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Volatility and Stuff

With the situation on the Korean Peninsula threatening to give us another 9 years of MASH and with our own politician desperately trying to find relevance on the world stage by injecting themselves into the crisis I thought it might be interesting to see how markets viewed what was going on. Markets traditionally respond to uncertainty with a lift in volatility – this lift reflects not only the uncertainty but also the need to be compensated for the risk associated with this uncertainty. If things are really bad then markets lift volatility across the board. So to see if this was happening I took a small snapshot of major markets, looked at their 30 day historical volatility and then compared that with their long term average volatility.  I have marked those markets that are currently experiencing relatively low volatility in blue. The results of my straw poll can be seen in the table below.

HV Comp

Intriguingly the worlds largest market doesn’t seem to think much of the crisis, nor does gold which is usually seen as a barometer of such things. As to what these means I have no idea and historical precedents are not much help since it offers a slightly different picture. At the outbreak of the original conflict in 1950 volatility went through the roof  but during the Cuban missile Crisis which our idiot politicians are trying to compare it to only had an increase in volatility after the crisis ended and markets were recovering.

So what does it all mean? I have no idea but since it is only observational and not predictive it doesn’t really matter.

 

 

YTD Performance

As we sail past the half way point of the year I thought I look in the rear view mirror might be interesting to see how a few select markets have performed. There are no prizes for guessing that the local market has been shit.

ytd

 

Bad NIght For Silver

My contingent shorts were hit last night so I have to disclose that I am currently short silver.

finviz

It will be interesting to see how these silver stocks fare during the day ahead.

Silver Stocks

 

No Man Is An Island

So said John Donne and the same is true of markets. One of the most fascinating features of trading is that markets at times they display interesting interrelationships and that these relationships tell you something about the underlying emotional state of the market. Below are three markets I am currently involved in and all seem at this point in time to be telling a story about how the market is currently coping with a President – Elect who seems to have the IQ of a trout and the stability of a slinky falling down Mt Everest.

Markets

As  personal disclaimer I am currently long gold, short the USD in various iterations and my short term Dow system just threw me out from my last long position. So this is my story so it reflects my internal bias. What is interesting is that the Dow didn’t power through 20,000. I remember when it hit other “significant” numbers and it just burst straight through – there was no prevarication or hesitation. Yet at the same time the Dow paused gold began to move up and the USD Index began to move down. Whilst is is interesting to try an assemble a narrative from this – it is easier to simply trade the charts and let others build a narrative as to what they mean.

As a final point it is worth looking at how a few major markets have performed YTD – as you can see precious metals seem to be doing a fair bit of heavy lifting.

YTD

 

The Year That Was.

It is that time of the year when everyone involved in this business looks in the rear vision mirror and attempts to make sense of what happened.  And of course to everyone involved everything is so obvious and predictable. What is worse is that they take this data and attempt to make some form of prediction about the year ahead. Hindsight is all we have and whilst it is the perfect investment tool; we are denied its luxury in the real world. Even looking at a league table of performance of various instruments is somewhat meaningless. However, since they are all the rage below is one such table I quickly knocked up for a few common instruments.

League Table

Part of the problem is that these tables are looked at from the perspective of the buy and hold investor. It is assumed that you simply bought one of everything last year and held onto it and your performance either good or bad is a function of this. However, this is not how trading works. For example the AUD/USD began the year with a 15% gain, which is then gave back and settled into a meandering decline resulting in its ordinary year on year performance. Likewise all the gain in heating oil came in the first half of the year. Conversely, cocoa which turned in a shocker traded in a range for most of the year and then collapsed in October.

Whilst it is twee to say so in trading only the journey counts not the destination, in fact I would go a little bit further and say that even the starting point is irrelevant. As such tables such as the one above whilst vaguely interesting are essentially irrelevant to us.

Ten Minutes With Tate – One Month In


 

Wonder What I am Being Told Here?

One of the mechanisms by which I have learnt to deal with the vicissitudes of the market is to believe that they are actually very generous and that they will tell me everything I need to know if I just listen. When I have gone back and reviewed errors in judgement I have made as opposed to trades that simply didn’t move the major cause has been that I didn’t listen. One of the few joys of getting older is that in my instance I listen more and do less.

FINVIZ

 

 

 

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