July 2018 – Peter Brandt

Factor Alert, July 31, 2018 — U.S. stock market ready for another leg up?

July 31, 2018/by Peter Brandt

This content is for members only

Clues from the Treasury Markets

July 30, 2018/by Peter Brandt

Interest rate markets

U.S. interest rates have experienced a generational low. The long-term trend is toward higher rates (lower prices).

Treasury Markets – T-Notes

The COT profile is at all-time record extremes in terms of Commercial long and Spec short positions. The daily chart displays a 6-month bottom. While I am a long-term bear on Treasury prices (bull on yields), the COT profile and daily chart suggest a sharp rally could be in the works. I will monitor this market for a buying opportunity.

A rally by the nearby contract to 122^24 would retest the double top on the monthly graph.

Treasury Markets – T-Bonds

A rally on the monthly futures graph to 148^00 would be a retest of the overhead H&S pattern. The daily chart displays a possible inverted H&S bottom. This chart would suggest an advance to 152^00 – and that would go a long way to negate the H&S top on the weekly graph. The monthly T-Bond yield chart (next page) shows that the multi-decade channel remains intact.

The weekly yield chart displays a massive H&S bottom pattern. Resistance in the 3.25% zone has repelled the advances. A 30-year Bond daily print of 3.32% would signal the start of a strong trend toward higher yields (lower futures prices).

Treasury Markets – Bond Yield Charts

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Factor Tracking Account Update

Live questions from Members

What are your thoughts on the current movement in gold? 11:06
Does Peter think to have a macro perspective (for example, follow things like RealVision) is an advantage when trading Factor principles or a disadvantage? 13:39
Wedges: preceding action - Sometimes wedges form after a strong move in the opposite direction. 15:32
Would you have made more money if you had traded Stocks only? 16:29
Do you trade the commission or non-commission forex pairs usually? 17:23
This is a two part question. In one of your recent newsletters, you mentioned that you have changed to trade management approach during the last few years, namely selling half when reach 100bp in profit and raising stop to even as soon as possible. But that selling half into strength part is not always included in your Factor analysis. So my question is 1. Do you do this differently in your prop account, but not in the Factor account? 2. How do you reconcile that by selling half earlier, it will be much more difficult to get the "bottom liners"? 18:22
How much emphasis do you place on volume these days? Can you please speak a bit more how you view/use volume when trading futures/forex? 22:45
Do you or have you ever looked at Fibonacci analysis? If so, which levels have you found to be most consistent (even though you might choose not to use them at this stage)? 25:00
How you decide to move stops, did not understand the real tight move in the IWM based on volatility. 25:29
I understand that Peter has been cutting down trade size dramatically since about the book "Diary" time. The main reason behind that is because Peter is approaching the retirement age or he simply believes the time has changed and trader shouldn't take 3% loss anymore. 27:54
I’m curious to your average risk sizing YTD. Seems like LDR has been difficult to apply on $100k account size. Are you applying different initial risk tactics recently? 29:05
You've mentioned that you don't trade single name equities and from what I recall that decision is driven by the leverage that can be applied. Am I correct in my recollection? If you could lever single name equities like futures would you trade them? 32:16 (Link to document referenced https://www.peterlbrandt.com/trading-futures-forex-related-etfs-foolish-use-capital/)
The death cross of the 30 week MA and the 50 week MA will happen in around 3 weeks. In case that the $5750 was the market bottom what are the possibles outcomes which the market could react when the death cross happens? Usually the market makes lower lows when this happens. 33:35
How do balance aggressive risk management with "letting winners run”? 33:53
Double tops / bottoms - I don't see many of these on your reports. Is there any particular reason for t his? 36:22
Both E&M and Schabacker were written with single stocks in mind and with the Daily charts as primary tool of analysis. Your Q&A says (And this is clear from your reports) you don't generally follow single stocks. E&M and Schabacker were very confident that these methods work for single stocks. Do you think they work less well nowadays? Or do you think someone who applies your trading methods to liquid single stock should achieve similar returns to what you achieve on currencies, stock indices and commodities? E&M required a 3% margin of safety to accept a trading signal. Do you think that is still optimal for single stocks? 37:26
You've mentioned your experience of loneliness while trading - How do you address this? Outside of the Factor Community, how have you built and managed relationships as a lonely trader? 41:09
When do you consider fundamentals or look at fundamentals? If you don't how do you manage the media/news/information around fundamentals? 42:58
What makes you think your strategy needs adjustment and how often do you review your strategies for adjustment? 44:33
If BTC has an INTRADAY WBB Candle breaking out above $6829 (completing the 5 Week H&S Bottom) combined with Volume Breakout and Diverging Bollinger Band s, how sure can we be that it does not come back under 6829 by 00:00 UTC (end of day)? What is the strategy for that? Stop-Loss at ~$6750? 46:38
The H&S failure is the only failure that you actually trade. Since so many of the formations fail - by your own admission you expect a trade to fail at inception, as the winning percentage is below 50% - do those failures themselves present trading opportunities with manageable risk? 51:14
Would you have traded Feeder Cattle Head and Shoulders. I did today and got stopped out. 52:26
You mentioned the other week that over time you’ve added chart patterns to your library, and gave one example of “ottoman with chair”. Would you be able to share th e other with us over time/in a special piece. 53:18
How do you determine how many bps of risk you will apply to each trade? For an account size of $250,000, trading only equities, how much do you recommend each position size be around? 53:53
Can you please speak to moving stops once position has gone your way? 55:05
Do you trade BTC futures through an exchange and if so which one do you use? 56:40