26 October 2016

During the past week, among my investments, major change occurred on oil and Japanese Yen.

Oil did not rally the way I thought. I think the mistake was mine. I overestimated the commitment of OPEC November production cut meeting. I thought market was going  to  react more than what was oil price at 1 year high a week ago.  Oil fell 2.5% due to OPEC deal uncertainty as Iraq said it would not join the cut. I should keep a clear mind on oil issues as it is very delicate and involves a lot of politics than simple supply and demand. I was naive to act early on OPEC case as there is still a month to go till meeting. My bias decision making would have cost me a lot if I was too aggressive on the issue.

I did not increase my positions on oil and investment return on portfolio was less than -0.1%. . Yesterday US Crude oil inventories was announced by EIA which came positive for oil. the price went up but went back to its previous position. It seems even such important news could not reverse the short term negative trend.  EIA also published an article on shorted oil futures which was the most since 2007. Short positions play a role to pull prices down but I think most of them will stay intact and not covered as producers need to hedge against future price risk as also required by lenders as negative covenants. I will follow OPEC meeting closely as it will cause sharp price change in the market. Market trend is up for oil recently but it can be reversed if members do not reach any conclusion. I still do not have any strong idea or commitment for oil prices at the moment, therefore, will think about in the next few days on what course of action I will take.

Pound sterling was unchanged and had no impact at all on my portfolio. Inflation was 1% in the UK highest since 2014. However, pound did not fall as market had already anticipated higher inflation and current prices were reflecting it. I still hold on to my small long position and will stick to it probably for the next week unless i see a major change in the economy. I increased my short positions in yen as  strong dollar kept pushing yen lower and that was  good news for me.  More likely Clinton win, strong US economy and US dollar, undecided fate of UK economy and EU, slowing China, bond purchases of BoJ and even slight chance of rate hike in Dec ( likely not gonna happen) supports my idea shorting Yen and even increase my short positions. Technical currency trend is also up, so I am in a wagon.

I am still short at US stocks with small exposure just in case things go sideways. If I see economy is turning I might increase my short positions on US Stocks futures. Recently US dollar keeps rising in value against other currencies. Chance of Clinton win supports dollar move and US stocks. At the realm of strong dollar, FED is unlikely to raise rates. However, there is more uncertainty around that. Thus, I will closely follow FED.

My equity size is down -0.27% however this does not take into account my unrealized P&L. My current unrealized P&L is around 6% due to shorted yen.

 

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