Overdue Update

Hi Traders,

As predicted in the last post the S&P blew past it’s previous resistance. After feedback from fellow traders I will be posting videos shortly about my take on the current market trends and other tips and tricks I use.

S&P’s Moment of Truth!

It is definitely exciting times for traders as the S&P is pushing higher and higher. Below is a chart showing a longer term view of the market.

double top

As you can see there is a “double top”. The reason for the quotation marks is that as a trader you have to understand the higher overview of the market. A double top does not have to be to the exact tick. Think from bigger perspective, short term and long term traders would have placed stops just above that high. Big traders would use this as a way to hit stops an ride the short but certain downwards momentum at the ~1600 level

 

top zoom

The same chart zoomed in. Notice I highlighted the two large candles to the left in the image. I’m not huge on candle types as I believe it varies depending on the time frame but if this was not a clear indication the market was going up I don’t know how much more obvious it can get.

Secondly, the pull back looks to be very weak. Traders aren’t stupid they see the same news you do they know the S&P is hitting the highs who wants to get short now? What I personally will be looking at is the 1600 psych level and see the reaction from there. Trading the 1500 level not to long ago yielded some good trades. Although there is always uncertainty scalping and knowing the support and resistances in which traders are to scared to break from can definitely be profitable.

Good luck as we dive in to the unknown!

 

The Almighty Twitter?

After a ‘Twitter’ hack..Stating that ‘The White House’ had been bombed and that Obama was injured look what happened to the market.

Twitter Hack

The hackers proudly take credit for the immature Twitter hack and have been done this on more then one occasion.

PNL

 

The real question is…..Why and how can Twitter be this powerful. Within an instant 260k+ contracts were exchanged of this false data. Are we trading by what we hear or are we trading by real economic changes?

Upbeat Data Points to a Good Jobs Number?

A strong ISM manufacturing and ISM Non-Manufacturing coupled with a slightly stronger ADP reading bodes well for a potential upside surprise in this Fridays non farm payroll number. Although there has been discrepancies in the past between ADP and NON farm, I got a feeling we are going to get a good number this Friday, which coincides with the run in to the presidential elections…hmm conspiracy theorist say what you will!

Thus we have maintained these near high levels in the equity markets as Europe isn’t creating many new headlines, so in that aspect there is no real reason to go down, and when ever we do we simply seem to be brushing it off.

Although I do feel we will come off cause the market doesn’t represent the current state of the economy, near term I think we will continue higher.

STIRS have been fairly static lately, with low volatility meaning having to hold on to spreads for much long then usual. As the Bund keeps on rising, spreads have been gradually coming off, and as they’re coming near the bottom of the range, (on many 3 months spreads) I’ve been inclined to buy them. Sep13Dec13s at 4.5 is a level which has held strong before so have been trying to load up on this as it comes.

Tomorrow we have ECB press conference, but this is likely to be a non event as the main actions were taken last month, but any surprise announcement will be welcome.

Stocks sell off as Spanish Yields top 7.5%

Its been a pretty gruesome session to say the least. The Dax along with the all the other European indicies are being sold off aggressively as fears grow that Spain would need a full sovereign bailout.
Dax is down almost 4% as I write and as you would expect Bunds near all time highs again, trading currently at 145.87.
The Euro has been hit hard with it trading below 1.21 against the Dollar, and at this rate we looking to test the lows set June 2010 at around 1.18. The difference is this time we have much bigger economies struggling where as that time we were dealing with Greece, Portugal and Ireland.

As far as trading action goes in the STIR spreads, surprisingly we haven’t come off as much as you mite expect. Jun13Sep13 Euribor has been trading between 2 – 2.5 the whole day with low volume again, and its a similar story all along the curve. The lack of volume is still making it difficult to trade, but if we get interbank lending tightening up as we did in 08/09 we could start to sell of at the front end of the curve bringing some volatility and volume.
As the markets are pushing Spain’s hand more and more, its only a matter of time before a bailout is requested, and the question is who is next! Worrying times…

PFGBest collapses! Add that to the list…

Just when I thought it couldn’t be worse after MFGlobal, another big retail brokerage serve has collpased. PFGBest with between 500million to a billion dollars in assets been missapropriating funds and has a 200 million dollar short fall. As if confidence wasn’t low already, we now have another name to add to MF and worldspreads. And worse this happened in the USA with the tough regulation of the NFA & CFTC. So where there is a will there is a way despite the regulations put upon you. I cant imagine this helping confidence at all, many more are affected, and that is more people out of the futures market.
Some further details:

On or about June 29, 2012 PFG reported to NFA that it had approximately $400 million in segregated funds, of which more than $225 million were purportedly on deposit at U.S. Bank
On or about July 9, 2012, NFA received information indicating that PFG’s Chairman may have falsified bank records
On July 9, 2012, NFA made inquiry with US Bank and learned that rather than the $225 million that PFG had reported as being on deposit at US Bank just days earlier, PFG had only approximately $5 million on deposit at U.S. Bank.
Translation: another $220 million segregated account pillage has just taken place, in the vein of none other than Jon Corzine and MF Global.

The money has now officially vaporized.

It is truly wonderful of the NFA to finally get involved, after PFG’s clients have lost about 98% of their cash held with the firm.

ECB, BoE add more stimulus to prop the markets

The ECB cut rates by 25bp as well as the deposit rate, and the BoE conducted 50Bln Sterling more QE as was the expectations which led to a 150 pip sell of in the Euro, and a big drop in the Euribor spreads, as the curve flattened further.

Jun13/Sep13 went from trading 3s pre announcement to trading 1.5s at the end of the day, the same was try across the curve.

I was short 7s Dec13Mar14 took a half, to then see it go further down and we are now trading 5.5s.

It was a tough day to be going long as there wasn’t much pullback. This morning we seem to be consolidating around these level, and I took the opportunity to go long selected spreads, and waiting for some type of pull back which I expect.

The Bund has started to go back towards highs as we have moved up 100 points since the rate announcement yesterday. This was apart of the broader flattening as the 2s 10s spread also flattened as you would expect.

Today we look forward to Non Farm Payrolls and a further disappointment could lead to further flattening as safe haven buying would most likely be the play of the day.
Although if that is the scenario, we could later rally in stocks, as it adds to the probability of more Stimulus out of the FED.

This afternoon should be interesting!

Global stocks surge after EU agreement

Stocks surged as did pretty much every currency against the dollar as there was a major breakthrough at the EU summit.

The agreements include: the European Stability Mechanism (ESM) loan to Spanish banks will not have senior creditor status which effectively takes pressure off the country’s credit spread; the ESM will also be allowed to directly recapitalise banks; the rescue funds themselves will be used more flexibly to support compliant countries; and finally, the European Central Bank (ECB) will be acting as an agent for the rescue funds in market operations.

It was pretty much one way for stocks but for bonds we initially came off before going back up again. The Euribors provided a good shorting opportunity as we hit highs in the red month spreads before coming off for the 1/2 tick. After the first couple of hours of trading, it all sort of died down, and it was another low volume day for the Euribor.

However all in all June has been a positive month with plenty of events providing the volatility to be able to catch some swings for us day traders.

Hopefully July continues that way, as we have, as always a busy data week next week most notably, ECB press conference, BoE rate decision and Non Farm Payroll!

Hoping for a good one.