“Not happy” might also be an apt description of some macro punters out there. Macro Man has noted the possibilities of a March position squeeze, and thought that fixed income was a likely source of the pain. It seems as if he has missed his guess.
Foreign exchange is one market that has suddenly become bloody difficult, as it seems that it has been the locus of a lot of position squeezing this month. EUR/JPY is the latest cross to suffer a correction this week, following on the heels of EUR/USD (back and forth and back again!), USD/Asia, and EUR/CEE4. Not pleasant.
Gold longs have been feeling the “joy” of position liquidation for a couple of weeks; a chart of the past thirty trading days resembles one of the Alpine peaks near Switzerland’s many gold vaults.
And of course, the recent equity bounce has brought a steep correction (in percentage terms, at least) to the financials; the SKF double-short ETF has had a 40% peak-to-trough decline in just 4 days. Double-ouch!
Obviously, thre are some markets and strategies where the shake-out has been non-existent; Gilts, for example, are close to their highs and didn’t move much after yesterday’s reverse BOE auction.
Just about everyone goes through these periods where you have one thing go moderately wrong and a bunch of things go slightly wrong. It’s frustrating and unpleasant, but it’s part of doing business. Eventually, this too shall pass, as the saying goes; in the meantime, Macro Man’s got his nose to the grindstone, trying to ensure that happy days come again……the sooner, the better.
Macro Man can feel the knee starting to straighten out already. He’s been running long a bit of EUR/CHF as a hedge against his other (non-performing) positions, and for the first time his career, a central banks has intervened at exactly the right time and place for him.
Welcome to the wonderful world of QE, SNB-style:
For at least this afternoon, happy days are here again!
(Though whether Switzerland’s trading partners agree is a different question.)