We had worse then expected GDP, and a declaration of GM bankruptcy, and another Government investment of over 40 billion, but despite all of this we spiked over 100 points in the DOW in the last 30 mins of trading Friday, which has propelled European stocks this morning. It is weird to see but everything is up, Stocks, Bunds, Bobl, Schatz, infact everything along the curve. Not something you normally see, but then again this isn't a normal market. This week is a very important week, with rate decisions from the UK and EU, as well as US jobs data on Friday.
On the Euribor front, spreads have seemed to stabilise, dont know for how long but hopefully it will make trading this week a little bit easier.
Sunday, 31 May 2009
Friday, 29 May 2009
Awaiting US GDP
The bond market is leading the way lately as all eye the 10 year bonds across all markets as they continue to drop. Falling bonds leads to a rise in yields which is dictating where we go in the equity markets.
We rallied yesterday on the DOW as a 7 year treasury auction went off without much surprise and in line with the previous 2 auctions, and gave the signal to buy again.
There is a lack of conviction in either direction with the markets right now, but with US GDP this afternoon, a shock number either way could push this market out of its range.
Euribor action has been volatile with spreads moving down near the front end of the curve, but going up at the back of the curve. This has made it hard to trade butterflies and reversion to mean trades. Long term I think these are good sells, but you may have to take some pain for it to come good.
There are alot of markets where there seems to be a disconnect between the fundamentals and the actual price. Take oil for example which is trading around 65$ a barrel. although demand is picking up, we have come a long way from its lows and some sort of correction is in order. We are up almost 65% from its lows, and I think 68 will be a sticky area, if this price holds then I see a test of 50 again.
We rallied yesterday on the DOW as a 7 year treasury auction went off without much surprise and in line with the previous 2 auctions, and gave the signal to buy again.
There is a lack of conviction in either direction with the markets right now, but with US GDP this afternoon, a shock number either way could push this market out of its range.
Euribor action has been volatile with spreads moving down near the front end of the curve, but going up at the back of the curve. This has made it hard to trade butterflies and reversion to mean trades. Long term I think these are good sells, but you may have to take some pain for it to come good.
There are alot of markets where there seems to be a disconnect between the fundamentals and the actual price. Take oil for example which is trading around 65$ a barrel. although demand is picking up, we have come a long way from its lows and some sort of correction is in order. We are up almost 65% from its lows, and I think 68 will be a sticky area, if this price holds then I see a test of 50 again.
Wednesday, 27 May 2009
Euribor spreads reach new highs
Long term bonds sold off again yesterday with a breach of 119 in the Bund this morning, we have gone as low as 118.82, with 118 the next target. This has filtered through along the whole curve with Euribor spreads at highs with Jun10-sep10 trading at 26s, Sep10-Dec10 trading at 32s with the far end of the curve on the rise too.
It is hard not to go short right now given the lofty levels of these spreads , but it is wise to hedge using butterfly strategies as there seems to be no stopping this move upwards. I'm relying on a more staggered move upwards in spreads to give me opportunities to take 1/2 ticks in these spreads as I short new highs, but I am quick to scratch should it go against me.
Stocks sold off as long term yields rise resulting from the subsequent sell of on the long end. Higher borrowing costs are deemed as a risk to an economic recovery. This is the third time we have tested the 8500 level in the Dow and until we break one way from this small range forming, it will be unclear as to where we head from here.
Markets are also nervous from the impending GM bankruptcy and the auto sector also got a hit from the bankruptcy of Visteon the auto parts company, this surely will continue to put pressure on the jobs market.
High light of the day today will be the durable goods number from the US at 1.30pm GMT and new home sales at 3pm.
It is hard not to go short right now given the lofty levels of these spreads , but it is wise to hedge using butterfly strategies as there seems to be no stopping this move upwards. I'm relying on a more staggered move upwards in spreads to give me opportunities to take 1/2 ticks in these spreads as I short new highs, but I am quick to scratch should it go against me.
Stocks sold off as long term yields rise resulting from the subsequent sell of on the long end. Higher borrowing costs are deemed as a risk to an economic recovery. This is the third time we have tested the 8500 level in the Dow and until we break one way from this small range forming, it will be unclear as to where we head from here.
Markets are also nervous from the impending GM bankruptcy and the auto sector also got a hit from the bankruptcy of Visteon the auto parts company, this surely will continue to put pressure on the jobs market.
High light of the day today will be the durable goods number from the US at 1.30pm GMT and new home sales at 3pm.
Dow Jones tests 8500 again
After trading lower in stocks and higher in bonds for much of the day yesterday, a surprisingly strong consumer confidence number turned the tide totally and pushed us up big across the board, with the Dow up 200 points testing the 8500 level again. S&P 500 flirting with 900 and could it be third time lucky for the markets. The consumer confidence number has put a new push to the upside, and stock look strong again the morning, and it wouldn't be surprising if we reach DOW 9000 in June.
As much as I bang on about thinking this market is going down, which I still believe is where the market should be, sentiment is the only thing that matters right now, and there is still plenty of cash on the sidelines to push this market higher.
Bunds have broken out of the decending channel range and is now making a run for 119, as I stated yesterday, the short term target is 118 in Bunds, as we have broken the channel, unless stocks fail to break the resistance levels and make another attempt downwards.
Euribor spreads coninue to move upwards especially at the front of the curve, but the far end seems to be stabilising. Although there was some volume, spreads were very tight and it proved to be a difficult day. Today morning has presented alot more opportunities to enter spreads on euribors, on short sterling there continues to be a lack of real trading opportunities as liquidity is low.
