Monday

TheInflationist Weekend Summary: 310509

Post a Comment June 1, 2009 – 12:03 am |   | Permalink |  Print This Post |

The previous highs have been tested again on the last trading day of the month (end of the month window dressing). Technical traders are very sceptical of this rally and have been calling for a pullback for a while now. We have also been expecting a pullback but the charts are starting to look like it will need to go higher before turning over. It may be an intraday spike, and may not be significantly higher than current levels, but a rally higher looks more likely. All the money printing will have an unknown effect on equity markets - inflationary forces vs ongoing unemployment/wealth destruction in households.

Any long positions will be focused on Australia 200 - the weakest market at the moment; whilst any shorting will be focused on India. India’s NIFTY index have retraced 50% of the entire decline ( 6250 to 2570). Our portfolio is net short after our new short trades on India last week - our 4240 and 4450 naked short anchors are in the red whilst our hedged short NIFTY long Hang Seng is up. We look to open a long ASX on weakness to hedge against one of our India, but maintain that regardless of whether markets will go higher or lower, India’s NIFTY is set to pull back. So as long as one is not over leveraged, we will see this level again. Casinos set a ceiling bet on every table to prevent players from doubling their bets after every loss - this removes any betting advantage a player has against the Casino. Here on Dow Casino, the ceiling bet is defined by ones capital (margin available) - hence if done right, one should always be able to recoup unrealised losing positions. Do not forget that “Markets Never Move In One Direction”. Having said that, we are aware that India’s economy is powered by Agriculture, being the largest producer of rice, tea, herbs. Agriculture makes 18% of India’s GDP, so shorting India long term is not a good idea. For now, we just do not buy into the election news.

indianiftychart

The rally in India may give us a glimpse of what to expect for other markets. Infact, technical traders magic retracement number of 61.8% should be taken out in time to give false hope to bulls and shake the bears off the next decline. We have our longs in the form of stocks, hedging positions, and Forex trades which traditionally go in our favour in rallies (ie short USD). Our portfolio is sitting within the 80-90k range in the last few weeks, reflecting our defensive strategy of having a long on markets which are fundamentally intact (in this case Natural Gas, Agriculture ETF, short USD) whilst shorting the general index.

Our short term technical indicators suggest markets will pull back Monday, so we will not be opening any longs at the time of writing (Dow 8500, AORD 3840). Our updated portfolio is summarised below for your convenience. Including unrealised positions, our total portfolio stands at $87672 at the time of writing, up 119.18% after five full months of trading (from 1 January 2009).

(Note error: profit for long HK40 has been converted to AUD)

Weekend Summary 010609 by theinflatinoist.com

For those who are new to our site, we started TheInflationist Trading Challenge in January 2009 with $40000. Unlike any other stock trading website, we trade publicly LIVE, track our performance transparently, and make actual trades in our personal portfolio (yes, we own every stock and trading position in our portfolio). We stick our necks out on the public chopping board and feel actual pain when our positions are in the red (No, this is not virtual trading for us!)

This phenomenal 119% result is reproducible for all readers as trades are published live at prices available to readers. Applying our own fundamental and technical analyses with our conservative risk management strategies, combined with the views of some of our favourite investment analysts (Jim Rogers, Mr Magik, Tony Caldaro, Brian Shannon, Guy Lerner, Marc Faber and Philip Manduca), we formulate trading plans both short and long term. We do not rely on any one source, and not uncommonly trade contrarion to these technical experts (with all due respect).

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