Christmas came early for financial bloggers, mainstream financial media, and people that just love to tweet. As if one major event wasn’t enough, the Federal Reserve and Captain Bernanke (our personal nickname) announced the much hyped, much anticipated start of tapering, but only slightly; just enough for the Dow to jump almost 300 points. And if you thought people were active on twitter and the financial blogosphere before – just give them a Fed inspired 300 point rally to all time highs to ratchet up the activity to insanity levels.
Here was the action in the DOW, Nikkei, and Vix – see if you can spot when the announcement was made:
(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Finviz.com
(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Finviz.com
(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Stock Twits
How did managed futures do on the big spike?
Well, drilling down to the day-to-day gains & losses can be dangerous for your wallet and psyche when analyzing trend followers, and the situation is of course very fluid. But at first glance the Fed’s decision to taper and extend QE looks to be good for trend followers in the near term (or yesterday, at least). The Barclay BTOP 50 Index recorded a 0.38% daily gain yesterday {Disclaimer: Past performance is not necessarily indicative of future results}, as most of the trend followers we track are long stocks, long euro & british pound, and short yen (which all moved in their favor).
But the best sign for managed futures performance down the road wasn’t a few markets going their way, yesterday. The best sign to us was the tapestry of red and green shades on the market heat map towards the end of the day. It was a “risk on” day which was decidedly not well attended. Only stocks really participated. Energies were sort of flat, metals were down, grains were down, and foreign currencies were down. That’s good news for CTA’s who rely on grain markets to zig while energy markets zag, as one of the reasons given for managed futures poor performance the past few years has been all markets moving as one in a ‘risk on/risk off’ environment driven by Fed announcements such as this one.
So hello taper, and so long risk on/risk off?
(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Finviz.com