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Elgrey
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Expat finance professional living and working in Hong Kong.
  • My January, February-15 Strategy Review

    OK, welcome back everyone. I must apologize for skipping February but as I mentioned earlier I was trying to keep myself away from trading during February which is not my favorite month since funds re-allocate their portfolios. And who knows what nests in their smart (or not) heads. Anyway I could not fully resists my pashion to trading and made some bets. Some went good, others did not. OK, here we go:

    RBOB - I was right to call a bearish phase in January but February was full of surprises. I should have paid more attention to divergence between March and April contracts prices and inevitable come-back. I did not make any money in the end. A zero game. Well... Next time.

    Palladium - seasonal tendency did not go smooth this year. Possibly reasons were weakening dollar, and already inflated price. Any way can't win all the money in the World.

    Lean Hogs - I was short and I was greatly rewarded. And I continue shorting the market. However I moved from April to June as price divergence is increadibly strong and June is much higher than April.

    Now about positions I did not announce:

    Cocoa - soon after bearish grind reports went live I opened short position which went fine until Harmattan brought a bull rally. Prices went up for 15 days in a line. It was an exceptional rally without respectively justified fundamentals. No, Harmattan was real and its effect on crops was without saying too but the effect of this hot dry wind was not that devastating. Generally, main crp is very good, soil is moist, current weather conditions are in favor of good development of mid-crop. I expect market to pacify within near time.

    Cotton - CT bottomed at 58 and made a nice comeback to 65. At this time (about a week ago) I reviewed COT report and noted that commercial users became rather bearish (although not absolutely) and funds made a strong comeback. Technically speaking the rally went too fast and too soon. From fundamental perspective India announced sale of its reserves and China could not implement reform to prevent own cotton producers from oversupplying the market. Also, US crop figures came and they were very healthy but market failed to acknowledge that. For now markets stay focused on several weeks of strong export sales (which were followed by two weeks of rather bleak numbers but it has not been considered yet) and there is uncertainty on planting area. Once things be clearer I expect reduction in speculative interest.

    Natural Gas - I was shorting NG since June and a couple of days ago I reversed my stance. (a) COT picture is rather bullish and promising, (b) seasonally this time is right to open longs, (c) technically I believe that 5th wave down is now complete and we are in correction phase higher. Elliot theory for NG often brings good results.

    Feb 27 10:03 PM | Link | Comment!
  • My January-15 Strategy

    Happy New Year everyone. I had no plans to initiate big trades when funds are about to rebalance their portfolios but a few items are on my list:

    RBOB - I continue to believe that petroleum group is in downturn and will stay there for some time. Among all the petroleum products gasoline options offer best premiums to option sellers at the moment.

    Palladium - I expect bulls rally to continue. If things go the way I want them to and if they do follow this path I will increase the position.

    Lean hogs - latest Hogs and Pigs report shows increase to hogs inventory as well as numbers of hogs slaughtered compare to last year figures so market is well supplied and prices should continue its down trend.

    That's it for now. I am interested in my favorite plays in coffee and cocoa but I prefer to wait and watch weather and processing reports. Bearing in mind coffee explosion last year I urge everyone to be careful. Last year rush began during last days of January. Bear in mind that last year demand outpaced supply and deficit was covered by reserves. Should this happen this year too the prices would explode a big deal. Grains group is not my favorite at the moment because of lack of news - US is done and US will be off the table for some time. Come February-March and we will know more about Brasil and Argentina crop conditions.

    Jan 05 4:37 AM | Link | Comment!
  • My December-14 Strategy Review

    Decemeber is over. Review is here:

    Grains group (W, C, S, SM, BO) - behaviour was contradictional - W peaked in mid Dec, C was on the rise, S, SM, BO stuck in ranges with some sort of a rally around Xmas. Can't tell if it was a one night stand or something yet to become. BO options I wrote expired worthless and I retained premium. As I said before - market was non-directional, a question mark.

    Oil group (CL, HO, RB) - oil lost even greater deal than I expected, more than 20% in December. I did not expect such a magnitude and I benefited from it more than I expected. Such move made me change my mind - my short calls are very deep out of the money so I do not want to buy them back and will hold them into 2015 until expiration.

    Natgas - here I was wrong and I paid my price. Natgas in winter is a hard business.

    Coffee - minus 10% in December as expected and good profits.

    Cocoa - here I was kinda wrong. Cocoa was moderately up and crushed just before the New Year. But long-term I am still bearish. My options will expire on 2nd of January and I hope to retain all the premium with me.

    Hogs - minus 10% again and counting. Pork is in excess these days. Just as I wrote earlier.

    Cotton - I did not initiate the trade as I was hesitating all the way. I was correct - market moved higher and a month ago I said it would go down.

    PA - I opened longs on 30th. It is too early to judge but remember that for many years palladium has offered a good bullish opportunity around Xmas until 2nd half of January - 1st half of February.

    A couple of posts below I wrote that this year was a year of a grim bear for commodities. So this is final result:

    Goldman Sachs Commodity Index lost 33% in 2014,
    Dow Jones Commodity Index lost 17% in 2014,
    My proprietary fund gained 119% in 2014.

    This year my top 5 earners are:
    1. Coffee
    2. Cocoa
    3. Soy group
    4. Natgas
    5. Hogs

    Although most of my calls were bearish I do not think we are in a full-scale bear phase of the market. I just do not know. Making any call, be it bullish or bearish, should not be based on overall market phase but on individual market fundamentals:

    - Why would one expect higher grains and cotton prices if crops were good in States and South America? And speaking of cotton China still keeps huge reserves.
    - Oil markets are in a firm grip of overproduction and politicians. It will take Putin to change his attitude (which won't happen overnight) and Islamic State to cease to exist before trend changes. For now market seem to switch from economical factors to politics.
    - US weather was mild all the way and heating demand was weak thus reducing consumption and prices of natgas.
    - Cocoa was overheated since last year with all this talk of super-demand. And numbers that supported it were only moderately bullish, thus pullback was only a matter of time.
    - Coffee markets shoot up incredibly in Feb-Mar but fears of drought and drought damage were overly exaggerated (as always happens with markets) and, again, pullback was only a matter of waiting.
    - Sugar production was slightly better for the whole year except for last weeks, so prices should go down even more than they did last year, right? Yes, that's right and yes, this what happened.
    - Hogs were overpriced after 2013-14 PEDv outbreak, so again - a pullback was only a matter of waiting.

    As you can see fundamentals were were different in each particular case and should they develop in some other ways the markets would have behaved differently too. Therefore I do not believe we are in fully-scaled bearish phase. But, let us look from a different angle - if all components of the market will be in a down turn, investors might lose their interest to commodity sector as such, and then we will be in bearish phase! Or we maybe there already, who knows?

    Let us turn this page, this chapter is finished, new ones lie ahead.

    Happy New Year!

    Jan 02 4:25 AM | Link | Comment!
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