My apologies for not starting my EOD market commentary. I had the flu for a full 2 weeks in January, and it knocked me out. I got back into the market last week just in time for the Friday supply imbalance. Here is the newsletter sent to subscribers on Thursday afternoon.
As you can see from this chart...the supply imbalance could not have played out any more perfect. My position was never "tested" by the market (newsletter was sent out where you see the cross-hairs on the chart below).
My P&L on this trade was +28 ZN ticks (fully levered) in just about 24 hours.
That comes to just over +30% return on AUM in just one day.
---------- Forwarded message ----------
From:
Govt Trader <govttrader@gmail.com>
Date: Thu, Jan 29, 2015 at 4:09 PM
Subject: GovtTrader Supply Imbalance NewsLetter
To:
Today the UST model has triggered a supply imbalance in ZN futures.
Yesterday
was a P-up, and today was a non-facilitating sell imbalance (meaning
*they* tried to sell the mkt early, but the mkt came right back up in
the afternoon).
This tells us that the UST mkt (specifically ZNH5) has an embedded skew to higher prices.
ZN is currently trading 130-04 while ES is @ 2014
The
ZN mode today is 130-05 at the lowest. This makes 129-22 the bottom of
today's bell curve...and that *should* be the lowest ZN can trade with
this embedded skew. The most likely path for ZN should take it to above
the local high @ 130-20...possibly to as high as 131-08. Nothing is
guaranteed in trading of course.
Tomorrow in the month-end trade...which should be supportive of this UST rally.
As
you all saw on twitter, i bought both the 7yr auction (ZN @ 130-02),
and then ZN after the auction @ 129-30 (so my avg price is long ZN @
130-00).
My stop is the ZN local low @ 129-16...but unless
ES rallies to 2062 (the top of its January bell curve) we *should* not
get anywhere close to my stop level.
Remember,
everything in trading is based on probabilities. We never have 100%
certainty. Even tho i'm confident that this will play out in my
favor...that is not a guarantee.
Since these
embedded supply imbalances / skew are the highest probability trades, my
position is larger than usual. While there is no guarantee that we
will see a short squeeze rally in ZN tomorrow (or possibly early next
week), the odds are greater than 70%, and that is what i am playing for.
My
target for this ZN long is 130-27 --> 131-08. That is a large
range...but short squeezes are notoriously difficult to predict, both in
time and price.
If you have any questions, please feel free to reply by email.
GovtTrader.
