Overnight and Pre-Market

This morning you will see something very clearly, something that you might not have realized before had so much power and such a strong correlation that it could drive the futures by itself. What am I talking about? The Cost of Carry.

Overnight there wasn't anything special out of Europe to send futures higher, in fact Italy's Monte Pacshi was halted as European trade opened overnight for the week (remember yesterday Europe and Great Britain were closed due to Easter) on news that they were one of the first non-Cypriot banks to experience a bank run due to the Cypriot mess. Unemployment in Europe hit 12%. Final Manufacturing PMIs for Germany, France, Spain, Italy and the Euro-area were all i contraction below 50 and even worse for the PIIGS countries. Italian PMI fell  to 44.5 from the Flash of 45.8,  Spain's PMI fell to 44.2, vs flash 46.2 and 46.8 last, UK 48.3 vs Flash 48.7, Germany 49.0 vs Flash 48.9 down from 50.3; France 44.0 vs Flash 43.9.

In fact, it got even worse with Slovenia's #2 at their Central Bank saying, "Slovenia must start credible measures to avoid aid."

Overnight there were rumors that Cyprus' Finance Minister was going to be kicked to the curb, this morning he has turned in his resignation and it has been accepted in the midst of ongoing investigations...? Investigations of the Finance Minister?

"Negotiations were completed today, with considerable success for these objectives", the President says, adding that "it is, however, something that particularly appreciate, but I want to exclude from the resignation by Mr. Sarris is the high political ethos and politics sensitivity demonstrated. "

"The decision of Mr. Sarris submit his resignation for reasons of political touchiness, to facilitate the work of the Investigation Committee, is a cultural phenomenon in the life of the Cypriot political life", says President Anastasiadis.

Are we about to hear that it wasn't only the President and his family that sent their money to London a day ahead of the Troika confiscation?

No, the news out of Europe overnight was no reason to ramp the market. It wasn't the EUR/USD either, not amidst this news...

EUR/USD falling all night since about 9 p.m. EDT.

So what was it, the very sensitive (apparently) cost of carry. Here's the Carry pair USD/JPY...

This is a multi-day chart going back to Friday to present, the USD/JPY was falling, meaning the cost of carry was increasing and at up to 200:1 leverage, every pip (the smallest unit of measurement that FX is typically quoted in down to the 4th decimal point) counts! Note the recent change sending the pair up and the cost of carry down on this 5 min. chart.

Here's the same pair on a 1 min chart overnight since 8 p.m. EDT at the far left, around 11:30 the pair hit its low and from there the cost of carry fell all night sending the futures market higher.

 ES 1 min in line overnight with a negative divergence pre-market, however...

 The more important 5 min chart has come in to line, just like the market averages' 3C charts suggested yesterday (as seen in last night's last post).

 NQ/NASDAQ 100 futures 1 min chart ramped all night and is seeing a negative 1 min divergence pre-market, but...

 again the 5 min chart is strong and that's all that really matters for now.

 TF/Russell 2000 Futures also ramped all night as yesterday afternoon's leading positive divergence suggested. Again there's a negative 1 min divergence pre-market, but...

Again the 5 min chart which is all that really matters is in line just as the IWM charts posted last night suggested.

Now you can see how very sensitive the market is to the cost of carry as it fell, it was used to finance the overnight ramp in real time.