Trading the Trend

[over9k]

Why are you arguing a medical perspective then?

jog on
duc

You think case numbers aren't a macro metric to consider. I'd agree with you over the past couple of months (though not before them) but not now, now things are different. There's a massively higher probability of infection personally, there WILL be a massive spread of infection, and we know how deadly the virus actually is/that it isn't just a headcold.

What I'm saying is that we're going to see both the reintroduction of restrictions (or refusal to lift them at all) as well as voluntary isolation etc that we didn't see previously. America is NOT going to return to what will be the new normal that the rest of the first world has as america did NOT contain the virus like, say, AU/NZ have.

And what if there are? What will happen re. the market?

jog on
duc

Well it won't go to the point otherwise expected, will it?

I'm not talking a time horizon of a couple of days here though, which you appear to be. I don't doubt we'll see a bump on monday, but I've never been talking about monday. As I said, iirc it takes about three weeks for data to reflect infection spread, so three weeks after the riots, the data is armageddon and thus so is the market.

Again, it'd be worth clarifying what time(s) you're talking whenever you post something.

 

[ducati916]

1. You think case numbers aren't a macro metric to consider. I'd agree with you over the past couple of months (though not before them) but not now, now things are different. There's a massively higher probability of infection personally, there WILL be a massive spread of infection, and we know how deadly the virus actually is/that it isn't just a headcold.

2. What I'm saying is that we're going to see both the reintroduction of restrictions (or refusal to lift them at all) as well as voluntary isolation etc that we didn't see previously. America is NOT going to return to what will be the new normal that the rest of the first world has as america did NOT contain the virus like, say, AU/NZ have.



3. Well it won't go to the point otherwise expected, will it?

4. I'm not talking a time horizon of a couple of days here though, which you appear to be. I don't doubt we'll see a bump on monday, but I've never been talking about monday. As I said, iirc it takes about three weeks for data to reflect infection spread, so three weeks after the riots, the data is armageddon and thus so is the market.

5. Again, it'd be worth clarifying what time(s) you're talking whenever you post something.

1. Why are things 'different'? To answer you question: no the virus numbers are not a macro-metric that I would consider. Why? You demonstrate to me an objective measure that tells me when the numbers are important and (potentially) market moving and when they are not. Until that point it is all subjective hyperbole and markets do not discount hyperbole.

2. You know that for a fact? Of course not that is just your view. But let's say you are correct: what happens in the market?

3. That tells me nothing.

4. My holding time will be measured in years. However, rebalancing will happen when it happens. That might be tomorrow or next year. Generally I try and give a couple days notice of when I think something relevant is going to happen (as in previous post). Sometimes, it is so clear, it could be a couple of weeks.

jog on
duc

 

[over9k]

1. Why are things 'different'? To answer you question: no the virus numbers are not a macro-metric that I would consider. Why? You demonstrate to me an objective measure that tells me when the numbers are important and (potentially) market moving and when they are not. Until that point it is all subjective hyperbole and markets do not discount hyperbole.

So the answer is twofold. First the cost of cases themselves and then how people react to them. But you're looking for an objective metric when there isn't one.

Here's a simple example: How are you going to go out for a meal at a pub when you need to wear a mask the whole time? That's not an objective metric, but people are not going to head out to bars etc when every 2nd person is likely to kill them with an infection unless they have a mask on.

I can't be objective about the cost to business of every infection - an employee being off work for a month, a director being off work for a month, an employee dying, a director dying, so on and so forth, and yet I guarantee you these things will happen and will cost everyone a boatload. Same as with zoom meetings etc being such an effective alternative, people simply aren't going to travel for business or really do much at all (even go to the hospital) unless they ABSOLUTELY have to. This isn't modelling, this is behavioural economics - not objective by its very nature.

Sure things will pick up for the next couple of weeks, but the moment serious infection numbers hit the news (which they are going to) is the moment EVERYTHING changes. We know this because they already did the second the last ones did. You're essentially claiming this pattern of response to the virus data is not going to be repeated.

