Tuesday

Expected Pullback | Gas Experiment

Post a Comment April 28, 2009 – 4:58 pm |   | Permalink |  Print This Post |

Our little Natural Gas experiment costs us $226 ($113 in our public portfolio as we only had $2/point) - we rode the contract all the way to expiry. This does not change our long term view of Natural Gas - we added more to our Natural Gas ETC position - another 2000 at 0.63. Our next target is for Natural Gas to go below $3 before we open more positions (in the ETC - no more contracts with expiry for us).

naturalgas

Now let’s move on. Markets are deeply in the red again shortly after opening. Dow closed -51 points yesterday and is currently down 90 points preopen. DAX, our high flier is down 3.2% after making new highs yesterday touching 4710. No other index broke last weeks Friday high. Although we expected the pull back, our short term indicators suggest markets will go up today. Usually we do not entirely believe in these short term indicators, especially when we expect markets to pull back with a target of 7400 for Dow. However, at -3.2% for the Dax before Big Brother (Dow) opens, we opened a long Dax position at $5/point at 4558. As in our previous post, we expected bad news to try to push markets lower - the potential for a Swine pandemic gives market the perfect excuse to pullback in line with technicals. We are not buying into this. If our indicators are right, we could be in for a bonanza. That said, we doubt the Dax will be able to close in positive territory after such a hit. We will close our Dax using the Dow as the indicator, ie when the Dow is in positive territory.

We have also taken a long NZD/USD at 0.5576 since the Kiwi dollar has taken a hit having a confirmed Swine case. An over reaction in our view. If this turns out to be a pandemic, be assured that New Zealand will not be the only place affected, so we do not see why it should be singled out. We are looking to long the Mexican Peso, but that could be a riskier trade being the epicentre of the outbreak. Besides, we do not know much about the Mexican economy. We are bullish on New Zealand -

In the 5 minutes into writing this post, we checked back onto our personal portfolio and to our surprise we are up 50 points from our lowest position. The screenshot below shows our personal portfolio (up $700). We have staggered our exit such that we will net $750 if it hits 4629. We do not usually set a limit on our profits, but will do in this case as we are betting against the direction the market should go in the medium term (ie a pullback before making higher highs). For the purpose of the official portfolio, we will exit when the Dow is in positive territory.

Long Dax www.theinflationist.com

Addition:

We exit our long Dax $5/point at 4620, booking a profit of 62 x $5 = $310 (Enough to pay for our blundered experiment yesterday).