Market Report And Chat Posts (Sept. 7, 2020): Initial Position For B&H Long DXY; Getting Out Of Bitcoin ASAP; Biotech, HY Due For Rebound

Summary

• PAM positions in long US Dollar (DXY futures) longer-term. We expect the Dollar to be firm until late Q1 2021. Long DXY is first B&H trade for the ALGO PORTFOLIO.
• The Bitcoin universe is due to collapse very soon. and will likely frontrun a similar sharp fall in the equity markets. We are selling our Bitcoin holdings ASAP.
• Bitcoin is very vulnerable to liquidity flows. It's even more sensitive to changes in liquidity from surfeit to drought. Hence the Bitcoin universe is a good leading indicator for equities.
• It looks like the Biotech and High Yield Universes are due for a recovery soon, even as the main equity markets remain vulnerable. Biotech and HY are tracking the liquidity expansion and contraction being provided by the TCB. In other words, these universes are tracking interest rate developments much more closer than equity movements.
• What it did show was that the commercial banks really anticipated the severe decline in GDP during the first half of 2020 -- one year ahead of time! The only thing that blemished that excellent projection was that the banks were not pessimistic enough.But as from Q3 2020, they are apparently very confident that growth will return and have designed their hedges accordingly -- all of this ahead by 12 months. What an excellent forecasting prowess.

(Here is the current, active spreadsheet positioning and P&L for the PAM flagship Swing Fund). It is delayed by one update cycle.

(Here is the year-to-date performance of the Swing Fund, as of August 31, 2020).

---------------------------------------------------------

During the first EIGHT months of 2020, PAM delivered phenomenal real-dollar trading performance, the best at Seeking Alpha:

PAM's flagship Swing Portfolio, year-to-date (August 31) delivered $66,129,967.82 profit on $2,172,813 capital. Year-to-date performance: 2,943.51%, on 707-80 win-loss trades. Year to date 2020 spreadsheet here.

Two other PAM funds: Algo Portfolio and Seasonal Portfolio (private) year-to-date (August 31) delivered even better performances.

More details on the SWING PORTFOLIO August 2020 performance here.

SWING PORTFOLIO's July 2020 performance here.

----------------------------------------------------------------

 

robert.p.balanModeratorLeaderOwnerSep 7, 2020 12:45 AM

GOOD MORNING ASIA

SEPTEMBER 7, 2020

Equity futures never got to here we hoped to sell.

However, we could be reading into something that is a product of very thin market conditions,

We will look again after a few hours.

Pre-Europe open, all I can tell is that the price activity so far has not been constructive -- the set up is for further decline.

And NQ remains weakest of the indices. We will put up at sell trade slightly above the current market.

_all PAM SELLS 144 CONTRACTS NQZ0 AT 11,525, GTC -- FOR ALL THREE FUNDS_

IceveinSep 7, 2020 7:09 AM

Are we expecting NQ to retrace this much? Only at 11414 at the moment.

robert.p.balanModeratorLeaderOwnerSep 7, 2020 7:10 AM

That order is in the Z contract ice. We have shifted to Z basis.

PAM BUYS BACK ALL 608 SHORT GCZ0 CONTRACTS AT 1921. LIMIT OR BETTER, GTC

*Modify this order to:*

_all PAM *BUYS BACK ALL 608 SHORT GCZ0 CONTRACTS AT 1911 (FROM 1921).* LIMIT OR BETTER, GTC_

IceveinSep 7, 2020 7:03 AM

These are the same?

robert.p.balanModeratorLeaderOwnerSep 7, 2020 7:04 AM

Ice -- typo -- 1911 back to the old level

all PAM SELLS 144 CONTRACTS NQZ0 AT 11,525, GTC -- FOR ALL THREE FUNDS

robert.p.balanModeratorLeaderOwnerSep 7, 2020 7:14 AM

DXY starting to perk up. We add to DXY long positioning.

