Recap for Week Ending 7/27

Net Asset Value: -24.25%
Change in Contributed Capital: 0
Cash Reserve (USD): 62%

The market experienced a major reversal this week. Monday, Tuesday and earlier Wednesday saw a further strengthening of the old trend, which had favored high-yielding, risky assets. On late Wednesday, after several central bank decisions (including a hike by the BoE and the RBoNZ), the market decided that that was the end of the tightening period and ran for the exit.

My portfolio was built such that I was net long AUD, CAD, EUR, GBP, NZD, TRY and USD, equally, and I was net short CHF, JPY, and XAU equally. When the market started going against me, I added more to my losing positions, using my cash reserve. Hey, I was averaging down; I reasoned. It had worked before, it will work again, right? Wrong. I turned a 11% gain into a 2% loss, into a 5% loss, into a 10%. Then I manually closed out all positions and rebuilt a brand-new portfolio from the ground up when the market paused.

The pause was more dangerous than I thought. It gave me time to doubt myself and my system. I ended up ignoring signals on daily charts in favor of signals on 15/30-minute charts. A new trader's mistake. What's more, I placed more trades more frequently and without preset stop loss orders. Another newbie mistake. I closed the week with a loss that more or less offset all the gains I have made this month.

In retrospect, if I had just sold USD/JPY when I spotted the MACD crossover on the daily chart, I would be in a better shape. In fact, the USD strengthened against most currencies and gold last week but weakened most against the JPY. At any rate, the value of the U.S. worsened and I incurred a net loss of 26.44% in purchasing power.

	20-Jul	27-Jul	change	real return
CHF	1.2004	1.2079	0.62%
CNY	7.568	7.5580	-0.13%
EUR	0.7235	0.7337	1.41%
GBP	0.4865	0.4941	1.58%
JPY	121.22	118.56	-2.19%
XAU	0.00147	0.00152	3.36%
ORORCL	classified	classified	-24.25%	-26.44%
DJIA	13,851.08	13,265.47	4.23%	2.03%
Nasdaq	2,687.60	2,562.24	4.66%	2.47%
S&P 500	1,534.10	1,458.95	4.90%	2.70%

There is a probability that the Japanese yen will further strengthen against the USD and other high-yielding currencies in the coming week. But let us not forget the Japanese consumer numbers prior to the big unwinding. Deflation is still an issue in Japan. The BoJ will not raise interest rate just to combat interest-seeking Japanese grannies. The carry trade will once again be attractive. Oil and gold will once again rally against the USD. Fundamentally, China, India and other emerging markets are growing, maybe not as fast as the market perceived last week, but fast nonetheless.

All things considered. The move from hi to low-yielding assets was too excessive and without significant retracements; therefore the downtrend has no staying power. Support should be around 115 for the USD/JPY and 650 for XAU/USD.