Charts and Patterns Q1 2017 Commentary
|Instruments traded:||FX Spot and CFDs|
|Asset Classes:||FX, Equity Indices, Commodities|
|FX, Equity Indices, Commodities||Trends and Technicals|
|Quarterly Return:||-4.71% (net of service fee but gross of any applicable performance fee)|
|Q1 2017 daily return volatility:||0.90%|
|Average Trades per week:||4 (since inception)|
The first quarter of 2017 was a period of consolidation for many non-equity assets. Given that Charts and Patterns is predominantly a trend following system, sideways price action made it difficult over the period to identify good trading opportunities. Furthermore, market moves were range bound and choppy, with many trades unable to reach their profit targets.
Equity Indices remained resilient, whilst the US dollar weakened and Japanese Yen pairs all detracted from the highs at the start of the quarter. Within commodities, metals appear to have started a bullish move but the asset class broadly remains choppy.
Chart and Patterns continues to hold a long term position on gold versus the Australian dollar, and is reaching its first profit target. Given the lack of trend within current markets, the position may take most of this year to reach (the proposed target). In addition, a profitable outright long gold position is currently held, though gold and silver have been challenging to trade successfully this quarter.
Within soft commodities, market moves proved difficult to catch and resulted in losses during the quarter; continued US dollar strength has caused some volatility in soft commodities, working against the initial expectation of bullish movement.
After a few attempts to buy the S&P 500, Charts and Patterns did manage to benefit from the position, however final profits were reduced given that the profit target was not met. Attempts to buy the FTSE and DAX resulted in losses due to tight stop losses, even though the expectation of higher indices was correct. Equity indices have yet to incur any meaningful correction and so long positions are kept on hold until then.
In currencies there have been a number of small losses and break-even trades. Currency trades were unable to hit their profit targets due to the aforementioned market choppiness and range bound moves.
At the start of the second quarter, the strategy manager’s view is that gold and silver look set to continue higher, in conjunction with more US dollar weakness and a correction in equity indices.
If an equity correction does occur, the strategy manager anticipates the US dollar trend to reverse and for it to appreciate. In addition, equities should find a new base for establishing a second leg of upward movement. The outlook for soft commodities at this stage is unclear and subsequently Charts and Patterns remains cautious until better trading opportunities arise. As we enter the second quarter, Japanese yen pairs are still correcting and buying opportunities are anticipated in upcoming months.