US Dollar, Grains, Gold: Yesterday’s Atomic Green Bomb by Attain Capital

Ouch… that was one heck of a day yesterday for those long the US Dollar and short just about everything else against it, including Grains, Energies, and Foreign Currencies (we’re looking at you – Euro). When things are up this much in a single day… over 1.25% in stocks, +2% in metals, plus 4% in energies, over 1% in grains and some +2% to +3% moves in foreign currencies – the quote board starts to take on that atomic green color (Atomic Green, Nuclear Green) {Past performance is not necessarily indicative of future results}.

US Dollar

(Disclaimer: Past performance is not necessarily indicative of future results)

Table Courtesy: Finviz

The good part about trend following strategies are their ability to capture significant parts of -50% moves down in Gold and -20% moves down in the Euro. The bad parts, are that they aren’t quick enough to avoid quick spikes like this in the opposite direction. They can’t be, or they will get stopped out of those long moves. They don’t react to every feint, instead preferring market prices to ‘verify’ when a trend is over.

But here’s the silver lining. With nearly every position in their portfolios going against them yesterday, many systematic programs we track were only down between -1.5% and -3.0%, showing that even when an Atomic Green bomb blows up in its face – the risk management is in place to limit collateral damage. The next question, and more important than a day’s movement, is if this bounce turns into full on trend reversal in the US Dollar, which will add to the pain until positions are reduced/eliminated.