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Elgrey
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Expat finance professional living and working in Hong Kong.
  • My December-14 Strategy

    Winter is here with us. Hope you guys enjoy great weather full of skiing, ice-skating and building snowmen together with your kids. Something I haven't done for many years cause it never snows in Hong Kong where I live. OK, let's get down to business and plan our investments for December.

    I want to make a note that I do not suggest any large bets to be transferred into past second week of January as funds will be rebalancing their portfolios during January and first week will be still sleepy as many of them will be on vacations but second and third weeks could be rollercoasters. So if you trade leveraged instruments like futures, options or leveraged ETF you may have second thoughts about staying on the side lines during first weeks. I hope I will be smart enough to do so. Can't win all the money in the World anyway. So, let's roll...

    Grains group (W, C, S, SM, BO) - right now this market is a question mark. I would suggest to stay away or slightly bearish. The crops are good, major market trend is bearish but beware of Christmas rallies. They are unexplainable. I do not expect any strong ones but let us be careful. I have a short position in soyoil.

    Oil group (CL, HO, RB) - political tensions remain uncleared so I see no reason why markets should recover. However, markets have been terrible oversold during last days after OPEC failed to act. Technically speaking daily Bollinger Bands were breached at lower end so a pullback is a possibility. I do not have any position yet but I am thinking of a modest bearish position. And I will not take it into 2015.

    Natgas - I have a short position and I think I will change it into a strangle. I do not think that deviations from USD4.00 be long-lived in December.

    KC - I keep on my bearish stance in coffee - rains continue to pour in Brasil and weather is very favorable. Keep on selling rallies.

    CC - cocoa crop is good this year and there are talks in press that shortage fears have gone to far. This translates into understanding that funds are bearish on cocoa and unloading cocoa. I see no reason to stay away from this opportunity.

    CT - cotton crop is good this year and there are no big news from China demanding huge amounts of cotton. Stay short.

    HE - hogs usually decline after Thanksgiving and COT report tells us that commercial users of hogs are bearish. These two add-up into a bearish solution for hogs issue.

    PA - I want to remind you about Christmas rally in palladium market. Watch technical indicators carefully.

    AC/DC - yeah you heard me right. New album of this superband will be released on 2nd of December. And what is also important is that this album will possibly be the last one considering the age of these guys. So if they perform somewhere around your area - do not miss the chance. Maybe this will be the last.

    That's it for December. Stay sharp.

    Dec 01 1:20 AM | Link | Comment!
  • My October-14 And November-14 Strategy Review

    As last business day of November just ended I will quickly run through the performance of my positions.

    KC - coffee calmed down after October worries as predicted.

    CC - looks like market finally changed its direction and bears are in control.

    SB - sugar was losing positions until recent Unica report showed reduction in sugar production. I quit my bearish position a couple of days before the report.

    NG - that was a nightmare in November for bears like me. Weather turn was very unexpected. But as it was to stay for a brief period only I chose to endure the pain. Now NG is just a notch higher than it was a month ago.

    C - here I was wrong and after reviewing fundamentals I decided to take pain. Can't win all the money in the World anyway.

    HE - hogs market shows bear trend but bulls are reluctant to give up. Waiting for them to surrender.

    S, MS, BO - S and SM bottomed on October 1 and I decided not to invest in these after revisiting the fundamentals. Instead I was selling rallies in BO. BO however was somewhere neutral which is absolutely fine for option seller like myself.

    CL, HO, RB - no comments. You know it crashed. Politics is a nasty game.

    Looking back this period was sometimes painful but the majority of calls I made were correct. End of QE, weaker growth, political tensions continue to discourage investors to invest thus giving bears more power.

    Has super-cycle finished? I do not know. Many say "Yes" but contrarian Jim Rogers says "No". Although I regard him as a teacher in commodities and investments in general I do not agree with him this time - fundamental issues that cause financial crisis have not been resolved and instead new threats of new cold war and new stage of war in Middle East come into play. How would World economy develop in such circumstances and boost demand for commodities? I do not know. And his words about investing in Russia turn me away from him too - why would one choose to invest in a country where investors do not feel safe and economy of which is being garroted by sanctions? They yet have to hit the bottom.

    Nov 28 9:19 PM | Link | Comment!
  • My October-14 And November-14 Strategy

    I am sorry for a slight delay with my next post but all I meant to say with my silence was that my portfolio remained intact. OK, below are my thoughts as to what is left of October and November.

    KC - as I mentioned many times before I was short coffee and this position took a serious hit after rains got delayed by 2-3 weeks in Brazil main coffee areas. However delayed does not mean cancelled. Today when coffee prices hover between 2.10 - 2.20 per pound I see it as a good opportunity to place short bets as rains will begin in a few days. Anyway, my short December calls have strike prices of 2.10 and 2.25 so even a slight delay will make me a winner. But in general I was indeed wrong expecting price declines into 1.60 area. I guess this price levels are not achievable in short to medium terms unless weather improves drastically. I plan to keep this short position open until options expiration in mid of November and will reevaluate the market then.

    CC - another rollercoaster market. Supply and demand factors are being pressed by fear and panic of Ebola. I will remain bearish until expiration of my December calls in 3 weeks and reevaluate the situation then. So far I see more downward bias unless Ebola spreads into Ivory Coast and Ghana which has not happened yet and I hope this won't happen.

    SB - sugar market is a question mark at the moment. I have had bearish bets on it since middle of August and I closed almost all of them. Now I am cautiously bearish - harvesting in Brazil is approaching the end and next step will be to see the development of next year's crop. We are approaching crossroads.

    NG - I had a options strangle on natgas since mid-August and now I am bearish it again. Injections are quite healthy. Weather is supportive. We may see 3.60 in December futures within coming weeks.

    C - insight of record crop corn is definitely in sell-mode. Market tried to reboot last days but I think it is a bull trap and we are yet to reach new lows as harvesting will continue in November. Export sales are healthy but far from striking levels and this makes me think that buyers expect better bargains.

    HE - lean hogs tried to restart bull rally but that did not happen. I've been bearish hogs and I think I will add to this position.

    S, SM, BO - I am still bearish on soy but I do not want to engage into selling of S directly. I'd rather be shorting SM and BO as they have not taken so much damage as S did.

    CL, HO, RB - I was away from this trade for quite a while after I closed HO bullish bet. At that time I expected seasonal appreciation which did not happen because of political reasons. Now I believe that political pressure on oil will persist as States and Saudis want to punish Islamic State and Russia for their clumsy attempts to change World picture. I thought of 1980s scenario to happen again when oil dropped from 40 to 7 dollars and I think we are heading that direction. WTI lost 20+ dollars and I do not think this is a bottom - States and Saudis came very well prepared and IS and Russia are not. This could be an easy win for them if they drop the prices to low 70s or even under 70s. Among all the oil products to short I favor RB the most as demand for gasoline is not strong during winter.

    This year I've given mostly sell recommendations and I am pleased to see that I've been right. Humphrey B. Neill said in his Letters of Contrary Opinion "Don't confuse brains with a bull market". I am glad to see I passed this first exam. Dow Jones Commodity Index lost 9% year to date, Goldman Sachs Commodity Index lost 13%. I do not want to disclose my results before the year end but I gained year to date.

    Oct 16 11:01 PM | Link | Comment!
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