Long/Short Equity, Special Situations, Currencies
Contributor Since 2009
CGTS: THE NEW SCIENCE OF INVESTING
BREXIT REDUX? IS BRITAIN HEADED FOR CIVIL WAR?
Nov 03 9:42 PM•FXB, ERX•Comment!
Disclosure: I am/we are long ERX.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
WHAT? The British Court says Britain can't exit Europe? Well, not exactly. But Nigel Farrage is warning of betrayal and public anger. The argument of the court seems to be that democracies can't be trusted to be sober enough to make the politically correct choices; for anything really important, we need to trust political professionals (read THE ELITE) to make such decisions for us. In other worlds, the aristocracy needs to trump the democracies. Good news for the oligarchs.
The aftermath of today's surprising decision by a UK high court to rule against the government's Brexit stance, pushing a Parliamentary vote to ratify Article 50, may have major consequences for the political landscape of the UK according to Deutsche Bank. As DB's Oliver Harvey writes, the court's decision today reduces odds of a "hard Brexit" and weakens PM May's position, which makes a 2017 election now the German bank's most likely scenario.
Here is a recap of what happened for those who missed it, and what Deutsche Bank thinks will happen next:
UK High Court Rules against government prerogative
This morning the High Court ruled against the government in a judicial review brought to prevent the triggering of Article 50 without a parliamentary vote. The judgment, which can be found here, concluded that:
'it has been established for hundreds of years that the Crown - i.e. the Government of the day - cannot by exercise of prerogative powers override legislation enacted by Parliament,' and that 'the Court expressly accepts the principal arguments of the claimants…[that]…the Government does not have power under the Crown's prerogative to [trigger Article 50]'.
The British Pound blasted our portfolios today (nearly all SHORT the Pound -- we still are). This made us want to look at the curriencies a bit closer.
FXB jumped; but is still PROP2 SHORT.
The Japanese Yen is a hot topic button. Japanese leaders want a weaker yen. They don't really know what to do: they have done all the right things to have the Yen weaken (all the wrong things, in facct), but it keeps ascending. Is Japan pressuring the FED to raise interest rates to buoy the Dollar against the Yen? (Be careful what you wish for.)
Forgive us for repeating this US DOLLAR chart every night. Our view is that the US DOLLAR is the MOST important chart of all. If the Dollar rises, everything else gets scared. This most recent BEAR CHILL we are passing through is a FED-generated CHILL. This chill, and its backlash, may make it harder for the FED to actually raise rates.
Look at the CHILL in our DASHBOARD.
China is survivng. Gold and Silver (the new currencies) are recovering. Here comes the Yen and the Euro; there goes the Dollar. Oil has been kicked in the throat. Remember, a war with Putin, if it is not a shooting war, will be a Dollar War, which is also an OIL WAR. (This discussion is an undercurrent with what the FED is now threatening.)
Yes: look at that TRADING TEMP. Starting to get chilly. 55°. We decided to run a chart of the TRADING TEMP and UDOW. We did not make a nice chart. Excel is NOT the thoroughbred is once was. I'll get a better chart eventually, I promise.
The UDOW is blue (I think); note how the two move together and how the TRADING TEMP above 80° seems to be a SELL SIGNAL. I wish I had more data to study this over time. I will figure something out.
BAROMETER trying to bottom. All this selling (I think) is a sign of PANIC in the electorate. My gut feeling says Hillary is falling.
Let's fiinish our look at the currencies. FXE is still a short.
USDEUR BUY SIGNAL.
The Pound is rising; the dollar is mixed; the best currency today was gold and silver. GOLD/TIP shows this. So does GOLD/UUP.
Those of us who are long gold and silver stocks look pretty good at the moment.
Our SHOCK TRADE system is off to a bad satart, admittedly. We did have a bright moment. Our LONG DEC calls on DRV (Short REstate Stocks) gave a COVER SIGNAL at the end of trading today. We put in an order to sell these calls at 3.0, above the 2.75 offer. We bought these at 1.25 a week ago. This is exactly what we want from this system. We want this system to become a stead INCOME trade. It is not where we want it to be -- but this is a glipse of where it will be.
We know DRV could go higher. We want a system that consistently wins regular battles of 60%. We can live with that.
Our VIX-8 trade of TZA is off to a bad start. We bought DEC 30 puts. TZA has roared higher, to our disappointment. It is trading at 33.48 after today. In addition, the two trading triggers (IT SPEAR and LT SPEAR -- see the two bottom panes in the chart) have both gone positive, cancelling out the trade. Sort of. We still have prop1.
The chart shows VIX-8 overlaying the chart -- and now missing the recent SHORT SIGNAL. VIX-8 SUPREME, however, is still a short -- because VIX is still negative. This is suggesting that this rally (this selling surge) is NOT the real thing.
Let's look at TZA earlier in the 2014 phase.
We want to cover this position when the RED SPEAR is negative (it is already positive) AND when EMV is oversold, below zero. We think thi is still a positive trade potentially. Clearly we are putting a lot of trust in PROP1. Time will tell if it is so justified.
