Dollar confusion and Theme

Percentage of fed hike in December now 50-50,up from mid 40’s yesterday.. Today’s second tier data  showed a down-tick In inflation,Less confident consumers and A PMI reading out of Chicago  that equaled the best month this year.Weak inflation and Month end adjustment weighing on Dollar today,I believe.We have seen a solid move higher in Yuan fixing,EM currencies all higher vs dollar, The Yen higher after no new Stimulus ,New Zealand had best month  vs greenback in 2 years,Indias rupiah 7.2% monthly gain largest in 6 years So quite possible month  end positioning is trying to maintain gains against dollar,and next week the path of the dollar will return higher.96.589  the low print before FOMC statement on Wednesday, should provide support.Monthly London Fix at 11:00 will be watched closely.

Month end flows love that term will dictate the action today.Today and 2 days prior the pit high in Spuz 2086,will be watching that level.

The general consensus is that Crude Oil has been higher on Expectations that Cuts  in R&D   and exploration will eventually reign in supply.Oil and Gas companies have been slashing spending as aggregate amount of $19B in write downs has been announced from companies reporting so far.Chevron cutting 6-7k employees,Exxon cutting production and slashed R&D 22%  Y/Y.

Gold is falling out of favor once again as Investment choice,having its worse week in 9.Copper  set for 5 monthly drop in 6.

Remember  payroll report next week,markets already in holding patter till then.Watching Europe/london close for hopefully some action.

SPX,DJI ,Dax and Bulls

Just a few thoughts on the technical of  The indexes. SPX, DOW and NDX have all been trading above respective 200d MA .The SPX and DOW for about 5 days,NDX for about  10 days.The 200d  is more a of a guide post then a definitive point of ‘ bull or bear’  for the long-term direction of underlying asset.The longer asset stays above the metric the more the slope starts to turn higher which gives confidence that trend will continue higher.Enough of that Mumbo jumbo,Last Thursday ECB hinted at more QE in December,The Indices gapped higher on open   and have  stayed above gap ever since.Powerful combination of a gap and 200d MA to keep Bulls happy.A test of the gap and 200d  will be forthcoming,if they hold could be smooth sailing for bulls into year-end.

Into Europe where the QE impact is felt more directly,The Stoxx50 and Dax have yet to trade above 200d MA,The CAC sits above.If the Dax can   break above and maintain trade above  that level it could  give a real nice lift to all Stock markets as it is a Proxy for exporting countries.A continued weakness in Euro will definitely help accomplish that feat.(11053 is level as I write)

Something to monitor next couple of days

Theme and confusion

Crude Oil continues to shine as it rallies  and outperforms  Brent.Plenty of bearish headlines  for Brent  Iraq  and  Russia  announcing another increase in production.. Crude side of ledger  Small amounts of Oil exported to mexico and japan,Draw at cushing delivery point(genscape announced outflow today as well) .Refinery maintenance  is ending,and demand will pick up as they come back on line.lastly majority of oil related companies will be reporting earning over next week and half,Chatter is that the cuts to production and Exploration will be large and  hence less crude next year.Crude calendar spreads are bid  and CL/CO  spread as well, this does illustrate a bullish outlook,for now.

International grain federation increased size of Worldwide Crops for 4th time this year.Solid export numbers for Soy,Wheat and corn but yet trade heavy.limited movement cash/farmer selling has markets looking for some type of driver.The time for exciting grain trade is nearing the end.Soymeal has yet to break support with any type of momentum.For Wheat Increase in Drought conditions for Midwest and lack of Rain Ukraine for next 2 weeks provide a bid.

Spuz have failed to trade above yesterdays highs and Dollar continues to give back some of yesterdays gains.Strong Dollar= Strong stocks.

Short and long End being sold in Europe and USA as Dovish Fed bets  are being unwound.

Theme  today  is of readjusting to the new fed order regardless what net change of dollar is  .

Soymeal

SMZ5 Comdty (SOYBEAN MEAL FUTR D 2015-10-28 11-19-46

Soymeal starting to price  out any worries concerning  harvest.Cash prices today  are steady to lower.Waiting for a break below 299.80

SMZ5SMH6 Comdty ('SM' SPREAD     2015-10-28 11-19-59

Soymeal  Dec/march spread  backwardation coming out  as it trades below 200d SMA as Supplies should be plentiful.markets are cautious though as farmer sales are slow to materialize,but they will come.

Oil,Theme and Risk On

Risk On Driving markets today.Possible dovish fed?Continued Dovish ECB talk ,Swiss nat’l bank increasing QE?Fixed Income heavy as it is not A QE trade were Fixed income will be bought . Spuz above last week highs,2 month highs. NASDAQ needs to break above 4652 to accomplish that feat.Oil Storage numbers were in line,production bearish, products were bullish as demand increased for both Distillate and gasoline( big jump in refinery demand for Padd2 district).After initial dip in Oil,macro “risk On ” took another leg higher and dragged oil with it. Mizuho said pain trade in oil is higher prices as Shorts increased by 21%.Earlier this morning we saw big “pop” in oil,some saying a swap deal to Export oil to mexico was the cause.I saw no,as Oil is swapped not exported!.I believe it was the break above previous days high in Brent,that caused large volume spike in prices.

