NQ is on its tail...
7 years ago
Friday, March 8, 2013
June ES Contract at Jobs level
ES has dropped all the way back down to the pre-jobs level over the last 17 minutes.
ES is actually now below the 8:30 jobs situation.
NQ is on its tail...
NQ
NQ is on its tail...
Overnight
We start in China, as futures slowly melt up, where Chinese imports fell apart and exports surged as Soc. Gen. has said is a harbinger of economic weakness, which led to another Shanghai red close. Then we jet over to Europe where UK Construction Data dropped by nearly 8% (7.9). The Bank of Italy said January Small Business lending was down by -2.8%, Austria printed a negative for Q4 GDP, Spanish Industrial Output dropped by 5% in January while German Industrial Production printed at 0 on consensus of +.4. Finally the ECB announced that banks will repay $4.2 billion in LTRO 1&2 loans, about half of what was expected which contradicts the strength Draghi claimed yesterday in LTRO re-payments.
The reason none of this mattered overnight... The same pivotal asset I have been talking about all week, the Japanese Yen.
Yen plunges overnight
At 8:30 US payrolls blew away consensus at 236k (expected 165k) with January revised from 157k to 119k, the UE rate dropped from 7.9 to 7.7, but a usual there was another drop in the labor force.
However this isn't all good news to the market, the immediate question... "Will the F_E_D start tightening sooner?"
Look at ES...
Not quite the party one might have expected on the jobs...
Perhaps more important to all those fearing the open... the EUR/USD
As suspected yesterday for different reasons, the Euro plunge on the news and USd flew higher, NOT GOOD for STOCKS. And we are now below $1.30 again.
Price is always deceptive, give it a few minutes to work through a.m. trade before hitting the panic button.
More to come
The reason none of this mattered overnight... The same pivotal asset I have been talking about all week, the Japanese Yen.
At 8:30 US payrolls blew away consensus at 236k (expected 165k) with January revised from 157k to 119k, the UE rate dropped from 7.9 to 7.7, but a usual there was another drop in the labor force.
However this isn't all good news to the market, the immediate question... "Will the F_E_D start tightening sooner?"
Look at ES...
Perhaps more important to all those fearing the open... the EUR/USD
Price is always deceptive, give it a few minutes to work through a.m. trade before hitting the panic button.
More to come
Thursday, March 7, 2013
What's Up with the Failure of Dow theory Today?
Dow Theory is or was great when it really mattered, Charles Dow came up with the ideas behind Dow Theory when he was running the Wall Street Journal in the early 1900's, it wasn't until after his death that Dow Theory was actually born, but back then it made a lot of sense; the Dow Industrials were true industrials like the US no longer has and the transports were the railroads that delivered all of this stuff, if one diverged from the other, it was significant, after all, the Industrials can't be in good shape if there's a fall in shipping traffic right?
Well we are a services oriented economy now, IBM is one of the Dow Industrial's largest components, I'd say their closer to services than a production line and transports, they may be more reflective of EBAY or Amazon stocks now than IBM, however dumb money reads the theory in a book and they trust it.
Remember this low volatility, slow melt-p with no pullbacks when investor sentiment was at record levels? It was a perfect time for dumb money to enter and enter they did, I just wonder?
Why all of the sudden did transports just break away with the industrials? There's a -1.42% differential between the two over the last two days alone after having moved together tick for tick all year.
Well we are a services oriented economy now, IBM is one of the Dow Industrial's largest components, I'd say their closer to services than a production line and transports, they may be more reflective of EBAY or Amazon stocks now than IBM, however dumb money reads the theory in a book and they trust it.
FX
I'm not sure if I'm going to try to cover the FX markets, what happened today, why it likely happened and what it means.
As you know the BOJ announced their policy statement last night, the outgoing governors, despite pressure by the Prime Minister, rejected immediate, ope ended asset purchases. The new incoming BOJ governors are expected to be a sort of extreme departure from the current/outgoing ones and they are in lockstep with PM Abe.
In fact Dallas F_E_D president, Fisher actually voiced concern that Abe is "Politicizing" the Bank of Japan and adding to his comments on Abe, "He is aggressive". I think it's pretty telling when a regional F_E_D president comment on or rather criticizes another central bank and he's far from the only one.
At least one current member who will be staying on board made her loyalties clear, she'll stand with Abe's choice of new leadership, but she is only 1 of the 9 member policy board. The conventional wisdom seems to be the other members may not be so keen on abandoning the current path for a much more extreme policy stance, obviously led by the PM.
I don't know what will happen longer term, but the Yen figures prominently as a Carry trade pair which is important as many hedge funds and Institutional investors not only take advantage of the carry trade, but use it to finance their equity operations, small moves in the FX market at the leverage some of these professionals are using can lead to catastrophic results so I think it's fair to say there's some uncertainty as to what the BOJ will actually do, there's little doubt of what the new crop of leaders want, but can they get it?
