready to raise cash from some of our outperformers, such as KORS, SIRI, LIZ and PNC. I believe that in this period of the market, the fourth year of a recovery and this time horizon before earnings, that every portfolio should rebalance and have no more than a 50% equity stake. I like upwards of 75% cash, because there are a lot of headwinds for this market. If you have to trade something for booking value, I would buy the VXX on close every day and hold till 9:45am and sell it hard into strength, but other than that, I am not a fan of equities here at the SP500 around 1390's. Also it is not a bad idea to short SPY at 140 if you really want to play something. Again we are BEARISH on the market currently, so look for dividend stocks, defensive stocks (healthcare and utilities) or short parts of the markets using ETF or ETN's.

    Commodities

    WTI Crude

    106.87

    SELL WTI and long Brent

    Brent Oil

    125.13

    Sell WTI and LONG Brent

    Nat. Gas

    2.275

    Nat Gas is a BUY at 2.00 to 2.10

    Copper

    380.85

    No Position

    Gold

    1662.80

    We are long term LONG in GLD to 2200

    Silver

    32.272

    We are long term LONG in SLV to 42

    Wheat

    654.25

    No position

    Corn

    646.50

    LONG Corn to 780 as long as energy moves higher

    Currencies

    EUR/USD

    1.3270

    SHORT EURO to 1.3165 and STOP at 1.34

    AUD/USD

    1.0463

    LONG AUD to 1.06 and STOP at 1.0365

    USD/JPY

    82.35

    LONG JPY and SHORT USD (Also look for JPY in Commodity space)

    EUR/CHF

    1.2050

    Floor is 1.20, So long EUR versus Swiss

    USD/CAD

    1.0022

    No Position

    USD/CHF

    .9081

    No Position

    Fixed Income

    3 Month

    .07%

    No Position

    2 Year

    .35%

    SELL 30's and 10's and buy 2's

    10 Year

    2.23%

    SELL 30's and 10's and buy 2's

    30 Year

    3.31%

    SELL 30's and 10's and buy 2's

    Germany

    1.86%

    No Position

    Spain

    5.33%

    No Position

    Italy

    5.02%

    BUY Italian Bonds and sell French Bonds

    France

    2.93%

    We are SELLERS of French Debt w/ BUYERS of ITALIAN Debt

    Greece

    19.02%

    Our positions are SELLERS of Greek Debt

    We wish you a great trading week and we always value any thoughts of future updates. Please remember to only trade what you can afford to lose, and always think different.

    Stocks: GLD, SLV, VXX
Back To Jonathan A Parker's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (1)
Track new comments
  • Non-Performing Loan
    , contributor
    Comments (464) | Send Message
     
    Should I ride VXX right into the ground?

     

    Stocks cannot just go up,can they?
    26 Mar 2012, 06:48 PM Reply Like
Full index of posts »
Latest Followers

StockTalks

  • Looking at AA this week and knowing we will earn money for our partners. Check out our latest Instablog about how we hedged this week.
    Oct 9, 2011
  • Scooped CNBC by a week- HPQ is a STRONG BUY! http://bit.ly/obnYsn/. Jonathan Parker, MBAIF.OB Fund Manager Atlanta Capital Management
    Sep 16, 2011
More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.