I want to take a second to express how much fun these markets are lately to trade. And before you dismiss my comments as a trader who has hit something big and is now as happy as a pig in shit, I want to say that this is not the case as yesterday I got creamed. Many of my macro positions went hard against me (way too much precious metals in the portfolio), but despite this, I still had a blast.

For the first time in a long while, stocks are moving up and down. For too long the big winning traders were simply those who were boldest with the blue tickets. It was not very fun to trade. It almost seemed like the stupider you were, the more money you made. All it took was closing your eyes to risk and strapping it on big time. Then you sat back and watched it go up! There was precious little opportunities on the short side, as equities were blasting higher with only the very most minor pullbacks. One of my newsletter writers guy wrote this great piece about how the really smart guys know when to be stupid, and to a large extent he is bang on.

However that market is behind us (thank goodness) and traders like myself can play the swings without the market simply blasting straight up. And over the past week or so, the swings have been massive. It is tons of fun to trade again!

Have a look at yesterday’s action:

Tuesday, April 15, 14 at 7:33:30 PM America/TorontoliboardS&P 500 trading April 15, 2014</a> </div>

That’s a round trip of 70 S&P handles! The trading is all over the map!

And it’s not just yesterday, let’s look at the day before yesterday:

Tuesday, April 15, 14 at 7:35:17 PM America/TorontoliboardS&P 500 trading April 14, 2014</a> </div>

That was even more up and down, but it again travelled 60 handles! Awesome!

To contrast this, I randomly chose a big up day from last month – March 4th:

http://themacrotourist.com/images/Azure/ESM40304Apr1614.pngS&P 500 trading March 4th, 2014 – BORING!</a> </div></p>

It was a strong positive day and we finished 25 handles higher, but it was just chug, chug, chug higher. The dips were tiny and boring.

Lately the trading is miles better than the trading from the last couple of quarters. I am having more fund punting around S&Ps than an eight year old at Disney World. Let’s hope it lasts…


Japan’s downgrade

When you look at yesterday’s action, it seems pretty random. Big move up in the morning, followed by a huge swoon, only to have the whole thing rally back up to finish at the highs. Huh? What the heck is going on?

The important thing to realize about yesterday’s action was that the trend was lower, until a seemingly small detail dramatically reversed the direction.

ZeroHedge had the best reporting about this development:

Moments ago the Nikkei strategically leaked a report that the Japanese cabinet office, quite expectedly, will downgrade its economic assessment in its April report.

Remember my theory about what is driving the de-risking move? I contend that it is the reluctance of Europe, China and Japan to further ease aggressively.

Therefore this downgrade of the Japanese economic assessment was taken favourably by the markets as it increased the likelihood of further Japanese monetary stimulus. Have a look at this great chart, again by ZH:

http://themacrotourist.com/images/Azure/JapanDowngradeApr1614.pngIntraday Trading with Japanese Downgrade</a> </div>

I think that the near term direction of the market is going to hinge a lot more on these three other countries than it does on the Fed. Watch for shifts from these other banks and don’t worry about the Fed.


Gold’s puke

Yesterday was not kind to my precious metals position. And given the pain that I felt, it is obvious I am probably a little too long for my own good (you are always too long on the way down and not long enough on the way up).

How bad was it?

http://themacrotourist.com/images/Azure/GOLDApr1614.pngGold trading over the past 3 days</a> </div>

It was U.G.L.Y. In the space of a few hours, gold got drilled for $50 and silver was even worse.

What triggered it?

There was very little consensus as for the reason for the big decline. I am pretty sure it wasn’t “The most interesting man in the world” on the right, but you never know, he seems to be everywhere on the internet and 3 million ounces is a lot of selling. Some market analysts pointed to Goldman and Morgan Stanley’s reiteration of their $1,050 price target. Others pointed to the an article in the [India Times that highlighted the potential of large Chinese gold financing problems.](http://economictimes.indiatimes.com/news/international/business/china-may-have-1000-tonnes-of-gold-tied-in-financing-wgc/articleshow/33766159.cms) At the end of the day, I am not sure what caused the massive sell off – and that worries me a little. I have two theories and I am not even sure that if I could confirm them what I would do about it. My first theory is that gold has actually being stronger than it should have been during the last couple of weeks due to hedge fund unwinds. I am increasingly convinced that the hedge fund community (apart from the dyed in the wool gold bugs that never change) is trading gold from the short side. I have read anecdotal stories about how Tudor went short last year and it has been one of his better trades. If something has been trending one way, you can bet that the hedge funds are in on the trade. Therefore over the past couple of weeks, as the hedge funds have been forced to de-risk, gold has been stronger than it should be. Yesterday was simply that short bid walking away as the markets had stabilized and the forced unwinding came to a finish. My second theory is that things are way worse in China than we know. I need to do some work on this, but China had a failed bond auction a few days ago. Their credit seems to be trading very erratically and there might be more issues over there than the market is focused on. Even if I knew that either one of these theories was correct, I still don’t know what to do about my position. Big picture, I still like the precious metals, and yesterday I took advantage of the move lower in the GDX (Gold Miner Index ETF) to add to the trade. For now, I am going to hope that yesterday’s selling was just noise and stay with the game plan. However anytime a position moves that hard against me, it is prudent to re-evaluate and look for what you are missing.
**Uncle Carl** [Most of you that read this blog know about my dislike of Carl Icahn.](http://gfbblogs.azurewebsites.net/blog/2013/12/19/master-of-the-universe/) I am pretty sure the feeling is mutual (sorry I couldn’t resist that one – he of course has no idea who I am, and I am pretty sure he is not going to worry about what some Canadian thinks about him). In case you don’t know, I find the way he conducts himself on TV by getting into fights with other hedge fund managers quite pathetic. His letters telling successful company managers like Tim Cook how to run their business when he in fact owns less than 2% of the company should not be given any airtime, yet CNBC drags Carl on air to hear his crap. To me, he kind of epitomizes everything that has gone wrong with the financial system. And what is really sad is how there was a whole bunch of traders _who idolize him._ These fools tag onto his trades and eat his shit up and go back for seconds. Well, let’s have a look at how good ole’ Carl rewards them. During the blitzkrieg of Carl’s soaring popularity TV tour, Carl’s Icahn Enterprises ran from $85 to $150 in about three months. Of course during this time, the media’s infatuation with Uncle Carl was helping propel the stock higher. Let’s have a look at the chart of the trading in the stock: http://themacrotourist.com/images/Azure/IEPApr1614.png At the height of the frenzy Carl issued $270 million of stock at $135 per share. Well, that secondary held issue price for a whopping one day. Even Carl appearing on the cover of TIME three days later (I am sure there was no whispers of that leaked to help move his stock up prior to the issue and that the rise was coincidental) could not move the stock back up to the issue price. Since then, it has been a steady drip lower and anyone who bought Carl stock anytime in the past six months is now under water. I don’t blame Carl one iota for issuing stock into the rip higher. It is like blaming a cheetah when it kills an antelope. When Carl sees a wrong price, he of course is going to hit it. But I do wish that the media would report this aspect of good ole’ Uncle Carl. Somehow I don’t think CNBC is going to be reviewing their clips of their never ending adulation and apologize for helping Carl move up his stock to stuff the public.
**Positions** http://themacrotourist.com/images/Azure/PositionsApr1614.png