In any case, we have more FX traders than I was aware of. Yo may recall yesterday I felt very strongly that there is at least a temporary floor in for the EUR/USD at $1.30 and yesterday that was broken to the downside, which essentially means I'd take the pair long, well one of our member's wrote to me this afternoon,
"Hey Brandt,
While I mostly use FX analysis for broader market analysis, as you can see, one of our members made two profitable trades in less than a day on just very basic information posted. I'm not trying to push anyone toward FX trading if they are not comfortable with it, but as we both agree, the more tools you have at your disposal, the better your chances are of having the right tool for the trade.
In any case, here's my take on FX as of now. It seems to me that the Yen has already discounted Abe's policies and BOJ picks, now it's a matter of whether all of them get through and then whether they can get the votes to push through what most would call a radical agenda. The G-7/20 pretty much stopped short of calling Japan out on the carpet for currency destruction because most of the member countries are doing the same thing, they just don't have the same amount of dilution yet. The fact a sitting F_E_D regional president called the policies extreme shows that no one really wants to go toe to toe with Japan when it comes to a currency war, the problem is, many will be forced to.
In my mind the real wild card is China who has already started draining money out of their system, they know hot money is flowing in to China as a result of the currency wars which will only get worse, China will pay for it so don't be surprised to see China take drastic measures to curb inflation which is now hitting their housing market.
I see the Yen as a trading short for now and maybe something like AUD/JPY short, but only in small trades. I'd expect the Yen to move lower on confirmation of Abe's picks, maybe move higher if all 3 are not confirmed. However I think to a large degree, the Yen has discounted a lot of what Japan wants to do. I wouldn't want to be short the Yen near any kind of policy or decision moments.
The EUR/USD seems like it will head a bit lower from here, to me it's not worth the trade as the $1.30 level seems to have a floor in, any moves below $1.30 and I'd be looking at the data and looking at long EUr/USD lie our member above pulled off yesterday for a big gain.
Currencies are connected to our markets and assets in many more ways than most would imagine, I think this is a time for some wild volatility in currencies as the devaluation wars heat up which will lead to trade wars and China will not allow inflation as a result of worldwide currency devaluation, what they will do and how far they will go remains to be seen, but I personally can't imagine the limit at which they would back off to keep hot money from entering and inflating their economy.
As you know the BOJ announced their policy statement last night, the outgoing governors, despite pressure by the Prime Minister, rejected immediate, ope ended asset purchases. The new incoming BOJ governors are expected to be a sort of extreme departure from the current/outgoing ones and they are in lockstep with PM Abe.
In fact Dallas F_E_D president, Fisher actually voiced concern that Abe is "Politicizing" the Bank of Japan and adding to his comments on Abe, "He is aggressive". I think it's pretty telling when a regional F_E_D president comment on or rather criticizes another central bank and he's far from the only one.
At least one current member who will be staying on board made her loyalties clear, she'll stand with Abe's choice of new leadership, but she is only 1 of the 9 member policy board. The conventional wisdom seems to be the other members may not be so keen on abandoning the current path for a much more extreme policy stance, obviously led by the PM.
I don't know what will happen longer term, but the Yen figures prominently as a Carry trade pair which is important as many hedge funds and Institutional investors not only take advantage of the carry trade, but use it to finance their equity operations, small moves in the FX market at the leverage some of these professionals are using can lead to catastrophic results so I think it's fair to say there's some uncertainty as to what the BOJ will actually do, there's little doubt of what the new crop of leaders want, but can they get it?
In any case, we have more FX traders than I was aware of. Yo may recall yesterday I felt very strongly that there is at least a temporary floor in for the EUR/USD at $1.30 and yesterday that was broken to the downside, which essentially means I'd take the pair long, well one of our member's wrote to me this afternoon,
"Hey Brandt,
What you're posting is helping. Taking advantage of the euro trade from yesterday allows me to take those profits and flip it into today's position. And when dealing with leverage, the security of 'free money' is a big bonus.
Just wanted to give some positive feedback before I forget."
After asking a bit more about what he's doing and his permission to repost the exchange, he offered up some more thoughts (I've always liked the FX market, I feel it trends better than commodities or equities, but as he admits and as I commonly say, "There's a right tool for every job")...
" In fact, it works great when an option trade isn't appropriate. Different tools for different scenarios. I went long aud/jpy yesterday when you brought up those positive 1 min charts. I got a few more pips on that one than I expected(when i woke up this morning). You can definitely enter some short term trades with the tight correlations. 1 SPY weekly call would not have netted as much as the aud/jpy.
TOS has those mini pairs in the commission fx pairs(you pay for a tighter spread). So they don't even have to enter full positions if they don't feel comfortable yet."
While I mostly use FX analysis for broader market analysis, as you can see, one of our members made two profitable trades in less than a day on just very basic information posted. I'm not trying to push anyone toward FX trading if they are not comfortable with it, but as we both agree, the more tools you have at your disposal, the better your chances are of having the right tool for the trade.
In any case, here's my take on FX as of now. It seems to me that the Yen has already discounted Abe's policies and BOJ picks, now it's a matter of whether all of them get through and then whether they can get the votes to push through what most would call a radical agenda. The G-7/20 pretty much stopped short of calling Japan out on the carpet for currency destruction because most of the member countries are doing the same thing, they just don't have the same amount of dilution yet. The fact a sitting F_E_D regional president called the policies extreme shows that no one really wants to go toe to toe with Japan when it comes to a currency war, the problem is, many will be forced to.
