Pride Goeth Before the Fall? – A Performance Review of 2021
It’s been awhile since completing a review of market calls made here at Marginrich.com. As my general knowledge of market inter-workings and crowd psychology has refined over the past several years increasing in nuance and depth, now’s as good a time as ever.
Let’s start with accuracy percentage and a list of the articles with basic details. Then I’ll provide a quick, detailed breakdown of each call afterwards down below. We’ll work backwards from the most current post, skipping 2 posts where I don’t make any directional calls or predictions.
Nine of the 11 asset forecasts between December 2020 and December 2021 were correct, for an accuracy rate of 82%. Stellar by any definition, especially for a free blog written in spare time. Each forecast was actionable via options, futures, the underlying asset, or simply raising cash.
1. Trading Brazil – 12/12/2021: The Brazilian Real would strengthen against the US Dollar and Brazilian stocks were about to be re-rated higher. (CORRECT)
2. Options Markets Muting Signals – 11/20/2021: Trapdoor underneath stock markets and potential for a large selloff in the near future. (CORRECT)
3. Insiders, Metaverse, and Options – 11/16/2021: Options usage too extreme; quick & shallow selloff felt very close. (CORRECT)
4. I Can’t Fight This Feeling – 10/24/2021: Commodities sentiment extreme and due for a selloff led by oil with a rise in the US Dollar. (CORRECT)
5. If Everybody’s Thinking Alike, then… – 9/13/2021: Technically, I stated the cannabis sector looked as if it might be basing for a potential up-move. I didn’t actually make a directional call, but I’ll still own it. Same goes for EWZ, for which I actually did make a directional call 3 months later. (WRONG)
6. Volatility Interpretation – 9/1/2021: Volatility was about to show its face in stock markets. (CORRECT)
7. I Don’t Know Why I Talk About Crypto in a Public Setting – 8/30/2021: Ethereum on the verge of another run upwards. (CORRECT)
8. The Best Part of Waking Up – 7/22/2021: A correction in coffee was imminent. (CORRECT)
9. Bitcoin – A Quick Technical Read – 7/16/2021: I thought BTC had one more puke-dip into the $20k range, anywhere between $21k and $29k. Major whiff. My article actually bottom-ticked that particular correction before BTC went on to return over 100% within 4 months. (WRONG)
10. Oil Taking Its Breather…Finally – 7/7/2021: Oil correction had begun (not obvious yet) and XLE would sell off accordingly. (CORRECT)
11. Beware the Secular Trend’s Short-term Counter Move – 12/28/2020: The Euro/USD pair had reached an extreme point and a USD rally looked primed, which would coincide with potential fear-events in the equity markets. (CORRECT)
So that’s the quick and dirty. Keep reading below for a bit more detail and to view the charts better illustrating each forecast. Each chart will have a yellow circle denoting the date the article was published.
Calls on EWZ were the chosen expression for this trade. Pre-tax return was 100% in less than 2 months. While everyone has been focused on energy, I focused on an EM component that looked ripe to provide a kickstart to 2022 trading.
Real strengthening vs the USD. Any reader could’ve bet futures here on the currency pair for a tidy profit.
Options Markets Muting Signals:
This particular article actually top-ticked the NASDAQ Composite, but I didn’t go short here. Hindsight being what it is, I should have, but instead I simply raised cash levels for the opportunities that are currently availing themselves.
My focus was on the NASDAQ in this article however one has to include the S&P 500 if one is going to comment on general equity markets. No top-tick as there was a bit more demand for the S&P 500, but within a matter of weeks, the trapdoor opened for this index, too.
Insiders, Metaverse, and Options
You could almost smell the move coming, like a turkey basting for hours. Then, Black Friday delivered a little fear for the unprepared. No trade here as raising cash was the strategy, and the ensuing rallies assisted with that process. Going short up until the past few months was a dangerous endeavor and understanding option flows was and is critical.
I Can’t Fight This Feeling
That little 11% jaunt downward in the underlying ETF over the next month resulted in a 135% pre-tax return on simple Put purchases. Of course, energy as a sector is a different beast entirely now, and along with inflation, the Russia/Ukraine conflict has put commodities front and center of the financial space again.
