The most successful traders can talk in detail about the patterns that they perceive in markets and how they have traded those patterns. The patterns make sense to them and represent some manner in which markets are “offsides” and thus offer a favorable reward relative to risk.
The least successful traders talk about catching moves in markets and are not focused on particular patterns or setups. They let market movement define opportunity, rather than allow their definition of opportunity guide their involvement in the market.
I recently came across a December 1996 San Jose Mercury News article on tech pioneers’ attempts to carry the pre-browser Internet’s bulletin board community vibe over to the new-fangled World Wide Web.
In effect, the article is talking about social media a decade before MySpace and Facebook and 15 years before the maturation of social media.
(Apple was $25 per share in December 1996. Adjusted for splits, that’s about the cost of a cup of coffee.)
So what’s the point of digging up this ancient tech history?
1. Technology changes in ways that are difficult to predict, even to visionaries who understand present-day technologies.
2. The sources of great future fortunes are only visible in a rearview mirror.
Many of the tech and biotech companies listed in the financial pages of December 1996 no longer exist. Their industries changed, and they vanished or were bought up, often for pennies on the dollar of their heyday valuations.
Which brings us to cryptocurrencies, which entered the world with bitcoin in early 2009.
Now there are hundreds of cryptocurrencies, and a speculative boom has pushed bitcoin from around $600 a year ago to $2600 and Ethereum, another leading cryptocurrency, from around $10 last year to $370.
Where are cryptocurrencies in the evolution from new technology to speculative boom to maturation? Judging by valuation leaps from $10 to $370, the technology is clearly in the speculative boom phase.
If recent tech history is any guide, speculative boom phases are often poor guides to future valuations and the maturation trajectory of a new sector.
Anyone remember “push” technologies circa 1997? This was the hottest thing going, and valuations of early companies went ballistic. Then the fad passed and some new innovation became The Next Big Thing.
All of which is to say: nobody can predict the future course of cryptocurrencies, other than to say that speculative booms eventually end and technologies mature into forms that solve real business problems in uniquely cheap and robust ways no other technology can match.
So while we can’t predict the future forms of cryptocurrencies that will dominate the mature marketplace, we can predict that markets will sort the wheat from the chaff by a winnowing the entries down to those that solve real business problems (i.e. address scarcities) in ways that are cheap and robust and that cannot be solved by other technologies.
One of North Korea’s missile test-firings in May suggests that the country’s ballistics development program is nearly complete.
On May 14, Pyongyang launched an intermediate-range missile, what it calls a Hwasong-12. The projectile reached an altitude of more than 2,000km — well out of the Earth’s atmosphere, which is about 480km thick — then hit the Sea of Japan while traveling at least Mach 15.
Mach 1 is the speed of sound. Mach 2 is twice that.
That the missile did not disintegrate upon its re-entry into the atmosphere shows that it is capable of carrying and delivering a warhead.
Furthermore, it is believed that the missile’s electronics were able to keep measuring the inside temperature, flying speed and perhaps other data — and send the information back to ground control.
Sometime later, a national security source who is familiar with Japan’s missile defense circumstances told me, “North Korea appears to have completed the development of a Japan-targeted nuclear missile.”
The expiration of the June contracts and the roll into September positions appears to have boosted activity in the currency futures, and may obscure the signaling effect. Of the 16 gross positions we track, speculators add to exposure in all but four positions. There speculators covered gross short Swiss franc, Canadian, Australian, and New Zealand dollar positions.
There were several significant position adjustments, which we define as a gross position change of 10k or more contracts. Speculators boosted the gross short euro position by 37.2k contracts (to 122.4k). This accounted for the vast majority of the sharp drop in the net long position from 79k contracts to 44.9k. Gross longs grew by a mere 3k contracts to 167.2k.
Speculators sold 49k Mexican peso contracts to bring the gross short position to 76.7k contracts. The gross longs added a 2.2k contracts (to 125.7k). As a result, the net long position was halved to 49k contracts from 95.8k.
The bulls added 10.1k sterling contracts to lift the gross long position to 50.6k contracts. However, the bears added 8.2k contracts to the gross short position, which stood at 88.2k contracts. This means that thee net short position barely changed, slipping to -37.6k contracts from -39.4k.
New Zealand dollar futures were active. The gross long position rose 11.1k contracts to 38.4k, while the gross short position fell 8.7k contracts to 16.9k. The net position, which had swung to the long side in the prior week rose to 21.5k contracts from 1.6k.
The US dollar edged higher against most of the major currencies over the past week.However, the fundamental backing is still not solid, and it makes as wary of these upticks, even though we think a bottom is being carved. Specifically, the US interest rates still not finding much traction, and President Trump’s legislative agenda still is encountering significant resistance within the Republican Party.
Since the end of April, the Dollar Index has alternated between advancing and declining weeks. We suspect the pattern will continue next week. After this week’s upticks, it means a setback. Over most of this period the Dollar Index has been confined to a roughly 96.50-98.00 range. The Dollar Index peaked in front of near 97.90 on June 20. It can drift toward the lower end of the range, which we expect to hold.
The euro was confined to narrow trading ranges last week and finished little changed against the dollar. Since the middle of May, the euro has traded in an $1.11-$1.13 trading range. After starting the week in Asia above $1.12, it was confined to the lower half of the range in the past several sessions. The sideways trading has alleviated the extended technical condition we have been monitoring. In our macro view, we are concerned that a great deal of good eurozone news has been discounted, and that the economic momentum slows and price pressures ease. The softening seen in the flash PMI is consistent with this. Next week, the preliminary estimate for June CPI will be reported. The signal may be obscured by a decline in the headline and a small gain in the core.