In my mind the real wild card is China who has already started draining money out of their system, they know hot money is flowing in to China as a result of the currency wars which will only get worse, China will pay for it so don't be surprised to see China take drastic measures to curb inflation which is now hitting their housing market.
I see the Yen as a trading short for now and maybe something like AUD/JPY short, but only in small trades. I'd expect the Yen to move lower on confirmation of Abe's picks, maybe move higher if all 3 are not confirmed. However I think to a large degree, the Yen has discounted a lot of what Japan wants to do. I wouldn't want to be short the Yen near any kind of policy or decision moments.
The EUR/USD seems like it will head a bit lower from here, to me it's not worth the trade as the $1.30 level seems to have a floor in, any moves below $1.30 and I'd be looking at the data and looking at long EUr/USD lie our member above pulled off yesterday for a big gain.
Currencies are connected to our markets and assets in many more ways than most would imagine, I think this is a time for some wild volatility in currencies as the devaluation wars heat up which will lead to trade wars and China will not allow inflation as a result of worldwide currency devaluation, what they will do and how far they will go remains to be seen, but I personally can't imagine the limit at which they would back off to keep hot money from entering and inflating their economy.
Max Pain
This was a choppy, frustrating day if there ever has been one recently.
Earlier I mentioned weekly op-ex and I had not looked up the max-pain or the op-ex pin yet, this of course can change as tomorrow is another day and we only have the data we have now, but if this is close to correct, than we should expect a move lower tomorrow. It seems to me op-ex Friday's see an early move toward the pin and then are a bit more free to move during the last hour of the day.
Here's the max-pain or op-ex pin for tomorrow's weekly QQQ, SPY and IWM expiration, should we get a gap down, I'd be looking to get as much of that momentum as possible and as soon as it starts fading, get out, I can see it happening and being worth some money as the QQQ weekly $69 puts were worth over 20% at several points today.
IWM weekly max pain $91
QQQ weekly max pain $68
SPY weekly max pain $153
All of the above at max pain have enough ground to cover that the momentum would almost certainly make the puts worthwhile.
I'm going to cover another topic and update.
Earlier I mentioned weekly op-ex and I had not looked up the max-pain or the op-ex pin yet, this of course can change as tomorrow is another day and we only have the data we have now, but if this is close to correct, than we should expect a move lower tomorrow. It seems to me op-ex Friday's see an early move toward the pin and then are a bit more free to move during the last hour of the day.
Here's the max-pain or op-ex pin for tomorrow's weekly QQQ, SPY and IWM expiration, should we get a gap down, I'd be looking to get as much of that momentum as possible and as soon as it starts fading, get out, I can see it happening and being worth some money as the QQQ weekly $69 puts were worth over 20% at several points today.
All of the above at max pain have enough ground to cover that the momentum would almost certainly make the puts worthwhile.
I'm going to cover another topic and update.
AMD for momentum traders
I think a close below $2.52 and I wouldn't let it get below that before the close, is probably about where AMD will end up stopping out very short term, as I said, I prefer to hold it longer term and I showed you why, but for momentum traders, here's the 15 min stop which is as wide as I'd go on an intraday move like this.
Quick Futures/Market Update
It looks like both ES and NQ should be making a leg down in to the close
ES intraday
NQ intraday
AUD/JPY-Trade
For our FX traders and general analysis as the movement in both currencies is bearish for stocks, the AUD/JPY looks like it's going to fall.
As mentioned earlier, the Yen looked like an upside reversal was building, it has only gotten stronger since. It would seem there not a lot of risk in shorting the Yen here, I don't know how long the trade will last, but it looks like it's worth a short.
The AUD/JPY is already starting to roll a bit, but that's not why...
Here's the yen 2 min
3 min
And now the 5 min is moving.
As mentioned earlier, the Yen looked like an upside reversal was building, it has only gotten stronger since. It would seem there not a lot of risk in shorting the Yen here, I don't know how long the trade will last, but it looks like it's worth a short.
Short Term GOOG Update
It looks like intraday GOOG is going to see some upside, I don't know if it's enough to add to the April Put position, but I'll keep an eye on it.
Quick Market Update
Everything has been very choppy, even the TICK, it looks like the market is going to try and make another leg lower shortly (before the close).
I've been thinking about the weekly option expiration pins we have been seeing and if memory serves me correct, we usually see a move toward the pin on Thursday and then a deeper move to the pin on Friday, so this is just me writing out loud, but a move down today would seem to imply a lower pin tomorrow. It would also seem to make sense to me from a sentiment perspective, although I haven't run any max pain calculations yet.
I've been thinking about the weekly option expiration pins we have been seeing and if memory serves me correct, we usually see a move toward the pin on Thursday and then a deeper move to the pin on Friday, so this is just me writing out loud, but a move down today would seem to imply a lower pin tomorrow. It would also seem to make sense to me from a sentiment perspective, although I haven't run any max pain calculations yet.
