I am a part of the team which is responsible for management and hedging of commodities exposures. Some say corporates are good only in following advice from banks or brokerages. I do agree corporates do not have market insight of a bank. But here is a problem. It is not bank or broker or a hedge fund that has biggest risk that markets will go against them. These guys always have an option to do nothing and wait for a better trading opportunity where as we don't. We have to continue to purchase commodities, spend currencies for daily business. Such company is always exposed to changes to market price even if it decides not to hedge. In fact my company has probably one of the biggest short commodities portfolio in the world. Managing such risk effectively is a challenge. It is like being between a rock and a hard place. You get your behind kicked all the time be senior management, whether it was a missed opportunity to hedge or hedge that turned to be out of the money. Critics will say if you lost money on your hedge then you probably bought it cheaper on physical market. let's face it, nobody wants to loose money, full-stop.

So I do not have an option to do nothing as I am always in the position (short in this case). I think people like me have higher motivation to earn positive return on their portfolio then other players. In fact my intention is to bring hedging to a performance benchmark of proprietary trading.

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Friday, August 13, 2010

Going to "Kububrum" PART 2

So we continue "Kububruming"....

Honestly, I was impressed by German GDP and in the beginning my emotions took over and it felt like we might even post the low for the time being. Yet, markets did not think this way. Like French say "Bon..." What are we looking at now?

S&P threatens to close down under all short term and long term moving averages. Moreover it gapped through 50d moving average. Whatever happens this is not a "buy" market. Looking for a retest of "flash crash" lost at 1062 and possibly lower, as momentum is still not oversold. Keep in mind that fundamentals have yet to catch up with the price action so the move there might be choppy from here.


EUR has its old skeletons resurfacing with long term solvency of Greece, Ireland and Italy being in question... I still think that it is France that will have a problem, as it is a ticking bomb with soaring social security costs and high taxation. Good 2Q GDP numbers do justify rally off 1.18, however market is discounting slowdown if not contraction....Last support to be taken out is May highs that coincide with 50d moving average:


Oil's summer rally looks to be coming to an end as we roll through all moving averages. There is some support that comes with bollinger bands and channel support line, but overall price action looks corrective within larger bear trend:


Even feels like Copper will give up in such environment, but technical picture is not yet turning bearish... probably this is another shoe to drop in overall bearish environment:


Overall no sign of bottoming in risk assets yet. But again, sentiment got hit but we need to see fundamentals catching up with the price action. Have a good weekend!
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