The US Dollar followed it’s typical anti-correlation to commodities by rising. Since that initial run upwards, it has chopped in this uncertain environment. I suspect the ultimate, long-term path is downwards for the USD, but that’s a philosophical discussion for another time.
If Everybody’s Thinking Alike, Then…
Ugh, what else needs to be said? This one is ugly. To reiterate, I did not actually make a directional call or bet here. I simply thought that the bear market in cannabis may be reaching a nadir. But investors and speculators had other ideas as the market pounded this ETF for an additional 50% loss subsequent to publishing the article.
The article literally bottom-ticked the VIX. Unfortunately, I didn’t directly trade Vol here. I used the ensuing volatility to pyramid some positions in the long portfolios.
I Don’t Know Why I Talk About Crypto in a Public Setting
Those percentages in the chart above were from the publishing date of the article (yellow circle). The actual moves were, 20% as annotated for the first ascent, then a quick 50% downdraft followed by a 75% spike. If you ignored ETH in 2021, or crypto period, then you missed some of the best trading opportunities of the year.
The Best Part of Waking Up
Coffee was the gift that kept on giving for about 4 weeks in late July through late August, before squeezing out of an old school pennant to what seems like non-stop upside. The initial trade was simple Puts on the JO ETF for a 40% pre-tax return in a week. Then I was able to scalp 20% in a week out of JO with some Calls before finally squeezing the last bit of Put juice for 10% in a week before THE breakout in coffee.
Subsequent to those trades, I did overestimate the extreme in buying-sentiment and underestimate the impact of the freeze in Brazilian crops. Consequently, I gave back a bit of the profit with additional Puts and failed to capitalize on the ensuing multi-month rally as a result of my bias. All additional lessons at a fair tuition price.
Bitcoin – A Quick Technical Read
I darn near bottom-ticked BTC with this particular forecast. So wrong! As BTC goes, so goes the crypto markets so it wasn’t long before I was pursuing the other opportunity as noted above. As has been said countless times by countless players, trading is all about managing risk (control losses & maximize gains).
Oil Taking Its Breather…Finally
Oil (West Texas Intermediate) was overdone. I top-ticked the high in July on the day of publishing and was fortunate to estimate an unsurprising 20% sell off in the commodity.
I favored Puts on the XLE as the expression for this trade and the market rewarded me with a 100% pre-tax return in under 8 weeks.
Beware the Secular Trend’s Potential Short-term Counter Move
I published this article in the midst of what felt like virtually everyone expecting the “obvious” demise of the USD. The dollar’s imminent demise down into the $80’s has since proven to be fallacious logic. Its haven status as the world’s reserve currency has kept it afloat and demand will probably keep it there for some time until internal and external geopolitical/economic events shift perceptions and capital flows.
Once again, the anti-correlated pairing could’ve provided currency traders with an exceptional opportunity. Admittedly, I failed to take advantage of this potential trade with a currency pair expression.
What I did do was expect more intense volatility. As such, I purchased hedges which ended up costing me insurance premiums as the S&P 500 simply chopped for a month before continuing onward and upward. Sure, I was correct about some volatility but wrong about the amplitude. Still though, I contend that the price paid for peace of mind was worth it.
It’s my sincerest hope that if you’ve read this full performance-review that my skills and experience are apparent. I’m not some wannabe, greenhorn daytrader posing as a professional. Although I mostly showcase my technical analysis skills here at the site, I’ve honed my fundamental analysis skills for all asset classes and sectors. Over the last 20 years, I’ve poured my heart and soul into building an amalgamated skill set around a professional-level understanding of investing, finance, banking, currencies, economics, accounting, business operations, sales, geopolitics, crowd psychology of markets, leading/managing/coaching, and asset management.
Now I’d like to test those skills in the appropriate arena. If you’re here just to have a read, I hope you’ve enjoyed. I’ll continue to intermittently share actionable thoughts. But if any readers from the professional, financial space are interested in how I can benefit their organization, please don’t hesitate to reach out. Email address is listed at the menu button in the upper-right of the screen. My LinkedIn profile can be accessed at the About page by clicking the hamburger in the upper-left of the screen.
Here’s to a fruitful 2022 for any and all readers of Marginrich.com.