What you're experiencing is a shift within the perceived pendulum of inflation and deflation. The markets are clearly anticipating an ECB rate hike tomorrow and they expect the money supply to tighten somewhat. The result is that market emphasis is shifting towards deflationary pressure stemming from economic recession. The result can be clearly seen in the way raw materials markets behaved this week - crude oil being the exception. If the ECB raises rates tomorrow you can expect further pull back in commodities - oil included. Treasury markets will strengthen somewhat as emphasis slightly shifts from inflation to deflation. You'll likely experience some more drawdown in the coming weeks. Don't worry though, your longer term scenario of global stagflation is sound. Central banks are fearful that they may tighten the money supply too much. The industry they represent derives very little benefit from scarce money.
0.75% daily return compounds into about 552% annual return. I seriously doubt that it's possible to do it consistently at all.
^yeah, but I'm more worried about a sell off in EEM as a whole. Even if commodities rise, EEM producer p/e multiples could seriously contract... Japan and Australia might be safe havens.
It sounds as though your longs are not rising and your shorts are not falling if I understand you correctly. If that is the case then I'd say we are closer to a bottom than ever because the strongest stocks are commodity related companies and the weakest are just about everthing else. So your weak stocks are firming up and your strong stocks are beginning to break? This assumes are are long momentum stocks and not value stocks, and short weak stocks, not expensive stocks. Can you provide a bit more information on how you put on your neutral positions?
By EEM I assume you mean emerging markets. Buy OTM puts on the Bovespa to reduce the risk of a sell off in emerging markets as well as to reduce risk of a market shift away from your global stagflation scenario.
speaking of which, anyone have any type of data or plots for correlation of multiple markets over past few years to present to post? TIA ( I explained how to do a basic version of this somewhere back in the TA threads, but don't have time to run the numbers right now).
Hmm, I'm always watching out for my strategy to die a fiery death too. We may well be on the cusp of a big change. How often do you get a drawdown like this?