If market is pricing in “dovish ” fed then we hope for a hawkish fed Dollar still heavy and Euro sideways.

Weather has improved enough to weigh on grains and Soy.Wheat is back down to $5 and holding as worries about smaller Russian Crop are untrue.Cash sales of beans are little changed and the bullish China demand story running its course.course. Soyoil +1.2% as Export demand continues this may keep Soy from dropping further.

morning 10-28

Fed decision at 1:00, no change in rates expected. Focus will be on how the fed characterizes the international outlook and its thoughts on inflation .Whether the fed is sanguine or troubled , this could give a strong hint on December action. Overnight nothing but bad news, Handful of Chinese’s commodity companies reported earnings and they missed expectations. So far 68% of Companies that have reported earnings have missed expectations. Shanghai Closed lower as did all the Asian Emerging Markets.

Deputy Head of China’s steel industry said demand dropping faster than prices, Banks withholding loans and losses piling up. UBS cut growth outlook for China as well. BOJ meets Thursday night and is rumored to cut Economic outlook and push back the date when Inflation will reach target. There is a possibility that they expand stimulus as well. Retail sales missed as well -.2 vs f/c +.4.Australian CPI missed expectations as well 1.5 vs 1.7 for Q3.

In Europe Riksbank (Swedish Central bank) left rates unchanged but increased QE by $7B as it tries to get ahead of ECB QE and a weaker Euro. They pledged to do more if her currency continues to strengthen. German Import prices missed -.7 vs f/c -.2 (importing deflation). We had another failed bund auction 2.79B sold vs. 3 B expected. VW and Porsche issued profit warning, Greece is having some delays in instituting reforms and thus Delay in latest aid tranche. Norway Sovereign wealth Fund lost $23B in Q3 and will have to draw from Fund to fill budget holes. (Low oil prices the reason) On Bright side, I guess, we have dovish ECB comments (from MNI)

VISCO: EMU RECOVERY TO CONTINUE IN Q3 AT CONSTANT RATE
05:30 10/28 VISCO: BRIC, CHINA TURMOIL POSE THREATS TO EMU GROWTH
05:30 10/28 VISCO: BRIC, CHINA INSTABILITY THREATENS PRICE STABILITY
05:30 10/28 VISCO: BRIC INSTABILITY SLOWS INFLATION RETURN TO 2% TARGET
05:30 10/28 VISCO: ECB READY TO USE ‘ALL AVAILABLE’ TOOLS TO BOOST INFLA
05:30 10/28 VISCO: ECB GOV COUNCIL TO EXAMINE ‘ULTERIOR’ STIMULUS IN DEC
05:29 10/28 PRAET: DOWNSIDE RISKS HAVE CLEARLY INTENSIFIED RECENTLY
05:26 10/28 PRAET: GOVERNING COUNCIL WILLING AND ABLE TO ACT
05:13 10/28 PRAET: SYSTEMATIC UNDERSHOOTING HICP TARGET HITS EXPECTATIONS
04:43 10/28 ECB PRAET: WE HAVE TOOLS TO ENSURE PRICE STABILITY

Dollar and treasuries are Lower Euro and bunds A touch higher. Weaker dollar, Hope for More QE? Pushing commodities higher.
I find it hard for FED to raise rates this year with the ugly backdrop of Global growth. On the other hand if payrolls stay steady and rate of change in Inflation is higher they will be forced to adjust rates. Today’s meeting is a nonevent but if Fed pulls a dovish rabbit out of the hat, that Eliminates possibility of December hike, Should be a fun one.

mid day Update and thoughts

Day one of  two day FOMC meeting usually a quiet one.Today we have had bursts of excitement,but be aware that   E-mini spooz  have $10 range,EURO  49 pip range.No one in a hurry to extend ranges.Apple earnings after the close is another reason/excuse to not be active in the markets.

Nat Gas Continues to be pressed higher as shorts cover. less to do with Weather today then position squaring before expiration.

Cattle seems to have run out of Bullish steam  as over bought conditions, a dip  back below 50d MA and A gap fill are too much for the feeder bulls to deal with.The report from World Health organization about red meat and cancer is not helping matters either.

Today’s economic reports where in line/lower. Even though second tier data,it is not the type that hints at robust economy.Weak durables and lower Consumer confidence adds evidence to  less spending scenario/Slowdown growth.Consumer confidence is a proxy for Spending,And durables are goods directly connected to manufacturing sector.

Bonds dont want to go  down today,no reason they should.Poor Economic data,lower oil  maintain bid,some talk of Month end buying creeping in,that is for others to argue.3 week low 30 yr yields,watching 2.746%.

Transports  down 2.6% headed for worse day in 2 months.This plays into earlier comments that slowdown in Commodity space not only affects producers  also the companies that transport them.