I also can't give you an objective metric of X number of cases where states and municipal areas reclose or just flatly never reopen particular areas, but I bet you it still happens, same as I bet you people aren't going to go elbow to elbow in bars when the infection rate is 500x what it was in feb. People weren't taking the virus seriously before not least of all because of the low statistical probability of actually getting it. That's going to change, and change dramatically.

People are now very wisely avoiding (only) the hospitals because they're infection hotspots. What happens when the whole country becomes a hotspot, which it will?

Again, this is what numbers *can't* show, but it doesn't mean they aren't true and/or won't happen.

2. You know that for a fact? Of course not that is just your view. But let's say you are correct: what happens in the market?

We see a drop in whatever economic activity has just been restricted and a commensurate drop in the market in response. Exactly like what has already happened?

Seems like a bit of a silly question to ask what'll happen to the market if economic activity is re-restricted?

3. That tells me nothing.

Sure it does - it means you won't see the bump as high as you were anticipating. If enough don't reopen or some more bad virus data is released, you mightn't see a bump at all. Either way, the outcome (in the short term) is not as positive as it would have been.

4. My holding time will be measured in years. However, rebalancing will happen when it happens. That might be tomorrow or next year. Generally I try and give a couple days notice of when I think something relevant is going to happen (as in previous post). Sometimes, it is so clear, it could be a couple of weeks.

jog on
duc

Sure, and I'm doing the same thing - you're just trying to use modelling to do it whereas I'm doing the complete opposite. You seem to think there's nothing that your models can't tell you though?

 

[qldfrog]

So the answer is twofold. First the cost of cases themselves and then how people react to them. But you're looking for an objective metric when there isn't one.

Here's a simple example: How are you going to go out for a meal at a pub when you need to wear a mask the whole time? That's not an objective metric, but people are not going to head out to bars etc when every 2nd person is likely to kill them with an infection unless they have a mask on.

I can't be objective about the cost to business of every infection - an employee being off work for a month, a director being off work for a month, an employee dying, a director dying, so on and so forth, and yet I guarantee you these things will happen and will cost everyone a boatload. Same as with zoom meetings etc being such an effective alternative, people simply aren't going to travel for business or really do much at all (even go to the hospital) unless they ABSOLUTELY have to. This isn't modelling, this is behavioural economics - not objective by its very nature.

Sure things will pick up for the next couple of weeks, but the moment serious infection numbers hit the news (which they are going to) is the moment EVERYTHING changes. We know this because they already did the second the last ones did. You're essentially claiming this pattern of response to the virus data is not going to be repeated.

I also can't give you an objective metric of X number of cases where states and municipal areas reclose or just flatly never reopen particular areas, but I bet you it still happens, same as I bet you people aren't going to go elbow to elbow in bars when the infection rate is 500x what it was in feb. People weren't taking the virus seriously before not least of all because of the low statistical probability of actually getting it. That's going to change, and change dramatically.

People are now very wisely avoiding (only) the hospitals because they're infection hotspots. What happens when the whole country becomes a hotspot, which it will?

Again, this is what numbers *can't* show, but it doesn't mean they aren't true and/or won't happen.




We see a drop in whatever economic activity has just been restricted and a commensurate drop in the market in response. Exactly like what has already happened?

Seems like a bit of a silly question to ask what'll happen to the market if economic activity is re-restricted?


Sure it does - it means you won't see the bump as high as you were anticipating. If enough don't reopen or some more bad virus data is released, you mightn't see a bump at all. Either way, the outcome (in the short term) is not as positive as it would have been.



Sure, and I'm doing the same thing - you're just trying to use modelling to do it whereas I'm doing the complete opposite. You seem to think there's nothing that your models can't tell you though?

What about we settle that in 2 months even go wide end august?
So you genuinely believe that in end 08 2020, the disease in itself will paralyse our day to day life?
not talking market which can go High Low irrespective of virus...
What may happen is in august qantas shareholders might discover they own a company with 3 months of no income..surprised???