US home sales at 3pm London time will be a market mover today, which could add more fuel for a push to the upside.
As much as I bang on about thinking this market is going down, which I still believe is where the market should be, sentiment is the only thing that matters right now, and there is still plenty of cash on the sidelines to push this market higher.
Bunds have broken out of the decending channel range and is now making a run for 119, as I stated yesterday, the short term target is 118 in Bunds, as we have broken the channel, unless stocks fail to break the resistance levels and make another attempt downwards.
Euribor spreads coninue to move upwards especially at the front of the curve, but the far end seems to be stabilising. Although there was some volume, spreads were very tight and it proved to be a difficult day. Today morning has presented alot more opportunities to enter spreads on euribors, on short sterling there continues to be a lack of real trading opportunities as liquidity is low.
US home sales at 3pm London time will be a market mover today, which could add more fuel for a push to the upside.
Monday, 25 May 2009
Debt ratings downgrade threat hits Bonds
Over the past week we have seen a big drop in Bunds, Gilts and US 10 year as the threat of a possible downgrade to government debt gets investors scrambling out govies.
Bunds have dropped below the 120 level and is trading at 119.76 as we speak. Looking at the chart below, technically speaking we could be due a bounce as we are touching the bottonm of a downward channel, but a break below this could mean a test of 118.
On the short end of the curve, Euribor and Short Sterling spreads have continued upwards. As longer dated yields continue to be sold of relative to the front end. We are trading above 30s on the Sep10-Dec10 spread, and on the short sterling front, we are trading 44s on the sep10-dec10 spread. In terms of trading, I will maintain an emphasis on going long on pullbacks, but am trading smaller size as there is still quite a risk that there will be a big pullback in these spreads soon as they have come up too far in my opinion.
Stock wise we look to be consolidating around these levels. The fact we have hit 8500 in the Dow twice and not gone further suggests, downside is more likely. We shall see what happens...
Bunds have dropped below the 120 level and is trading at 119.76 as we speak. Looking at the chart below, technically speaking we could be due a bounce as we are touching the bottonm of a downward channel, but a break below this could mean a test of 118.
On the short end of the curve, Euribor and Short Sterling spreads have continued upwards. As longer dated yields continue to be sold of relative to the front end. We are trading above 30s on the Sep10-Dec10 spread, and on the short sterling front, we are trading 44s on the sep10-dec10 spread. In terms of trading, I will maintain an emphasis on going long on pullbacks, but am trading smaller size as there is still quite a risk that there will be a big pullback in these spreads soon as they have come up too far in my opinion.
Stock wise we look to be consolidating around these levels. The fact we have hit 8500 in the Dow twice and not gone further suggests, downside is more likely. We shall see what happens...
Friday, 15 May 2009
Long term Yields rise
After a sharp bounce on the Bund, it was back to selling again, as we touched 122, and have retraced back to 121.18 again as I write. Schatz has barely moved as the Schatz Bund Spread rose big rising almost 70 ticks.
This was also the case in Euribors too but to a much lesser extent, as we inched up on the spreads across the curve.
Euro zone GDP was worse then expected, but US CPI was slight stronger then expected which gave rise to the market as the risk of deflation has eased.
Even though we haven't caved in yet on the stock front I still maintain my longer term view that we going for another big down leg, but for now, even though more downside is due technically, there's still buyers out there holding this market up.
Im away next week, will be updating again on the 26th.
Good trading!
This was also the case in Euribors too but to a much lesser extent, as we inched up on the spreads across the curve.
Euro zone GDP was worse then expected, but US CPI was slight stronger then expected which gave rise to the market as the risk of deflation has eased.
Even though we haven't caved in yet on the stock front I still maintain my longer term view that we going for another big down leg, but for now, even though more downside is due technically, there's still buyers out there holding this market up.
Im away next week, will be updating again on the 26th.
Good trading!
German Bunds go higher
Yesterday we saw bunds push up, and this is being continued today as we touch 122. We have risen over 150 points in the last few days as long term yields fall. Despite the rise in Bunds, Stocks showed some strength with technology leading us higher.
Spreads along the Euribor and Short Sterling strip have stabilised some what, as we have pulled back to levels we were trading before the Trichets comments last Thursday. I tended to be more long the spread yesterday, and is what I will continue today, but still hedge with another spread if necessary.
I have come across a piece by Jeremy Grantham on Business Insider, who is a bull about the short term and a depressive bear about the long-term. So what does that mean exactly?
It means there's 0.56 probability the market will eventually plunge to a new low. (See details below).
How's that for precision!
Spreads along the Euribor and Short Sterling strip have stabilised some what, as we have pulled back to levels we were trading before the Trichets comments last Thursday. I tended to be more long the spread yesterday, and is what I will continue today, but still hedge with another spread if necessary.
I have come across a piece by Jeremy Grantham on Business Insider, who is a bull about the short term and a depressive bear about the long-term. So what does that mean exactly?
It means there's 0.56 probability the market will eventually plunge to a new low. (See details below).
How's that for precision!
Subscribe to:
Posts (Atom)
Front month WTI Futures plunges to negative $37 as storage costs rocket
It was a move of epic proportions in the front month WTI Crude futures, the significance of which is not really known of yet, but was incre...
-
Equities are continuing the weakness this week, and we breached 140 in the Bund, nearing record low yields in the German 10 year, as well as... -
Ive been looking at finding automated systems for quit a while and came across FAPS Turbo, and automated forex robot. Sometimes looking at t...
-
I re bought BIDU today, buying back the half I sold at 138, at 119.40. We have have a sharp correction in BIDU, and I think the growth poten...