23 November 2016

OPEC deal is now more optimistic than before. It seems ministers decided to come together to try to reduce production. I should have expected this as I mentioned earlier that this is the last bullet OPEC has got to have an impact on price for this year otherwise, oil will tumble. However, I am not that still optimistic about the final  deal. Despite efforts of members,  there is no guarantee that deal will go through. uncertainty is high and if the deal does not work , prices can tumble to 40$ forced by speculators. next 7 days are going to be important for markets.

Trump talked about immigration, trade but nothing special on tax cuts. He, however, mentioned bringing jobs back and building the economy. It is not clear yet whether he meant doing it by protectionism or by expansionary fiscal policy. Markets did not react in the opposite way. The dollar is still strong, DJI, SP500 hit the all-time high. They are going up and as long as there is no bad news coming out I think the trend is up in stocks. So, I will buy stock indexes in coming days.

As I mentioned in the previous post that I should reverse my position in gold and oil by going short as I expect no OPEC deal and Trump policies or FED will have a negative impact on gold. As I got the news that OPEC deal is optimistic, I stopped going short and kkept my positions on oil which made me money. I should, however, have gone short on gold. Technical analysis showed that gold was close to breaking on downside near the support level. As I was not available to check prices , gold had broken the level and gone down, I reversed my position and went short twice size of my long position. in the meantime, break cost me some cash. Since last week I have increased my positions on the dollar by shorting yen, still long on the pound, as I do not have the clear picture where Britain is heading for some unexplained cases, I am long for Britain.  However, I know this is not right. I should not be in the market if I do not have a judgment of the market. This can cost me as well if I am wrong. However, my position in the pound is less and this can be thought of a hedge position against the dollar in case dollar falls. So, I will stick to that position and increase substantially if I get a positive news from Britain or dollar reverses. The latter is not seen in short future to happen.

I have shorted long term government bonds as well in case FED increases rates. Traders are very certain rate will occur. So, this position is cover in case I am wrong in my previous estimate that FED rate will be stable. Even if , FED keeps rate stable, I don’t see much bond price rise as dollar getting stronger.

This week I am up in my portfolio thanks to oil, Japanese yen. I could have been in the better position if I reversed gold earlier.

So, bottom line is, wait for OPEC decision carefully and take further actions after that. Probably I will short yen even further as the dollar gets stronger. And the commitment of BOJ keeping rates at 0%. I don’t see much opposite move unless the dollar is being threatened. I am not much sure about gold, though. It has gone below 1200$ level and I am not sure how much it will.





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