Well i do not look at media news just facts
France was my birth country, has massive number of underclass and poverty and a strained hospital system as a standard.
It got seriously hit with the first wave, around 30k deaths or so..you know vs our 110 ?.
There are still daily infections etc but lockdown is now eased and economy restarted.basic masks and preventions are taken i do not forecast disaster ahead .10pc of population infected in Paris
As elsewhere not something to brush aside but weather factor and age were defining the deaths areas
Economically the virus is out of the equation, but not the measures taken under its name.the world is ok now.
Will we have to live with the virus and improve treatments i think so
I am a pessimistic person...but you have way too dark a view..can we still say that?

 

[ducati916]

1. So the answer is twofold. First the cost of cases themselves and then how people react to them. But you're looking for an objective metric when there isn't one.



2. Sure, and I'm doing the same thing - you're just trying to use modelling to do it whereas I'm doing the complete opposite. You seem to think there's nothing that your models can't tell you though?

1. But there are objective metrics of how the markets react to the data/news. That objective measure are the markets themselves.

2. You are attempting to place your subjective view onto the market. I on the other hand simply look at what the market is telling me.

jog on
duc

 

[ducati916]

And next:

Which is exactly the opposite of what happened. The markets tanked between Feb. 20/22 and bottomed March 23. From March 23 through today, markets have gone (pretty much) in one direction. Was the news from 23 March all good news? No, far from it. It was bad. The markets rose.

Your thesis (to date) is simply incorrect.

Far from being a silly question, on a forum that is dedicated to trading the financial markets: it is the only question. Do we position long or short. When do we need to do that.

jog on
duc

 

[ducati916]

So let us look at a couple more charts:

So Chart #1. Dollar/TLT: At the end of December 2019 and start of Jan 2020, we can see the beginning of 'something'. We don't really know whether or not this is serious. By early Feb. we know what is happening and we know that it is potentially serious.

What is happening: Bonds are rising in value (falling yields). We know Bonds are a risk off asset. You could also look at Gold and check out what is happening. Do we know the 'causation'? No. Do we need to know? No. It is enough to know that something bad this way comes.

Chart #2: same story, risk off is occurring.

The circle was a false negative. It happens. However it corrected to the true message in ample time, that being late Dec.2019 early Jan. 2020.

Why? Did the media know? No. Did the media pick up on the fact? No. One of the few professionals banging the drum was Mr Gundlach. But for those looking, the message was clear: something was not right.

That is a MACRO indicator. When that flashes, I'm lightening up/hedging. Do I know why? Sometimes, usually not. Do I care? Not in the slightest.

The COVID news, implications, whatever, are already in the price or being incorporated into the price. I could care less what some half-wit journalist has to say or whether the numbers are real or imagined. I am onside with the market.

I have an opinion. Lots of them. But I no longer make the mistake of trading my opinion. NO-ONE CARES what I think.

jog on
duc

 

[over9k]

What about we settle that in 2 months even go wide end august?
So you genuinely believe that in end 08 2020, the disease in itself will paralyse our day to day life?
not talking market which can go High Low irrespective of virus...
What may happen is in august qantas shareholders might discover they own a company with 3 months of no income..surprised???

Well i do not look at media news just facts
France was my birth country, has massive number of underclass and poverty and a strained hospital system as a standard.
It got seriously hit with the first wave, around 30k deaths or so..you know vs our 110 ?.
There are still daily infections etc but lockdown is now eased and economy restarted.basic masks and preventions are taken i do not forecast disaster ahead .10pc of population infected in Paris
As elsewhere not something to brush aside but weather factor and age were defining the deaths areas
Economically the virus is out of the equation, but not the measures taken under its name.the world is ok now.
Will we have to live with the virus and improve treatments i think so
I am a pessimistic person...but you have way too dark a view..can we still say that?

America did not contain the virus. Like almost at all. Combine that with memorial day weekend plus all the riots and you have massive, massive infection spread in a tiny period of time.

You're going to get voluntary shutdowns again by state governors etc and people voluntarily staying indoors as well. Combine that with the actual costs of infection (people off work, people dying, so on) and you have a recipe for disaster.

AU/NZ will largely be reopened and functioning on account of actually containing the virus. USA did not do this, which is what people are forgetting - they are the ONLY major economy not to contain it and they are now the global epicentre as a result.

