A.M. Observation

Good morning.

Overnight futures melted up on very low volume apparently on AAPL concluding the deal with China Mobile which was assumed to be completed last week before we found out on Friday that it wasn't, it's not exactly new-news as this has been 6 years in the making, but nonetheless Tech traded up in Europe on the AAPL news, now lets see if it's a sell the news event which I'm guessing with a 6 year lead time on the rumor, it likely will be.

China is still having massive interbank liquidity problems as the 7-day repo hit all time seasonal record highs (as it tends to rise at the end of the year for regulatory reasons), but last night hit 980 basis points or 9.8%!!! The situation is so bad now that the Government has called on Chinese media to cool it or tone down stories on the liquidity crisis, if anyone remembers, this is what got the ball rolling in the US in 2008, it was because of subprime, but it was the lock up in interbank lending that created the Lehmans and Bear Stearns, not good news.

FX is more or less flat and boring still, the USD/JPY lost ground and broke $104, found some support, bounced, but still can't get back above $104 as the Yen slowly gained more ground.

Crude did pullback as I suspected last night, it found some support, but I expect a larger pullback, we'll check in to that early.

And  the big story of the long bond fat finger trade executed in large size in low liquidity sending it up from 130 to 135 instantly, kind of like some of the other strange , large block trades of the last week in the overnight. Had this occurred during regular hours, it's hard to see how it would not have crushed risk on sentiment. For now it is a mystery who put it in, if indeed it was a fat finger or something else, I have a little diffficulty believing it was a fat finger trade at that time of night.

As was said in last night's post, I'd rather see the market up early today than late today and so it shall be with about a 10 point rise in ES overnight on a low volume melt-up, however we'll see what happens in regular hours, there's usually 3 trends in the day, the overnight, opening and a.m. and afternoon that tend to all be distinct.

Key to watch, the Yen, the Chinese banking crisis, Carry Trades, Now the Long Bond and any longer dated bonds and gold which is looking to be stabilizing.