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Futures Trade Desk- Navigating Stormy Markets

Client Note

Navigating Stormy Markets

The topsy-turvy world of global trade continues its path of one day up and one day down, in reaction to breaking news sentiment. The unique set of fundamental circumstances unfolding as a consequence of years of miss-directed fiscal policies and institutional investment faux-pas is likely to continue through to year's end.

Patience is required as the mid-term global charts go through a sideways spiral. We have been here before, many times, but this period of trade does seem to be going on forever. Whether equity bull or bear, bullion buyer or seller, or a bond investor on the long or short end of the curve, the outlook remains the same; intra-day volatility will dominate as fair value is sought in milliseconds rather than historically over a period of days and weeks.

Buy The Low, Sell The High

There are near-term trade opportunities in all markets when buying at the low of the previous session and selling at the high, and vice-versa. These trades are available as a strategy because of the lack of mid-term chart directional sentiment and momentum.

The USD/S&P 500 inverse correlation remains strong, with equity and bond markets dominating intra-day direction across all global asset classes. Gold and Oil have formed an inverse correlation, with gold buying being met with oil selling, and vice-versa. Silver trade does not yet have the same strength of upside momentum seen in gold, but that may be more to do with Exchange floor margin requirement threats more than anything else.

The changes that have happened in regard to electronic trading dominance and the increase in algorithm trade that tracks momentum, headlines, price action, and sentiment, have been constantly highlighted and are now worthy of main-stream media attention. Who would have thought that Buy-and-Hold would cover just  few days as a strategy, rather than the previous connotation that buying-and-holding could last for decades.

Traders and investors have not been seen such reactive market arenas before, which is a pure reflection of the technical advancements that has all aspects of daily life impacted by the speed in which information now travels. The relentless desire to get information quicker than yesterday, in an effort to respond sooner, has transposed itself into traded markets that are truly 24-hours and are so completely globalized now that regional 9-to-5 cash-only trading has lost its appeal.

The fact that most are happy to absorb data in streams of maximum 140 characters at a time is dumbing down the ability to accept, review, process, and react to information. Long gone are the days of thinking-time, where data was processed in an orderly fashion, and informed decisions were created. Speed of reaction is all-consuming with little regard for mid-term consequence, and only a desire to see an instant reward.  

No Bell Curve

Those looking for a flowing bell curve effect on their investment portfolio will not get it by trading and investing in regional markets only; gaps in closing/opening prices due to global momentum swings are prevalent. The long-term investor will have to introduce a near-term mix of global exposure to their portfolio.

Global exposure can be achieved via Futures trade, which remains the most accessible of all global traded markets. As a balance to equities and bonds held over the longer term, exposure to Futures trade offers easy access, lower margin requirements, and 24-hour global momentum, creating a tradable balance to the buy-and-hold mantra that has failed to deliver for over a decade.

Whether equity markets go on a bull run that has S&P 500 breaking 1275, or has a bearish reversal that tests 1095, is literally a coin-flick in the current headline-dominated trading environment. The reaction to either move however is tradable, via the Futures markets that track both bull and bear equity, commodity, and interest rate moves with a repeatable daily pattern. 

 

 

Information, analysis and methodologies provided are for informational purposes only, obtained from sources believed to be reliable, and should not be used as a replacement for research by an individual investor or licensed investment professional. In no event should the content of this correspondence be construed as an express or implied promise, guarantee, or implication that profits or losses can be made or limited in any manner whatsoever. No guarantee of any kind is implied or possible where projections of future conditions are attempted.