You need only understand how exponentials work to see how this thing plays out now.

And next:

View attachment 104741

View attachment 104742

Which is exactly the opposite of what happened. The markets tanked between Feb. 20/22 and bottomed March 23. From March 23 through today, markets have gone (pretty much) in one direction. Was the news from 23 March all good news? No, far from it. It was bad. The markets rose.

Your thesis (to date) is simply incorrect.

Far from being a silly question, on a forum that is dedicated to trading the financial markets: it is the only question. Do we position long or short. When do we need to do that.

jog on
duc

Not disputing this. But you're falling for the classic causation & correlation trap. There was a massive stimulus in march and a lot of medical advice was ignored on account of the infection probability being relatively low and people not thinking the virus was a big deal anyways.

How do you think they're going to behave when they do know it's deadly and the infection probability is 500x what it was in feb or whenever?

Even if behaviour does not change at all, the actual costs of the virus will be enormous.

But again, people wisely avoided (and still are avoiding) the hospitals because of how infectious the environment there is. Take that behaviour and apply it to an entire country that's massively infectious, and you have your answer.

 

[over9k]

I'll repost what I said in another thread:

America is now the global epicentre. We know from case studies around the country and around the world that from the point in time of mass spreading events, we can expect to see significant surges in caseloads in three to five weeks. Memorial Day was May 25. The protests have occupied the first two weeks of June. We should expect to detect mass outbreaks across the country in both Red and Blue states in late-June and especially in July.

As to size, consider the case of Austin, Texas. Just two weeks after Memorial Day, Austin has already seen caseloads double. That’s before the protests have had a chance to add their own fuel to the fire.

America’s quarantine efforts were insufficient to root out coronavirus, likely making it endemic to the population. That was before the Memorial Day parties and protest movements. Purging the virus is now not only an impossibility, the United States is now on track to experience the worst documented infection rates in the world (many countries have worse testing regimes, so labeling the US #1 without a caveat is a bit disingenuous). About the only silver lining is that vaccine development efforts continue to outperform. We are highly likely to have a functional vaccine this year. That still leaves questions of mass manufacturing and distribution, but even in the worst-case scenario, that process will likely require under a year.

I highly recommend following peter zeihan - his macro intel is second to none IMO.

 

[ducati916]

I highly recommend following peter zeihan - his macro intel is second to none IMO.

Note the date: 21 April 2020. He almost picked the low.

jog on
duc

 

[over9k]

I don't trade oil so you'll have to fill in some blanks for me here.

 

[ducati916]

I don't trade oil so you'll have to fill in some blanks for me here.

Well essentially he implies further issues with oil and therefore lower prices. Oil has simply risen from that time. So while his analysis within his own domain may well be compelling, it is of no practical use in trading the financial markets.

jog on
duc

 

[Smurf1976]

People love a narrative. They want to know causation, even if causation is impossible to discern. The media provide that narrative. It has little if anything to do with what moves markets.

The thing about news is not to take it literally but it can still be of some use, usually by inverting it.

When the media tells you there's about to be a crash, it's quite likely a buying opportunity.

When the media tells you there's nothing to worry about, that's the time to be worried.

 

[sptrawler]

The thing about news is not to take it literally but it can still be of some use, usually by inverting it.

When the media tells you there's about to be a crash, it's quite likely a buying opportunity.

When the media tells you there's nothing to worry about, that's the time to be worried.

That is so true, they don't sell good news, they like chaos IMO.
If everything is trundling along peacefully, there is no news.

 

[ducati916]

The thing about news is not to take it literally but it can still be of some use, usually by inverting it.

When the media tells you there's about to be a crash, it's quite likely a buying opportunity.

When the media tells you there's nothing to worry about, that's the time to be worried.

There is certainly plenty of evidence for such a strategy: all charts taken from the 'Market Bottom' thread where they were previously discussed.

In the list below: on the left Market Bottoms, on the right Market Tops.

jog on
duc

 

[over9k]

That's the media reporting on what's already happened in the market though - you know, the past.

