Saturday, 10 January 2015

Trades I have undertaken this week

In newsflow terms not a heavy last week but as for market was a fascinating one essentially (as shown on this chart via down, down, up, up, down...and ultimately only slightly down for the week.

Personally I "enjoy" this sort of volatility as it provides opportunities.  What it does however is induce concern amongst investors and drives particular types of allocation preferences.  For example spot the trend over just the last couple of days:

Bond inflows hit 8-week high in flight to safety

Hmmm...pretty clear to me that caution abounds.  I have used this chart from @MktOutperform before as it gives a great sentiment feel over time.  And what was the latest (Thursday's) net bull-bear spread?  13.3% i.e. below the median.  Funny how that turn of the year optimism as shown below dissipated so rapidly...

Another sign of variable volatility was the performance of Shanghai just on Friday.  Here's a quick recap (remember this is just a one day chart!)

In aggregate then you end up with reverse yield gaps like this on in Europe (broadly replicated around the world except in real crisis countries)...and therein lays the opportunity over time for equity investors.  
Shorter-term it is going to be all about macro linked with earnings season appraisal (as always). On the latter front it is so important to keep watching those FY 2015 estimates earnings trends as discussed before (link here). 

So onto trades this week.  A few switches around...

Volatility - I sold my remaining long volatility positions (in the VIX and EuroStoxx volatility) on Tuesday as market pessimism felt overdone shorter-term.  This looked clever...but (as noted above) I remain fearful re the ultimate high likelihood of more volatility this led to...

DAX - ...instigating a short DAX position above 9,800 index points on Friday.  I feel the DAX is broadly in a 9-10k range so adding a bit of general cover felt correct to me. 

Otherwise late in the week I took off some of my trading long in Gilead (which had bounced nicely from an oversold position - I will probably keep the residual position on until the FY numbers in a few weeks time) and also in Tesco where late on Thursday post the turnaround plan (hugely well-received) I took profits on my trading position which had been built up over the previous couple of months.  I still hold my pension fund position untouched in anticipation of share price progress in 2015-16.  

Finally I could not help myself in adding to my small Quindell short position after the share price pushed up on rumours of stakebuilding/potential big sales of assets.  Still looks a troubled company to me.  

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