I executed few of my previous actions I mentioned. But I regret that I did not follow the one I said I would do and it was US Stocks. It was the only major asset class that rose in the past week. Others did not change so much. Instead of buying US Stocks I did the opposite. I reduced my positions after building up. The reason was that I was not happy with half of my portfolio being in US stocks. Stocks did well, though. 2.5% increase. I increased my pound sterling position during the week as pound moved up or down.
ECB had a decision on rates and QE. They decided to continue QE till April 2017 and reduce QE amount from 80bln to 60bln per month till December 2017. Within seconds Euro jumped from 1.06 to 1.08 and fell back below 1.06 a few minutes later. The last day I bought the very small amount of EUR based on technical analysis that EURUSD pair is close to support level of 1.05. It will be hard to break it below as it;s been tried a few times before. However, I do not see EUR rise substantially higher either. If there is going to be FED hike then we can expect a strong dollar. My guts intuition on FED hike is turning around. I think we can see FED hike this December. Yellen might increase the rates and watch for what Trump will do next. Dollar strength, however, has already started to hurt some US exporters and we will see more of that. A Strong dollar is a good news actually great news for Japanese.
US stock optimism is getting crazy. Everyone is investing in US stocks based on what Trump will do. This might trigger a correction in trend. therefore I am becoming more cautious. I will reduce my positions further in US Stocks to wait for what FED is going to do. Before Fed meeting, I am building shorts in US bonds as well as my conviction on rate hike increases.
Oil is still the black area for me. I might jump on the wagon and buy more if OPEC and non-OPEC upcoming meeting on Saturday go well. However, oil should be considered carefully. In the past, my positions in oil futures have been large and it was the main portfolio mover and oil prices have been quite volatile over time. I have done well in stocks , currency trading than oil. Oil trading has taken away my returns over time from what I made in other asset classes. I think I would call myself a failure in predicting oil prices. OPEC meeting trade was a good one, though.
I will still speculate on oil prices however my contract size will be small. If I build a strong conviction in oil , I will then go all in otherwise, I am happier to stay out.
Furthermore, it is worthwhile to note that , my trading over the past 2 months have been in the simulated trading account. That being that, I have always considered every trade I have made as if it is real money. This has given me an opportunity to trade with large sum amount of money feeling it is real. However, soon, I will be starting to invest with my real capital. As the sum will be considerably small compared to this account, unfortunately, I will not be able to trade almost all these asset classes due to regulatory requirements of my broker and US regulations. Therefore, macro investing with my real account will be gone. Instead, i will have to focus on stock picking which requires a complete set of skills and investment strategy. I will devote some part of my time to picking stocks despite I have not considered yet what style I will be following, I will still invest with this account and write on the blog but this might not be weekly. Either, twice a month or once a month. However, at this blog , in another section, I will be writing on stock picking.
Back to the experiment. I am not that happy with the move going on with the pound. Pound keeps trading up or down around 1.25 -1.26 level. The various mixed news is coming out from Britain. Future of Brexit is cloudy for me. I have told before that I should not trade if I can not see and build a conviction. I am inclined to reduce my positions in pound sterling and stay away for a while. As the last weeks’ returns on many asset classes have not changed, I believe market participants are not sure either. It is, of course, a good time to take a right side and wait for the market to react however if your vision is not clear then it is better to sit on cash rather than speculate blindly. The market always punishes those who speculate without having a strong conviction.
Bottom line is, stay away for a while from oil, stocks, short US bonds, watch where Euro is heading as well as pound and yen. I will probably consider buying/selling individual stocks for this portfolio as well.