This is quite a different thing to media reporting on something that's going to/will effect the markets. A massive spike in coronavirus cases over the weekend = armageddon on monday for example. Same with employment data or anything else that markets respond to.

There's big talk of a second wave in china over the weekend. Lots of ASX red as a result. Will be interesting to see how U.S is effected now as everyone were expecting a massive bounce tonight and that's now looking uncertain.

 

[ducati916]

1. That's the media reporting on what's already happened in the market though - you know, the past.

2. This is quite a different thing to media reporting on something that's going to/will effect the markets. A massive spike in coronavirus cases over the weekend = armageddon on monday for example. Same with employment data or anything else that markets respond to.

3. There's big talk of a second wave in china over the weekend. Lots of ASX red as a result. Will be interesting to see how U.S is effected now as everyone were expecting a massive bounce tonight and that's now looking uncertain.

1. Correct, all of those examples are historical examples.

2. At the time of the reports, they were current. This is often how it is: markets are trading at X, the media report that the markets will do X higher/lower. The markets do the opposite of what the media predict or expect. Those examples are simply some examples of the more egregious media pronouncements through the years.

3. To China I say: so what?

Remember the ASX tends to follow the US (not exactly, but close enough when there are big events). Friday in the US is Saturday in ASX. Today is the response to Friday's market in the US.

Re. bounce: who is 'everyone'? I haven't seen reports of a massive bounce being expected. I could have missed them I suppose (unlikely). I have said that I expect a bounce. But who cares what opinion I express. Whereas these chaps have a bit more clout:https://www.wsj.com/articles/frustrated-stock-market-skeptics-stick-with-cautious-bets-11592127000

Currently the futures are red:

jog on
duc

 

[ducati916]

So from the close on Friday last, here is how the Option Market closed:

The level we are interested in is that 300 level (again).

Open Interest is finely balanced: 119K v 113K. The interesting metric is the volume from Friday 28K v 88K. A very heavy influx of new PUT positions.

What is a market truism: the market moves to cause the maximum amount of pain (which drives transaction volumes). Well the pain trade in this instance is higher. That new volume, has no profits (worth speaking of) currently. The older positions will be in profit. Nothing a profitable position hates more, losing open profit. It will only take a nudge and those PUTS will be closing.

So why not the other way? Why would the CALLS not be faster to fold? Three primary reasons:

(a) The trend to date has been higher; and
(b) The fall has been fast, but without follow through: IV is still high (adding to profits) but if it starts to fade, that will also reduce profits comparative to price; and
(c) It is just plain harder to make money short than long. Short sellers are a very nervous breed.

The lows from Friday have been tested. They seem to be holding currently. Volume is thin in the overnight session, the real test will come on tomorrow's open.

jog on
duc

 

[ducati916]

If you are looking for where the risk is hiding...as always it is hidden within the Banks.

This is why the Fed. pulled out all the stops from day 1. They are aware of the problem. Hence they buy all debt. Period.

Citi just made $100M flipping CLOs. That is the problem: they are just too lucrative until they are not. Then you blow-up the bank.

In 2007/08 the Fed. simply were not aware of the issue and its extent. Hence they let Bear Stearns and then Lehman fail. They will not be repeating that error. Whether this issue comes home to roost, we'll have to wait and see. Currently, the issues remain hidden.

jog on
duc

 

[over9k]

I'm still in stay-at-home stocks for the next fortnight, might trim the position just in time for the 3rd of july data.

There's also the 737 max certification flight which should bump BA nicely, but I can't see anything but a very choppy decline for a while. I was just reading that the last batch of employment data was miscalculated and so with that being fixed, the next lot will look significantly worse. This is worth a read here: https://www.bloomberg.com/news/arti...n-more-confusing-than-may-s?srnd=economics-vp

If the fixed data ends up being significantly lower than predicted (as a result of fixing it) then expect a bloodbath.

ASX basically slaughtered today in reaction to the chinese virus data over the weekend. Also one melb protester testing positive but that didn't seem to be a big deal.

It won't last - good dip to buy into.