The Dollar Collapse

Booooyaaaaahhhh! I think I'm gonna quit trading equities and move into Forex (just a thought)... Sometime last week I moved everything into Yen. This has turned out to be a nothing short of perfect as the dollar fell to new lows Sunday evening. I sold my Yen as it regained strength, but then quickly jumped into Francs the as the dollar lost a few percent in a couple of minutes. Now, I'm back into dollars, hoping for more dollar strength so I can buy yen/franc a lil cheaper. I think there has been a bit of a panic (quite rational), and that a near term bottom has formed for the dollar (till Tuesday). I'm pretty sure the equity markets will do the same... high volume sell off, and then a slow steady recovery throughout the day. I keeping a close eye on FXI, looking for some good old fashioned panic, and a nice entry in the low 120's. I'm sure gold and oil will be ballistic tomorrow, but energy and precious metals seem badly in need of a correction, so I'm not exactly jumping all in.

A Good Day To Wake Up Late

Having missed the market open by about an hour, I didn't have to do any guess work as to the markets direction. SMN (double short basic materials) is up 6.97%, UYG (double long financials) down 4.85%, which is roughly a 2% gain on a -1.5% day. Thus, the hedge trade worked, but there was no reason to go long the financials w/ the news on Bear Sterns. Oil still made a nice new high, but Silver had a sharp drop early in the morning, and at this pace, it could easily work its way bay to 17 dollars an ounce. Perhaps we're gonna get a nice correction in commodities as the bear eats everything.
Having said that, I'm pretty disappointed with the last few months of trading. I'm showing ~6% gain for the last 2 months of trading, which is a anemic 3% a month. That's just fine and dandy if you have $100,000 and don't mind living on a shoe string, but I'm not even half way there. On a brighter note, the SPY is down about 15% in the same period, so I don't want to give up trading because it seems to be working. By the same token, I could have put all of my money into gold in May of 06, and laugh all the way to the bank, no trading, no fucking around, just laughing... Come to think of it, my 6% gain barely covers the drop in the dollar against... EVERYTHING. Glad I went to Europe last summer, because trips overseas are getting more expensive by the day.

An Interesting Week

In my last post I suggested a pairs trade including SKF and DGP. Since that post, DGP has fallen 3%, and SKF has risen 10%, netting a handsome 7% in the last 4 days. While I firmly believe in the soundness of the fundamental logic (a move to hard assets over paper assets due to credit worries), the technical picture doesn't look good in the short term. Precious metals have found resistance at the nice round numbers, Gold just short of 1000, Silver ~20. Moreover, oil prices rose to a record high on Friday, but fell on high volume, signaling a short term turning point. Energy stocks in the OIH failed to make a new high in spite of crude oil's advance, and it showed great weakness on Friday, along with miners. More importantly, SKF closed down 1% on triple the average daily volume after reaching a new high. The last time this happened was ~the January 22nd lows, which leads me to believe that there will be a strong counter trend in the coming week. The market may continue lower, but unlike the last few weeks, it seems like energy is leading the way lower. There may even be a short squeeze in real estate, finance, consumer discretionary. If Asia can recover, then there will be strength in energy and commodities, but if China continues to swoon, then I suspect there will be further price pressure in the near term. Perhaps the new pairs trade is UYG (double long banks) and SMN (double short basic materials). Hard to tell without my charts spitting out new numbers. In any event, keep your hard hats on, I suspect we're in for increasing volatility and a VIX in the mid 30's.