While OIL settled up +$2 (+4.48%) CL @ 46.68 — King USDollar takes more Kool-Aid bids

Today we had a classic pairing or “retracement” of the losses on Friday — at least for Crude Oil. Looking at CL from the fall on Friday — there was plenty of opportunity to get long and establish a counter position, (getting ready for the bounce back we saw take place into the settlement). I sat confidently holding my CL position as I watched stocks play their usual games, rallying into the morning and selling off intraday, only to rally and rip higher into the close and through it… Meanwhile as our stocks were able to bid back into the green, and Oil was firm — I was surprised to see the USD was getting stronger.

I saw Gold was lower and not having much of a bid, but I saw this as an inverse play to the higher stocks/oil — as I looked closer, it seemed that the USD strength was likely the culprit to break the bulls spirits, and generally we did not have much of a breakout or ability to build momentum. As I often play “the USD” through USDollar denominated commodities and stocks / markets… I decided to go back to something that was working last week, and dip my toes into FX Futures to play it directly.

What I mean by this, is often times I will make a trade elsewhere, thinking for example “Oh the Loonie (6C) is bid, so here comes the NZD (6N) and AUD (6A) rallying with it… (also commodity currencies)”— This momentum and “bid” in those products (thus weakening USDollars and showing a “bid” in a currency linked more specifically to certain commodities, — I would make a buy or sale in Copper, or Gold, Or Oil for example off of these other FX Futures moving. Basically I am using the market to play the market, as I see real numbers on markets moving, real money moving various asset classes, I know that “The Law of Cause and Effect” and correlations will be kicking in to complete the full picture, —and the thing is, this goes on for 23 hours a day, so the opportunity has not been missed, it hasn’t even happened yet!

This makes two points, one point is that “for every action, there is an equal and opposite reaction.” and the other point is that, I never feel like I am missing a trade or can miss a trade, there is always another one unfolding and setting-up. — The game of futures is not really ever over… this is why it is important for me to constantly best figure out my style, my risk, my plan, as the market doesn’t care about me, — I must always be looking out for myself as I trade these markets. So for now, I am going to do this by staying active, and being conscious of what is going on in other markets, even despite what I see elsewhere, or especially despite what I hear…

A fact is, we didn’t raise rates in September, and I feel like this had to be for a reason (and if it wasn’t- we still didn’t lift off), it doesn’t seem as a realist that we are going to be raising very soon either. I can only do what the market is telling me, but for now, I don’t understand why the USDollar would be getting stronger again? The music hasn’t stopped, so the party should still go on. That being said, we will see where the USDollar ends up let’s say, maybe by Thursday — after it has had a week to digest the fact that the previous Thursday, the FOMC did and said nothing that would make me think otherwise. Hmmm… The Spoos ES hit 2011.75 last Thursday, and now were trading 1960’s? I will not be sitting here trying to figure out when or if we will raise rates, I am going to be sitting here trading, as I have been. *It amazes me how many people still getting wrapped up on that subject (and asking or mentioning to me about rates), when day-to-day I can’t recall any of these conversations really helping me make much real money while really trading markets.

Just like people using “inventories or supply” as argument or justification for Crude Oil prices staying low, or going to 20… HA. — we see this get beat when the EIA/API state with numbers/facts otherwise… we didn’t raise rates, so the FED/FOMC is saying we aren’t ready… so I am not going to front run and bid up King USDollar (since it’s already been happening for a while) — rather, I am going to position for it’s fall. I think the market is smarter than the FED/FOMC, so if they are targeting inflation, we will see it first in prices or too quick for the average trader to catch. I don’t care where markets can move to irrationally in a moment or day, I care about where they are going to be in the future. As I typically would play this fading USD with longs in denominated commodities or stocks, I am not afraid to do it directly in the FX Futures (as well) as we made it past the most recent Fed Day with nothing to really talk about…

Let’s try again tomorrow. – Happy Trading.

-Bret Rosenthal