Wednesday, December 12, 2007
Even without the Fed's help, this is a market designed to help one lose money. Higher volatility means that random noise can generate an asset price move that one would, under more normal circumstances , associate with "signal." This in turn causes many in the market to establish/close positions on the misguided notion that there is useful informational content in price moves.
Until year end, Macro Man does not expect to be able to explain much of what he sees without using the words "noise" or "positioning". In this sort of market, selling what others have just bought and buying what they have just sold is probably a useful strategy.
In that vein, Macro Man was interested to see that two of the more high profile foreign exchange technical analysts on the street were both stopped out of short USD/JPY positions at 112.20, courtesy of the TAF announcement. As such, and given the nasty fade in equities, it would appear prudent to take profits on his partial delta hedge of USD/JPY straddles. Macro Man therefore sells $15 mio USD/JPY at 112.06 spot basis.