We have a long weekend in the US with the markets closed Monday for President's Day/George Washington's Birthday.
The Fundamental catalysts include the second Eurogroup meeting on Monday and as suspected there's confirmation that not only have Greek banks burned through all of their ECB Emergency Liquidity, but even the recent hike yesterday to $65bn in ELA funding available to Greek banks doesn't put a dent in the $90bn in obligations. It's likely traders will take risk off the table later today with the Euro-Group meeting Monday and the US markets closed.
The Ukraine Cease-fire which officially goes in to effect Sunday Feb. 15th, is off to a bad start as mere hours after the announcement, Pro-Russian Separatists staged a large scale attacks across Pro-Russian eastern zones of Ukraine, the possibility or even probability of the cease fire not taking hold as the last one did not, looms large, another event the market can't respond to on Monday as it is closed.
However the Black Swan, at least of the FX markets that few are talking about is the Japanese markets, both stocks and bonds and most importantly, the Carry Trade financed stock positions that are already being unwound in the face of Bank of Japan doubts about more asset purchases (QE) and several horrible bond/JGB auctions in Japan. Here's the USD/JPY carry's reaction to two events...
The second "yellow" arrow is a poor JGB auction.
Carry traders are de-leveraging or reducing exposure to the carry trade, the carry trade effects stock prices, it's essentially leverage of a fund's AUM that is usually applied toward risk assets like stocks, an unwind has the opposite effect.
The net result has been for the first time since Abe-enomics was introduced, the CFTC Nikkei 225 Futures have seen their first net spec short position, meaning essentially since Abe was elected.
In fact, the unwind of the Carry trade and rising Yen were the two things I wrote about almost 2 years ago to look for to occur concurrently with a major market (bear market) decline in US equities.
When times are good, things seem stable as they did with the BOJ's QE, the risk of the carry trade is very small, the reward can be large as some are run at 100:1 leverage which is then usually applied toward risk assets like stocks, but that leverage is a double edged sword and can turn in to monumental losses in a blink of an eye, thus carry traders are obviously reducing leverage and or exposure to the Carry pair which usually means they have to sell the assets they financed with it, typically stocks.
Watch for this story to become a bigger and bigger issue now that the BOJ itself seems to have lost faith in its QE program, the world will lose it a lot faster.
As for this morning, while we are in the range of an op-ex pin, there's so,me volatility, see IWM, it appears to be connected to the USD/JPY moves early on.
Keep an eye on oil/USO which has gapped up at +3.5% and is nearing the breakout level for the next leg higher after having completed a downside head fake move which we had anticipated 24 hours earlier, giving us a great opening position at low risk and good timing.
MCP is another making big moves or important moves this morning, up +15% at +1.07 , the $1.00 psych barrier has been broken, I'll update these soon.
As for yesterday's AAPL put position, it's very early, but initial price action looks like it may create a bearish engulfing candle over yesterday's star, a strong downside reversal pattern.
I'll have updates on all of them out soon.
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