How was it for you?

Forget Interest rates, the market returned to “normal”

Well, that was an interesting week. The effect of jawboning was finally appreciated as Central Banks finally got the hang of the fact that words, in a lot of cases, speak louder than deeds.

The Bank of England gave us what can only be described as a genius version of the art of deception. The market believed there for a minute that they were planning to hike rates, possibly twice, before August. The futures markets took the bait attaching a 60% chance to a hike in May and 100% for August.  

There are only so many times rates can be hiked before businesses stop investing and a slowdown starts but there are almost infinite opportunities for Heads of Central Banks or their colleagues to make little supportive comments for their underlying position. In the UK there us a clear concern about inflation which is well above the Government’s target and showing very little sign of abating.

There is a yawning negative gap between incomes and prices which is also a concern. The wages part is being influenced by a lack of investment by businesses due to the uncertainty created by Brexit. The excuse for high inflation is now starting to wear a little thin. The pound dropped like a stone following the Brexit referendum result but has retraced around 60% from its low, producer prices have fallen back in line, but consumer prices haven’t. Go Figure!

Don’t try this at home

I restarted an old trading account this week and took a few positions based on a theory I read about recently and some comments that were made to me at a conference that I attended where I was told I was wasting my experience.

The theory was that someone who has been around the market as long as I have should be able to look at price movement, study the price action and know, virtually instinctively, when to get in and out.

I must admit it felt like facing an armoured unit with a bow and arrow, but I gave it a try this week. The longer it went on, the better it felt. I applied money and risk management rules but quickly found that I was stopping myself out for the wrong reason, I dropped the position size a bit and that did the trick.

It was the Carney news conference that really got the juices flowing. I had been short of cable into the BoE decision as that instinctively looked right to me and the position was showing a profit, but I felt that it had a bit more juice in it. As Carney spoke a rally took place but I held firm as my profit turned to a loss not seeing anything to change my mind. After he stopped talking it seemed that traders also felt the rally was overdone and the market returned to my previous level it went another fifty pips and I cashed out.

No Charts, no signals, no EA’s or robots just gut and instinct. The Davy Crockett of the FX Market!

It may be the way for me to trade but it is so intense both mentally and in consumption of time that I will put my trading trousers away again until the itch needs to be scratched again,

Meanwhile in Cryptoland

There used to be this cryptocurrency, I believe it was called Bitcoin. All you could read about online was Bitcoin this and Bitcoin that. Then the market stabilized, and people started to see it for what it was, a means of transfer of value without regulation that as it matured would become more efficient, quicker to transact in and cheaper to deliver.  

A week is a long time in Cryptoland, and we have now reached the point where those who bought Bitcoin at $10k+ are licking their wounds, those who bought it to make an inordinate profit are very happy, nervous or “gutted” and those who see the whole financial revolution as being in a nascent state continue to make progress in their journey.

What is the true value of a Bitcoin? No one knows, but at least we don’t have Central Bankers trying to convince us of something that clearly isn’t true. No interest rate differential, no monetary policy considerations and no central bank intervention. Long live Crypto!