Stocks down between 2 and 3% on the indexes this morning. And people used to call me crazy for trading futures and said they were risky! During my Trendstat days, we rarely had daily moves of 1% in our futures portfolios.
This sure feels like another leg down or at least a move down to test the lows. The DIRECTION OBVIOUSLY IS STILL DOWN, WITH HEDGE ON. Thank goodness for the hedge. That is one of the main reasons I’m near equity highs on the portfolio. There’s been a little chop in futures the last week or so, but the hedge is holding firm with only 20% long etfs in my sector strategy and zero percent long in my momentum strategy. I updated the hedge chart at: https://enjoytherideworld.odoo.com/hedging.
Since I have positions in roughly 40-60 items on any given day, it’s kind of interesting to observe various things happening to the changing portfolio and try to understand what it is telling you about the world we live in. With the real estate market starting to soften, lumber prices are at new lows on the run down.
With interest rates moving higher, and the FED promising more moves up on interest rates, you should see a very soft bond markets and that’s exactly what we are getting lately. Treasury futures are very near lows on the run down.
I don’t know what Japan is doing to mess up the Yen against the US Dollar, but that market has been soft since January 2021! New lows on the run.
With all the political pressure against fossil fuels and the war in Ukraine limiting some supply and the summer driving season upon us, gasoline futures are very near the highs of the last 2.5 years.
With fossil fuels necessary for fertilizer production and a reduction of grain from Ukraine, you would expect higher prices for grains and soybeans has responded to a couple of years of generally rising prices and a current price near highs on the run.
The economy is now becoming a mess. Inflation is rampant with the highest inflation figure since 1981 this morning forcing the FED to continue their fight against inflation with the only tool they have remaining: raising rates. The psychology in many of the markets are deeply embedded at this point and it may take quite some time or price movement to move the population of traders back to the positive side mentally. In the meanwhile, enjoy the ride!
Hi Tom, What would you suggest to implement the hedges in Indian Stock market where we do not have the inverse ETFs. For shorting futures, you would use the same 21 days and 50 days period ?
Hi Tom. This is off subject of your article but I am currently reading your Position Sizing Book. I understand the concepts of margin risk, ongoing volatility risk but I am a little confused on how do you define total portfolio risk. Thanks for the interesting material it has really been enlightening!