Sold DXM8 for a loss of $615.00

I sold the Dollar Index position Friday at 72.79 due to the unemployment surprise and the comments by ECB President Jean- Claude Trichet saying he was going to raise rates next month. The market tanked and my reasons for going long were promptly proven wrong by the price action.

I originally went long because I assumed that the ECB would worry about slowing growth in EU, especially in the PIGS countries, than slightly higher inflation. All the US numbers had been coming in above expectations and I presumed that the FED would be the one worrying about inflation instead of economic growth. These two mentioned scenarios were to lead to a narrowing in the interest rate differentials between the EU and US. Sentiment was also shifting from extremely dollar bearish to neutral in the media.

I also thought that the 7 year drop in the Dollar Index was getting long in the tooth. Lots of new foreign currency ETFs have come out for the retail investor to hedge there dollars. When the retail investor is finally catching wind something is awry it usually means the trend has fully run its course for the time being. I also assumed all the reasons to hate the dollar were out in the open and the market had discounted all the negative information possible.

Trade synopsis: Bought DXM8 73.405, Sold DXM8 72.290, for a loss of $615.00

Sold SBV8 for a loss of $795.20

I sold my sugar position today for a decent size loss. I still love the long term fundamentals of sugar but, I don’t have the capital to wait for it to bottom. Maybe I’ve finally learned that buying a market trending down sharply is a bad idea no matter what the fundamentals tell me. I plan on re-entering this trade when it moves strongly through the 50 day moving average.

Trade synopsis: Bought SBV8 11.68, Sold SBV8 10.97, for a loss of $795.20

I don’t mind taking $700- $1000 losses on trades because I want to avoid the monster $15,000 loss that will cause severe damage to my bank account. My stated goal is to catch one or two long term market moves per year (I can pyramid) that will make up for all the small losses and then some.



Yesterday I went ahead and bought one US Dollar Index future as it closed above its 50 day moving average. I will probably add another contract if it breaks out of the previous peak around 74.00. I will post later on my fundamental reasons for thinking the dollar may finally be turning up since beginning its fall in 2001.

SBV8

My sugar position has turned profitable to my surprise. I broke my rules when making this trade by buying a product that was heading straight down hill with no bottom in sight. I will add to the position if it crosses above the 50 day moving average.

My reasons for this trade are based on the theory that prices are bottoming as the fundamentals appear the most bearish. I also see a couple factors that may cause this market to tighten in the near future. The USDA reported that in the 08- 09 growing season the world sugar market may finally go into a deficit after years of large surpluses. Other private forecasters have come out with reports saying the market will stay in a small surplus.

I support the deficit outlook because ethanol demand in Brazil will be higher than expected and farmers worldwide will plant more profitable crops in place of sugar cane. Ethanol in Brazil sells for $2.65 a gallon compared to gasoline at $5.65 gallon. Most cars in Brazil can run on ethanol, gasoline, or a blend of the two. As long as oil prices stay relatively higher then ethanol, demand will stay supported. The Brazilian Sugar Cane Industry Association is actively building new ethanol plants and will open gas stations that only sell ethanol fuel in the future. Furthermore, Brazil is aggressively seeking export markets for sugar based ethanol.





Cheaper ethanol outselling gasoline in Brazil


Brazil seeing sweet profit from sugar cane-based ethanol