Polihale.com > Predictions > September 6, 2020

Discussion: In short, the models are predicting that the US Dollar will get trampled next week, mostly by the Euro.

What's exciting here is that two models independently confirm this conclusion, using two different data sources. Last week, the prediction was to go long on the Euro (FXE). I traded it last Friday and made some gains. I cashed-out before the closing bell because I'm shy to leave gains on the table over a weekend, especially a long weekend. But the model still shows going long on FXE next week. I might jump back in.

Additionally, the models picked UDN as another long position. UDN is an inverse fund of the US Dollar (in other words, go long when the dollar is weak, and vice versa). UDN shorts the US Dollar against the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

The summary: Go long on FXE. Go long on UDN.

Prediction Made: September 6, 2020 at 14:48 GMT
Issue (ticker): FXE: Invesco CurrencyShares Euro Currency Trust
Issue (ticker): UDN: Invesco DB US Dollar Index Bearish Fund
FXE on Yahoo! Finance
UDN on Yahoo! Finance
Sentiment: LONG (bullish, prices will rise) for both
duration: short-term, fewer than four days, perhaps as short as intraday
expected profit: 1% to 2% in issue price; 5% to 20% with call options

How To Trade This Prediction

Note: all bets are off if there has been a major unexpected news event since the prediction

Less-Aggresive, Less-Risky trade:
Buy some shares of FXE and UDN at the next opening bell. Consider selling at least half after they increase 1% in value. In any case, sell it all within four days as this prediction does not go beyond that.

Aggressive and risky trade:
Buy call options of FXE and UDN at the next opening bell. Pick a strike price that's nearly At-The-Money (ATM). Pick an expiration date that's two or three weeks in the future. An extremely aggressive and profitable trade (but very risky) would be to pick an expiration date only a few days away. Sell when profits exceed 10%. In any case, close all positions within a few days.

Some options are lightly traded at the opening bell which results in a large spread between the Bid and Ask prices. That's a bad time to buy. Sometimes the only way to get a reasonable price is to wait a few minutes until the Bid and Ask start converging.

Actual Performance:
BOUGHT FXE SEP 25 2020 111.0 Call options @ 0.80 at 09:35 on September 8, 2020
September 8 was the first trading day after the prediction because of a holiday
SOLD FXE SEP 25 2020 111.0 Call options @ 1.35 at 09:33 on September 10, 2020
Profit of +68.75% for this trade

With this trade, $1 invested in all Polihale.com predictions since August 30, 2020 would be worth...
  • $1.80 (50% of capital invested per trade)
  • $1.33 (25% of capital invested per trade)
  • $1.17 (12% of capital invested per trade)
  • $1.08 (6% of capital invested per trade)

Epilogue: Everything worked perfectly. FXE might still go higher, but I'll never leave a profit of nearly 70% on the table. I could have sold half, and let the other half ride. But I'm happy with this. Seventy percent profit in two days. It's better than sex.

To be completely truthful, I predicted both UDN and FXE, but only bought FXE. UDN did not do as well. From its open on September 8, it went up about half a percent in a few days. But it never went lower than its open. At best (or worst), it would have been a flat return.