25 September 2017: Misplaced complacency

The Federal Reserve is likely to rate hikes not just twice over the next two years, but as many as nine times. Goldman Sachs economists Jan Hatzius and David Mericle said this in a new note Friday, as mentioned in an article that day at TheStreet. As the markets expect no more than 2.5 rate hikes over the next two years, such complacency is misplaced with the prospect of a more hawkish Fed for the foreseeable future. If Hatzius and Mericle are right, this era of record low interest rates will come to an end much sooner than the market is currently pricing in. And when it does, it is not unthinkable that it will take investors by surprise. And we know all too well what happens when investors are taken by surprise…

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US indices were in the red during most of the trading day on Friday, but bounced back during the second half of the session as geopolitical worries ebbed. All three major indices ended little changed Friday. The Dow closed slightly lower: -0.04%. The S&P 500 and the NASDAQ both posted small gains Friday: +0.06% and +0.07% respectively. The NASDAQ was the only index posting a weekly loss: -0.3%. The S&P 500 booked a small weekly gain of less than 0.1%. The Dow did better for the week, ending 0.3% higher.
It was another week of easing volatility. The first three trading days of the week, the VIX danced around the 10 level. On Thursday and Friday, it settled firmly into the single digits once again. The VIX closed at 9.59 Friday, 0.8% lower for the day, and 5.7% lower for the week. UVXY ETFs were up 1.28% Friday, XIV ETNs down 0.58%.
Danny Daredevil‘s RSS rose to 35%. Adventurous Anny is still keeping her cash position. Her RSS remains 4%. Solid Suzy and Lazy Larry saw their RSS decline by one percentage point to 39%.
None of our models gave a trading signal at the end of Friday’s session. On 11 September, it looked like a trading signal was about to come for Danny and Anny, but momentum moved away from the signal. Now, two weeks later, we are slowly moving closer to a signal again. It is possible that we will trade later this week.

Model  Holds Start date

RSS

YTD

QTD

AAR

Danny Daredevil UVXY 1 January 2016

34.93%

-66.53%

-69.00%

19%

Adventurous Anny Cash 6 March 2017

3.84%

3.84%

-25.11%

7%

Solid Suzy XIV 6 March 2017

39.22%

39.22%

11.23%

82%

Lazy Larry
XIV 6 March 2017

39.22%

39.22%

11.23%

82%

RSS = Return Since Start | YTD = Year-To-Date | QTD = Quarter-To-Date | AAR = Average Annual Return

 

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There is much, much more to dragonflies than meets the eye. René found out by reading about them last week, and it surprised him how little he knew about these fabulous insects until then. Dragonflies have inhabited our planet more than 325 million years. Compare that to the history of our own species (Homo Sapiens). The time frame for the evolution of the genus Homo out of the chimpanzee–human last common ancestor is roughly 10 to 2 million years ago, and that of Homo Sapiens out of Homo Erectus roughly 1.8 to 0.2 million years ago (Wikipedia).
The lifespan of dragonflies consists of two stages: first they live as a nymph for up to four years, then as an adult for only a few months. Most of them don’t die of old age though — they are caught by predators like birds.
The more René read about it, the more he became intrigued by the subject of dragonflies. The interaction between dragonflies and humans captured his attention in particular. It is said that dragonflies seldom approach humans, but when they do, it has a very special meaning. As far as René remembers, he has never been approached by dragonflies in his life. Surely he has seen them fly from a relatively close distance, but he never paid special attention to them, and vice versa.
This all changed yesterday, when he stayed at his forest retreat. While he was sitting in his comfortable chair, reading a book, a dragonfly came out of the blue and landed on his right shoulder. When he slowly turned his head to look at the unexpected visitor, it flew away. A couple of minutes later, the dragonfly came again. This time, it landed on his left shoulder. That was when René realized, there’s no mistake about it: a change is about to come, and transformation is dawning on the horizon.

Picture by Tammy Sue under the Creative Commons CC0 1.0 Public Domain Dedication license.