_all PAM BUYS 144 CONTRACT DXZ0 AT 92.80 LIMIT OR BETTER, OR AT BREACH OF 93.00, OCO, GCT -- FOR ALL THREE FUNDS._

PAM SELLS 144 CONTRACTS NQZ0 AT 11,525, GTC -- FOR ALL THREE FUNDS

*Modify this to:*

all PAM *SELLS 144 CONTRACTS NQZ0 AT 11,525, OR AT DOWNWARD BREACH OF 11,320, OCO,* GTC -- FOR ALL THREE FUNDS

OK, lets have another look when Europe opens in a couple of hours.

vons52Sep 7, 2020 7:42 AM

When u get a chance, plz let us know if adding NGZ0 can be a good idea. It was closed at 3.265 today and your order Friday was “Sell NGZ0 at 3.36 limit or better GTC.” it’s 2.9% below your sell target....thank you!

robert.p.balanModeratorLeaderOwnerSep 7, 2020 8:40 AM

von52 -- it is mighty slim pickings but could be better prospects if you get a bid executed at, say, 3.2350 area.

vons52Sep 7, 2020 10:43 AM

Thank you!!!

GOOD MORNING EUROPE / GOOD EVENING WEST COAST

robert.p.balanModeratorLeaderOwnerSep 7, 2020 9:42 AM

I am just wondering what games the MOTUs are playing. If I remove their frontrun from the SPX price, here is how SPX will relate to the seasonality of the aggregate US Financial System Liquidity

stephane.cSep 7, 2020 9:47 AM

Hi Robert, this is an interesting fractal that seems in line with the above

professor.hindsightSep 8, 2020 2:10 AM

Isn’t this showing the move down will be much stronger than expected? I know many traders were expecting a 5% drop before a pull back.

TimK123Sep 8, 2020 2:17 AM

Hard to tell from graph timescale, but I think that is showing a large move down in 2-3 weeks, some time in late Sept - early October, which means there's potential for a little pop in the meantime - look at where the yellow and pink lines jump up very soon.

Of course it's only one piece of data but doesn't disagree wildly with the vibes I'm getting from Robert and PAM re. the seasonal trends and expected moves in the next couple of weeks - e.g RB's posts earlier on seasonal trends and liquidity. I think Stephane's reasoning behind posting that was on the premise that the democrats win though, so there is a whole other set of assumptions behind that train of thought in your graph imho.

TimK123Sep 8, 2020 2:22 AM

TimK123Sep 8, 2020 2:22 AM

This one of SPX for example, showing SPX vs. the 5 year trend, lines up perfectly for recent movements (frontrun removed). E.g after the bottom is found very soon, another 3-4 weeks of rally might come. Then the election might mess things up a bit imho:

stephane.cSep 7, 2020 9:48 AM

1987-88 seems to be an excellent precedent

robert.p.balanModeratorLeaderOwnerSep 7, 2020 9:48 AM

That looks very good stephane.c -- thanks!

stephane.cSep 7, 2020 9:49 AM

Your welcome

robert.p.balanModeratorLeaderOwnerSep 7, 2020 10:14 AM

If I remove their frontrun from the 10Yr Yield, here is how how the Yield will relate to the seasonality of the aggregate US Financial System Liquidity.

SPX is set back 6 days. removing the front run of the MOTUs

robert.p.balanModeratorLeaderOwnerSep 7, 2020 10:26 AM

FWIW -- BTC Futures, Grayscale, Ethereum Classic vs PAM Liquidity, Ethereum Models, SPX

The Bitcoin universe is due to collapse very soon. and will likely frontrun a similar sharp fall in the equity markets.

robert.p.balanModeratorLeaderOwnerSep 7, 2020 10:28 AM

I am selling my (not-so-much) Bitcoin holdings ASAP.

lbin3815Sep 7, 2020 10:47 AM

Robert, any idea of how far down BTC can go? Thank you!

robert.p.balanSep 7, 2020 10:52 AM

Not much evidence yet (aside from the liquidity models), but CME Bitcoin could go back to 6 from 10 plus today.

gdflondonSep 7, 2020 11:57 AM

Robert, thanks. What is your thinking behind this?

robert.p.balanSep 7, 2020 11:57 AM

Bitcoin is very vulnerable to liquidity flows, and is even more sensitive to changes in liquidity from surfeit to drought -- hence the Bitcoin universe is a good leading indicator of risk asset price changes. See chart below.

gdflondonSep 7, 2020 11:58 AM

Thanks - sorry, hadn't seen that graph above your comment.

