Weekend From Hell

I am still trying recover from what gradually turned into the weekend from hell. Over here in Europe independentistas in Catalonia facing off against by Spanish police forces, attempting to stop what it considers an illegal election, turned into a major skirmish which left hundreds injured and an entire nation in political turmoil. Meanwhile in France an Islamic terrorist stabbed and killed two women with a knife at a train station in Marseille before being tackled by another woman (respect!) and eventually shot and killed by security forces. Not to miss out on all the havoc an ISIS supporter in Edmonton, Canada ran over a police officer with a truck and then jumped out of the vehicle stabbing the officer with a knife after which he ran off and managed to injure four more bystanders.

And just when I thought this may be it for the weekend the mass shooting at the Mandalay Bay hotel in Vegas happened. Quite frankly at this point I am at a loss for words. And no worries, I am most certainly not going to serve you the usual hapless platitudes about ‘my thoughts being with the victims’ and ‘this won’t change our way of life’, yada yada. Grand standing and virtue signaling are most definitely not going to bring any of the unfortunate victims back.

The Sour Fruits Of Polarization

What however may make a difference in the future, being the only trajectory in time and space we have the power to control, is to take a collective step back and think about how we actually got ourselves into such a lamentable situation barely one century after two consecutive world wars. Last week I warned everyone right here about the dangers of political polarization and the demonization of opposing views or opinions. Which is a topic I could spend a lot of time covering but choose not to as this is and always will be a trading blog and thus not the proper platform for political debate.

So I will simply say this. The human time line is riddled with disagreements, conflict, wars, conquests, injustice, and of course the main ingredient: human suffering. All of which historically is eventually followed by compromise and renewal. To assume that this moment in time is unique would be foolish as our failings are the inherent result of our human nature, which unlike technology and science has not changed since the moment we crawled out of our caves about two hundred thousand years ago. Blaise Pascal is quoted has having said that ‘all of humanity’s problems stem from man’s inability to sit quietly in a room alone‘. I think he was right and as long as there are people on earth there will always be recurring conflict. Which means the more people on this earth the more conflict one should expect.

The Lesser Of Two Evils

When I was young my perspective of the future was one of linear progression, growth and ever increasing wisdom/maturity, roughly in line with of our technological advances (if you count out weapons of mass destruction). However as I grew older and just a little bit wiser I came to realize that nothing in life is linear and that history is full of setbacks with only intermittent progress or renewal. Our momentary perspective on human and political reality are as fleeting as leafs in the autumn breeze and are usually strongly influenced by geographical and cultural self interest. There are times when right and wrong are easily determined (i.e. Vegas, Edmonton, or Marseille) and then there are others when truth folds like an onion and each side delivers convincing arguments (i.e. Catalonia).

While I most definitely do not approve of civilians (including children and seniors) being beat into submission by police forces, history has taught me that might is always right and that long term self interests will always outweigh short term moral concerns. Like it or not, the ruling class or elite usually winds up winning and whether it is for the worse or for the better is often only clear in hindsight and up to historians to sort out once the rest of us have long moved on and forgotten.

In other words: Don’t be too quick to take sides before understanding the big picture. And even then there are times when the only way to win is not to play. Life isn’t fair to any of us and that also includes Mariano Rajoy, who I am sure will now have to face a whole fur-ball of internal domestic problems after effectively enraging the citizens of an entire autonomous region. It’s quite possible going forward that Spain will face serious domestic strive and even terrorism on top of an already existing Islamic jihadist threat which just recently took the toll of dozens of innocent lives in Barcelona. I absolutely would not want to be in Rajoy’s shoes as he effectively faces a lose/lose proposition: Let Catalonia declare itself independent and Spain most likely faces political and financial turmoil. Or prevent Catalonia from holding the vote and most likely face the very same.

In the end Rajoy made the only choice that offered him a slim chance of retaining Catalonia. Frankly I never doubted that it would play out exactly as it did. But I also knew right away that it would come at a huge cost, and in the end may devolve into a full fledged civil war. Do not think for a second Rajoy did not consider the implications of his actions as he most certainly did. It’s possible that this situation somehow could have been prevented but there are moments in life when you are forced to pick between the lesser of two evils. Rajoy made his choice and Spain will most likely never be the same, no matter how this plays out.

As a side note, and just to give you an appreciation of the complexity of the issue: Assuming for a moment that Catalonia in the end succeeds in its push for independence. What then? Apparently the intent of the independendistas is to immediately join the European Union, but there’s a hitch as this requires an unanimous approval by all current member nations. And most certainly Spain, Italy, and most likely France would vote against it as each of them face their own domestic independence movements. So I really wonder if the average Catalonian has thought things through as EU membership, and thus economic support and recognition (thus also effecting its credit ratings, bond issues, etc.), for an independent Catalonia seems highly unlikely.

Now you may come to understand why I love to be an independent trader. The odds and probabilities are much easier to determine and unlike in real life at the end of the day there’s always one winner and one loser – it’s a zero sum game. Plus the only person hating you after the fact is only the one on the other side of your trade and not an entire nation, tribe, religious group, or family. Unless of course your name is Bernard Madoff…

Now back to business. Our E-Mini campaign is in good shape and I am now moving my trail from break/even to about 0.7R – just below 2510. Nothing really to do here as the formation on the short term panel seems to be unfolding according to plan.

Wheat however didn’t fare as well but at least the stop out was quick and painless in that we didn’t have to watch it gyrate around for days or weeks on end. I usually prefer it this way: you pick the wrong side and know shortly after. You learn a little and move on.

USD/CAD is still in the running, courtesy of what I would call a very fortuitous trailing stop. I’m not touching it for now until I see another spike low. With a bit of luck and patience/discipline we may be able to ride this one all the way.

EUR/USD is on my watch list and I am tempted to throw a 1/4% on a short position if we get a nice spike high after a bounce to ~ 1.175. Let’s remember we would be trading against the current medium term trend, so no big counter bets here, as much as I would like to see the Euro swirl the toilet. Yes, I am selfish – at least I’m in touch with my inner bastard 😉

ZN is still on my watch list – didn’t really see a convincing spike low yet and it’s possible it’ll continue further down to touch its lower 100-day BB.

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