"When a man is tired of trading, he is tired of life." If Samuel Johnson were alive today and running a hedge fund portfolio, he might well have uttered those words. Being tired from trading, on the other hand, is an occasional fact of a PM's life. And at the moment, Macro Man is pretty fatigued.
When one has a big bet in place that starts to go wrong, he has two options: stick with it and wear the drawdown, or trade 'em up. There isn't necessarily a single correct answer, as the appropriate response is shaped by level of conviction, market positioning, and one's own return and risk profile.
In any event, regular readers will know that your author has been running a short equity position, which was working swimmingly until about 10 am London time on Monday. Since then, obviously, global equities have stormed higher, leaving Macro Man facing the choice mentioned above. And he's decided to trade 'em up.
So yesterday he traded Eurostoxx futures, S&P options, AUD/NZD spot, USD/BRL options, silver futures, oil futures, Bund futures, and Bund options. The fruits of his labour were largely successful, but it's left him too tired to come up with a coherent piece this morning (or, as a reader pointed out, anything like the requisite level of proof-reading of yesterday's post.)
Given that there is some interesting data, earnings releases, and other issues today, it seems like a perfect opportunity to revive the "running diary" format. So away we go....
8.57 a.m.: So CIT halts trading last night and a story circulates that they're on the verge of a bailout. Then, after the close, the story leaks that they'll be left to their own devices. WTF? Did the Treasury do a quick survey to see wwho held their $70 bio or so worth of debt, discovered that it was no one important, and decide to leave CIT to the wolves? Enquiring minds want to know....
9.14 am: Some mumbles about a Chinese RRR hike, and equities are at their lows of the day. Helicpoter Wen getting nervous?
9.28 am: First day trade of the day goes sour; selling the break of the lows in Eurostoxx wasn't a great idea. Back to the drawing board...
9.59 am: Gym before Nokia earnings (@ 11 am London) or after JPM (@ 11.30?) Macro man's humming and hawing...
10.21 am: After JPM it is, as Macro Man's spent the past 20 minutes discussing the literary merits of Gabriel Garcia Marquez and Arturo Perez-Reverte with a couple of colleagues.
11.01 am: Nokia looks a tad light on both EPS and revenue basis...VG1 falls 7 points. Yawn.
11.16 am: NZD: never has a turd smelled so bad yet stayed so high for so long.....
11.30 am: JPM beats handily, coming in at 28c vs expected 5c. To quote Gomer Pyle, "surprise, surprise, surprise." Amusingly, the consensus was at 28c just a few days ago. Anyhow, who cares about CIT? New highs everywhere! And with that, Macro Man has a quick meeting with Hans and Franz to attend....
1.01 pm: Back after a hard session. Macro Man has found to his chagrin that at the age of 38, six weeks of complete physical inactivity produces a near-catastrophic loss of strength and muscle tone. Alas, recovery is much slower than loss! Macro Man has somehow shed more than 4 kilos over the last month, so at least the old power/weight ratios are improving...
1.31 pm: Shocking(ly low) claims data, especially the conttinuing claims. looks like some hefty seasonal adjustment issues and distortions with the auto shutdowns. That sort of begs the question of why auto industry shutdowns are now wiped from the data. Is Stalin running the Laabor Department now?
2.01 pm: Shock horror! For the first time in recent memory, the TIC data shows a trend (in this case, sales of $ assets) that match what the FX market did that month (the dollar went down.) Still, this data remains comfortably esconced in the "who gives a crap?" drawer.
2.25 pm: Five minutes before the open, and equity futures are very slightly limp while bonds have caught their first bid of the week (other than a half-hour squeeze at one point on Tuesday). Anything to draw from that? Who knows....let's see what happens after the initial retail flurry and Philly fed at 3 pm.
3.02 pm: Philly Fed declines for the first time since February. Stocks get a bit of a challenge, and bonds catch a bit more of a bid. Would put the chat amongst the oiseaux to see "risk-off" take hold here, wouldn't it?
3.12 pm: So will Mr. Miyagi pay a visit to the market today. Having implored Daniel-san to go "risk on" Monday morning, is he now returning to check on his protege's progress and advise him to go "risk off?" Let's see.
3.53 pm: Sigh. After great succcess yesterday, Macro Man has fallen to earth with his day trading today and delivered the red card after getting stopped out at local extremes twice in a give minute span after Philly Fed. Let's mark the sheets and go home.
4.43 pm: Another busy day in the books, so Macro Man's going to get the early train home. Let's see if the SPX drags him to the home office this evening....
7.45 pm: It just keeps on going, doesn't it? If only Macro Man hadn't pitched most of his remaining equity deltas today. It certainly has the feel of a melt-up, and it's tempting to get stuck in. But it felt equally dreadful last week, and, well....look how this week turned out. And as a couple of commenters have observed, earnings usually start out strong (relative to expectations) and then fizzle. Still, with GOOG, BAC, and the once-mighty C out before tomorrow's open, the squeeze can continue for at least a while longer.
9.01 pm: And now, Google reports. "Ex-items" beats consensus by a healthy margin; "ex-ex-items" has a shortfall by an even larger margin. What "items" cost GOOG 70c a share? That's a lot of beanbags for the playroom....
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