RM13Sep 7, 2020 3:36 PM

GBTC has no options, can’t be shorted in my accounts, too bad

centexlifeSep 7, 2020 5:17 PM

You can buy fractional amounts of BTC in, gasp, Robinhood but no shorting

robert.p.balanModeratorLeaderOwnerSep 7, 2020 10:41 AM

Seasonality of Treasury Cash Balance vs Seasonality of Biotech and High Yield

It looks like the Biotech and High Yield Universes are due for a recovery soon, even as the main equity markets remain vulnerable. Biotech and HY are tracking the liquidity expansion and contraction being provided by the TCB. In other words, these universes are tracking interest rate developments much more closer than equity movements.

TimK123Sep 7, 2020 11:03 AM

Thanks Robert. Is it right to assume the coming TCB seasonal rise could lift other equities apart from biotechs, such as ES, NQ etc., and does the flat PAM aggregate liquidity trace for the next month or two shown in your BTC chart give less potential momentum to any moves?

TimK123Sep 7, 2020 11:08 AM

P.S. of course election jitters might mix things up a bit I suppose too.

robert.p.balanSep 7, 2020 11:26 AM

Yes Tim, but the second half of October is less friendly to risk assets.

TimK123Sep 7, 2020 11:27 AM

Thank you Robert!

robert.p.balanModeratorLeaderOwnerSep 7, 2020 12:58 PM

PAM BUYS 144 CONTRACT DXZ0 AT 92.80 LIMIT OR BETTER, OR AT BREACH OF 93.00, OCO, GCT

We were unlucky with the low bid, we got the breakout bid.

*This order was executed.*

*DXZ0 -- DONE AT 93.035 BOUGHT 144 CONTRACTS DXZ0 FOR ALL THREE FUNDS. *

This DXZ0 entry for the ALGO fund will become a part of the long term trade portfolio.

RM13Sep 7, 2020 10:08 PM

Something going wrong? Look at the accelerating beta and all the fat tails we are seeing around us, obvious since Feb 2018.

Let's Talk About Skew, Baby...... | Logica

wisesunSep 7, 2020 10:11 PM

ETF is also another culprit

Market itself become a self fulfilling mechanism. if everyone believe in fibonacci, then fibonacci it is.

Scott007Sep 7, 2020 10:28 PM

Selling retail order flow is not new. Schwab did it in the 1990s as did Merrill.

robert.p.balanModeratorLeaderOwnerSep 7, 2020 10:48 PM

Question for you old-timers: Do you remember this chart being shown before the GDP waterfall occurred?

Olga -- you were distraught about this chart when I showed it. That was a year ago this month, I believe, September 2019.

robert.p.balanModeratorLeaderOwnerSep 7, 2020 10:52 PM

Came across it searching for a chart I need for an SA article.

RM13Sep 7, 2020 11:33 PM

GDP really did go down in line with this graph. Increasing value of Eurodollar now?

robert.p.balanModeratorLeaderOwnerSep 7, 2020 10:55 PM

What it did show was that the commercial banks really anticipated the severe decline in GDP during the first half of 2020 -- one year ahead of time!

The only thing that blemished that excellent projection was that the banks were not pessimistic enough.

But as from Q3 2020, they are apparently very confident that growth will return and have designed their hedges accordingly -- all of this ahead by 12 months. What an excellent forecasting prowess.

Good night everyone. I will see you in the Asian morning tomorrow.