Here's our report:
11/3/16 | Column1 | Column2 | Column3 | Column4 | Column5 | Column6 |
SPEAR CHANGES | ||||||
SYMBOL | CLOSE | PROP1 | SPEAR | ISSUE | ||
JNUG | 13.642 | 3 | 0.774 | * Junior Gold Miners Bullish ETF 3x | ||
GVA | 46.42 | 3 | 0.742 | Granite Construction | ||
NUGT | 15.386 | 3 | 0.649 | * Gold Miners Stocks Bullish ETF 3x (NYSE:O) | ||
VRX | 19.165 | -25 | 0.462 | Valeant Pharmaceuticals | ||
CTS | 17.5 | 1 | 0.21 | CTS Corp. | ||
AG | 8.71 | -15 | 0.192 | First Majestic Silver | ||
OCN | 4.175 | -1 | 0.102 | Ocwen Financial | ||
LODE | 0.24 | -19 | 0.003 | Comstock/Goldspring Mining | ||
DAKP | 0.043 | -19 | 0.003 | Dakota Plains Holdings | ||
AXPW | 0.016 | 5 | 0.002 | AXION | ||
VNR | 0.57 | -1 | -0.054 | Vanguard Natural Resources | ||
OREX | 2.41 | -23 | -0.124 | Orexigen Pharmaceuticals | ||
DUST | 34.5 | -7 | -1.58 | * Gold Miners Bearish ETF 3x | ||
JDST | 23.611 | -7 | -1.853 | * Junior Gold Miners Bearish ETF 3x | ||
CTL | 22.98 | -5 | -2.005 | Century Link | ||
EMV CURRENCIES | ||||||
NEW POS | NEW POS | |||||
SYMBOL | CLOSE | PROP | POSITION | TODAY | YESTERDAY | ISSUE |
EURAUD=X | 1.446 | -25 | Short | Euro/Australian Dollar | ||
FXB | 121.66 | -15 | Short | Enter Short | British Pound ETF | |
FXE | 108.028 | -15 | Short | Enter Short | Euro vs Dollar ETC | |
FXY | 93.79 | 3 | Short | Enter Short | Japanese Yen ETF Daily | |
INRAUD=X | 0.019 | -25 | Short | Enter Short | Indian Rupee/Australian Dollar | |
INRRUB=X | 0.954 | -21 | Short | Indian Rupee/Russian Ruble | ||
YCS | 62.435 | -23 | Flat | Short Japanese Yen | ||
USDARS=X | 15.1 | -25 | Long | Enter Long | US Dollar/Argentine Peso | |
USDEUR=X | 0.9 | -5 | Long | Enter Long | US Dollar/Euro | |
USDGBP=X | 0.802 | -5 | Long | Enter Long | US Dollar/British Pound | |
USDINR=X | 66.683 | -5 | Long | Enter Long | US Dollar/Indian Rupee | |
USDJPY=X | 102.891 | -23 | Long | Enter Long | *** | USDollar/Japanese Yen |
*** Not confirmed by PROP. | ||||||
M2F ALT CURRENCIES | ||||||
NEW POS | NEW POS | |||||
SYMBOL | CLOSE | PROP | POSITION | TODAY | YESTERDAY | ISSUE |
EURBRL=X | 3.6 | -23 | Flat | Euro/Brazilian Real | ||
VIX-SS CURRENCY | ||||||
NEW POS | NEW POS | |||||
SYMBOL | CLOSE | PROP | POSITION | TODAY | YESTERDAY | ISSUE |
EURCAD=X | 1.486 | -5 | Flat | Euro/Canadian Dollar | ||
JPYCNY=X | 0.066 | -5 | Flat | Exit Long | Japanese Yen/Chinese Yuan | |
JPYRUB=X | 0.614 | -5 | Flat | Exit Long | Japanese Yen/Russian Ruble | |
MXN=X | 19.185 | 3 | Flat | Exit Long | USDMXN - US Dollar - Mexican Peso | |
AUDNZD=X | 1.048 | -5 | Long | Australian Dollar/New Zealand Dollar | ||
USDTHB=X | 34.94 | -7 | Long | USDollar-Thai Baht | ||
SHOCK TRADE | ||||||
NEW POS | NEW POS | |||||
SYMBOL | CLOSE | PROP | POSITION | TODAY | YESTERDAY | ISSUE |
DRN | 17.51 | -25 | Flat | Exit Short | * Real Estate Stocks Bullish ETF 3x | |
DRV | 16.27 | 7 | Flat | Exit Long | * | * Real Estate Bearish Stocks ETF 3x |
EDC | 58.03 | -7 | Flat | * Emerging Markets Bullish ETF 3x | ||
FAS | 27.74 | -5 | Flat | *Financial Stocks Bullish ETF 3x | ||
JPNL | 44.732 | -1 | Flat | * Japan Stocks Bullish ETF 3x | ||
SOXL | 43.3 | -5 | Flat | * Semiconductor Stocks Bullish ETF 3x | ||
SOXS | 16.21 | -15 | Flat | * Semiconductor Stocks Bearish ETF 3x | ||
TECL | 43.9 | -7 | Flat | * Technology Stock Buliish ETF 3 x | ||
TECS | 20.71 | -13 | Flat | * Technology Stock Bearish ETF 3 x | ||
^VIX | 22.48 | 9 | Long | CRB Volatility Index Daily | ||
* OFFER TO SEE DEC 14 calls @ 3. Bought at 1.25. | ||||||
Gain of 59% in a week | ||||||
VIX-8 3x ETF SYSTEM | ||||||
NEW POS | NEW POS | |||||
SYMBOL | CLOSE | PROP | POSITION | TODAY | YESTERDAY | ISSUE |
EDZ | 24.635 | -13 | Short | Enter Short | * Emerging Markets Bearish ETF 3x | |
ERX | 29.57 | -7 | Long | Enter Long | * Energy Stocks Bullish ETD 3x | |
JPNL | 44.732 | -1 | Flat | * Japan Stocks Bullish ETF 3x | ||
TECL | 43.9 | -7 | Flat | * Technology Stock Buliish ETF 3 x |
EDZ and ERX is suggesting that the oil selling is ending. Oil is up fractionally in Asia tonight.
We're getting closer to the bottom here.
Best
MJC, CGTS
Disclosure: I am/we are short FXB.