In the past few weeks the rampant upside in the market has
understandably left those thinking that markets never go down. The VIX is
representing this as it is trading back into the 13s last week and despite the
big sell off on Friday the Volatility indexes still seem to be under pressure
on every up tick in the market.
The DAX is experiencing the biggest gains on the back of the
ECB QE programme. There seems to be such strong support despite the lofty price
rises over the past month, its as if the ECB are buying DAX futures as part of
the programme. The consequence of this programme is likely to be the same as it
is in the US. Companies will borrow at ultra-low rates and instead of feeding
it back into the economy through investment and jobs it will just repurchase
stock (which will prop up earnings per
share), which are already at record highs continuing the buy at any price
strategy.
But we can see how this can go wrong as was the case with
Oil companies who repurchased alot of stock when Oil was in the 80s and 90s,
and now with the fall in Oil prices stock buy backs have been suspended.
However as it stands, it seems there is no follow through to
any downward move so you assume the market will continue its current pattern
which is to buy into any dip.
Strategy wise I have been accumulating long Vol
Positions, as I'm looking for that
contrarian play. I'm also looking to short the Short Sterling curve on the back
of the big rise in the past week, with Dec15Mar16 trading 10 ticks above where
it was a couple of weeks back, a short here seems like a good risk/reward play.
I continue to hold my Dax short option play, and have rolled it onto April
Expiry now, so hoping for a 5% correction at least in this index. Finally I
have gone long some Gold in small size on the back of the big drop after Non
Farm Payrolls.
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