The Scary Commodities this Halloween

Halloween is here once more, and everyone around the office is gearing up: carving pumpkins, buying candy for trick or treat-ers, and last minute runs to the store for costumes. To get everyone else in the mood, we found some Halloween like similarities in the futures markets we couldn’t help but share.

Costumes:

Last year, it was the US Dollar/Euro Currency Battle Signal that got us excited for Halloween (Who doesn’t love bat man?)… and now that Bat Signal has transformed into one of the most feared villains in the galaxy… Jabba the Hutt, of course.

USD EUR(Disclaimer: Past performance is not necessarily indicative of future results)

Jabba

A couple weeks ago we went in depth about the US Dollar having its best quarter in years , and how Managed Futures has historically benefited from it (past performance is not necessarily indicative of future results), but what else is out there on Halloween Eve?

Scary Vs:

We’re talking a shock to the system…. That Damned V Reversal. Here’s Why you should be Afraid of the V-Shaped Reversal

That Damned V(Disclaimer: Past performance is not necessarily indicative of future results)

V for Vendetta

Chocolate:

Everyone needs their fill of snickers, Milky Way, 3 musketeers on Halloween. But where that chocolate comes from has but the market in limbo the past couple of weeks. It appears, the Cocoa market decided to get nice and scary (volatile) just in time for the ghosts and goblins to come out. That’s just your basic up move of around 12% and -13.5% fall in about a month and a half… nothing to see here, move along.

Cocoa
(Disclaimer: Past performance is not necessarily indicative of future results)

Sugar: Super Scary

For those that don’t like Chocolate (see here), there’s the laffy taffies, the warheads, the sour patch kids… basically… Sugar…. And lots of it. The market jumped out it’s mountain trend to start the year and has been choppy ever since.

Sugar(Disclaimer: Past performance is not necessarily indicative of future results)

We don’t expect sugar prices to go up anytime soon just because of Halloween, but recent studies show that the brain has the same reaction of cocaine as to sugar, suggesting that there might never be low demand.

Sugar Cocaine

 

That’s enough to maybe sway one of two people to be long sugar for the couple of the next couple years (or maybe short depending if the government calls for harsher restrictions).

We’ll leave that explanation to the journalists who make you really step back and think about it.  Here’s John Oliver from  Last Week Tonight doing his best to explain Sugar.  Have a happy Halloween, and don’t have too much sugar.

Pursuing Portfolio Perfection

It’s 5 years into the one of the biggest stock market bull runs of all time, and all looks fine for the aging bull even after this brief downturn in October.  For many, this has been a great run and they’ve been doing quite well during it. For many others, it’s been rather annoying, as their “smart” choice of diversification has under performed recently.

But here’s the deal – it’s not about beating the S&P 500. You’re on the quest to find a portfolio that best matches your needs before retirement. For some, that’s so far in the future, you’re not worrying about volatility. For some, it’s within reach, and you want to protect what you have before something bad happens. For some, you’re looking for something in between the two. So what’s your “Perfect Portfolio?” It’s not an easy question to answer, and many pros have tried (check out Meb Faber’s impressive list of asset allocation strategies and stats here). The basic portfolios to consider in our mind are the following:

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Past, Present, and Future in 30 Year Bond Futures

While everyone was watching the US Stock market bounce +5% over the last 8 trading days, there were a few hours of sheer terror/excitement (depending on what side of the trade you were on) in the 30 year US Bond Futures market at 10:00 am hour on October 22nd. What? Say you… I don’t remember any big moves in bonds at that time. And if you were looking at the so called ‘front month’ contract, you would be correct.  The December 2014 bond futures traded in a range of 142-10 to 142-12 between 10 am and 1 pm last Wednesday, as you can see below.

But while all was calm in the front month, there was a huge move going on in the June 2015 back month contract. Wednesday was the first trading day for that contract, and it quickly jumped from 141 to 152, a percentage gain of 7%, with a volume of over 16,000+ contracts in just 2 hrs. Compare the two moves below:

[Read more...]

Would’a Could’a Should’a

Woulda Coulda Shoulda
(Disclaimer: Past performance is not necessarily indicative of future results)

NASDAQ: The Good, The Bad, and The Ugly

(click here for a larger view)
Nasdaq Infograph_6

Stocks… We Hope they Go to Zero!

One of the best things about being in an investment which can do well when markets are down is the fun you can have at cocktail parties, in the locker room at the golf club, and dinner with friends. A -334 point down day in the Dow and around -5% move off of all time highs starts to  bring out the shrugs and exasperated expressions, as those well to do’s around you murmur their version of the timeless classic:

“Tough day in the markets today, huh?”

And here’s where it gets fun… because our go-to response is usually:

“Sure was tough… we hope they go to zero.”

For those from the world of traditional investing, or better yet – those who’ve only been around the last five years – this can be a bit unsettling and cuts a lot of conversations short.

“Go to zero? What?”

While we don’t actually want market to go all the way to zero (we still want a functioning society and all of that), we welcome with open arms the volatility that would accompany some fear and panicked selling. Because, you see, we’re mostly in the business of volatility. Or to be more precise – the business of profiting off of volatility expansions from periods of consolidation and dampened volatility.

As we have laid out before, managed futures tends to do well during market crisis periods because of their ability to go short global markets. In 2008, managed futures programs found themselves short nearly every type of market not considered a safe haven, be it stock indices, energies, foreign currencies, metals, grains, or softs. Fast forward to the past few weeks, and we’ve seen several managed futures programs start to initiate such short positions in markets like US and non-US stock indices, energies, foreign currencies, grains, and metals.

Quite simply, we’re cheering the markets to zero because the lower they go in this move down, the better for our clients in their long volatility investments. Of course, past performance is not necessarily indicative of future results and there are clients and programs and positions which may lose money in an extended move lower.  But generally speaking, such down trends work to the benefit of the managed futures space in our experience.

So for now we’ll be cheering… “Go to Zero!”

Russelll To Zero(Disclaimer: Past performance is not necessarily indicative of future results)
Chart via Finviz.com

The Best Images from “StockToberPocalypse”

Part of the reason many believe social media will never die, is because of days like today. Stocks experienced their single worst day of the year. The Dow plunged 300 points (-1.97%), The S&P had it’s best day of the year yesterday, followed by it’s worst day in six months (down -1.98%), and social media exploded with posts, comments, and charts trying to explain just what was happening – as if we had just lived in a dream land where stocks only went up the past five years. Is volatility in stocks here to stay? Why did stocks gain 2% yesterday, and lose all of it the very next day? Is this another 2008? Are we all F*(^% crazy as Reformed Broker says.

First, some funny ones…

Stocks Crushed

I’m confused… Is the lighting crushing something? Is the Lightning stocks? Or is it the Tornado? Is the Tornado volatility?

 CartoonCourtesy: StockTwits

And some serious ones…

 

Man on PhonePicture Courtesy: CNBC

The obligatory serious looking trader guys… (is that guy on the right wearing a Flyers shirt… what trading floor is that?)

Dow Oct 9thChart Courtesy: Reformed Broker

Wild Market MovesChart Courtesy: CNBC

Vix ChartChart Courtesy: Ryan Detrick