Schatz vs. 2 year

.SCHT2 U Index (schatz2)  Weekly 2015-11-30 12-20-29

Weekly Chart   US  2 year yield vs.  German 2 year yield(schatz) .We know the ECB meets Thursday,and  a decent amount of new Stimulus is being priced into European assets.At a minimum a decrease of.  1% in deposit rate,an Extension of QE program beyond Sept 2016 and an increase in the amount of QE. With the FED almost certain to raise rates in December it is easy to see why this spread has moved out to  the widest levels  in 10 years.

With  European Markets pricing in this amount of easing,I think the  buy the rumor sell the news trade will be in play come Thursday unless Draghi really  pulls a rabbit out of his Hat.

Today’s trade

Stocks meandering but have eased lower following a disappointing Chicago PMI(48.7  vs  f/c 54).Employment numbers were a touch higher and Prices paid  Contracted for 4th month in a row.Pending home sales were also near the lower end of expected range.Dollar a touch heavy but in no real  hurry to trade lower.Plenty of Possible market moving events later this week so market Focus will be on Month End adjustments today.

One of these Events is the OPEC meeting On Friday.Per WSJ  this could be on one of the most contentious meetings in a few years as 4 members want a cut in production.Expectations are for unchanged production levels so be prepared for the Discussion to be carried out on the wires as ministers arrive in Vienna later this week.The price of OPEC oil the “OPEC Basket” has been below $40 since 11-13.

There  has been plenty of talk about the breadth of the SPX over the last year.10 stocks have lead the market higher,without them SPX down for the year.Those 10 stocks  as a group down  .03% today.

NATO Comments

Another leg higher  here in spoos.With lack of any other “news”  it seems comments from  A NATO General have caused  run up. NATO trying to deescalate situation by Saying the 2 sides have talked and Russian not planning any type of Response.So far it has worked .What was  a Cloudly picture this morning ,filled with a lot of Unknowns,has become  more clear  with only the fate of the 2 pilots  unknown.

A Holiday Week as had an impact on trade and will continue to do so tomorrow.Whether the thinly traded markets over-reacted to Russian news last night,they have corrected most  of  it by this afternoon.The new time frame for markets on when to forget bad  news can now be measured in hours and not days.

RBOGB  Calendar spread still squeezing higher

As Hawk would say…

Sit back,relax and strap it down!reflation( or short covering) ongoing today.Crude oil has been sideways for almost 2 weeks stuck in a range between 41.21 -43.20 ish. Russian fighter jet incident has broken the market out of her doldrums.Oil vix +4%.As you know  most metals have had very few up days this month and most are near multi year lows.Speculators in the 13 agriculture commodities basically are flat,they have   smallest net longs in 5 months.( per agri money).Plenty of Conversation about the  historical? Net short in commodities   https://www.tradingfloor.com/posts/what-historic-hedge-fund-net-short-position-in-commodities-tells-us-6627898?tagid=product-commodities.

When the weight of “positions” tilts the boat one way eventually we know a correction is coming.We saw a little bit of that today as base metals rallied hard.(most higher by 2%  at a minimum.)Crude Oil pulled all Commodities higher.. Rbob was up 4%  as a possible squeeze in positions before OPEX drove outright Dec.and  Spreads higher. The move in  base metals was   The exact opposite reaction you would have expected during a Risk Off geopolitical move .I guess that  is what the up move so severe,no one expected it.

Why is Russian incident so meaningful for Markets?it seems that all powers were on same side in fighting ISIS,but now  after what turkey did   Countries may have to  choose sides and ruin the whole “one for all,all for one” fight.If it wasn’t so tragic,it would be a soap opera.

Soy

With Argentina election out  of the way ,and the Most bearish for grains candidate with a win Soy traded heavy for most of the morning.The newly elected president pledged to lower all export taxes for grains.

A bid has found  its way into Soy complex  as Jan. Beans are just off session highs with an 80 tick range today.The calendar spreads are also bid  showing  strength  front to back and trading less negative.This in itself is  bullish signal as some form of immediate demand is present.

According to AgResource  the rebound in Soy  prices comes from the fact that not all the soybeans to be shipped( from Argentina) in near future will have lower export tax.Supposedly the  export tax will be lower for 2 months  than revert back to original level there after.So it wont be lower for longer for Argentine Soybeans,which the market seemed to price in.

I would imagine some higher bids at processors and terminals also supplying a ‘bullish” signal for beans

Driving the action today

US  Stocks maintaining a bid after some disappointing Economic news and another flush lower in commodities.A dichotomy being established as materials and energy Stocks are higher,Materials +.74 %  ,Energy related+.6% .Not too often do these two diverge.Dollar is firm to steady  as the Rate hike percentage stands at 72%.the higher that goes the more confidence in USA  economy and higher stocks.2094 Fridays pit high on Spooz so far has been resistance. Expectations of higher  rates weighing on utility stocks and   continuing to flatten the yield curve. The 5/30 curve has been flatter for 5 consecutive days. During that period 5 year yields are higher  by 4 Bps.,30 year yield lower by 5 Bps and 10 year yields unchanged.

Dollar trying to trade above 100 this could weigh on Stocks   something to monitor.Crude oil searching for direction as Holiday markets  are apparent.

CFTC Update

Weekly update on What “manged money”  aka  Speculators did with holdings over past week.

Futures only                          net position

  • Corn -26k                                -79k
  • Soybeans +1960                      -46k
  • soymeal -7676                               -10k
  • Wheat  -21k                                 -44k
  • Live cattle   -1693                        5046k
  • feeder -539                                    -707

Gold speculators switched to a net short position of 8000 contracts  .first net short position since Early August

the record long positioning In Silver continues to dwindle as speculators cut 13k from  them.Still net long   by 12k contracts.

Copper at a multi year low  but Speculators still piling on.Increase in net shorts  by 8430,total net shorts stand at 27,827 contracts.

Only thing that can save  Nat Gas from the “dollar handle” is short covering.For second weak in a   row  Net shorts were cut.this week by 7353

Crude Oil net longs were cut by 28k,positioning still stands net long  by 109k. Rbob net longs cut by 18k,Speculators now net short Gasoline by 1800 contracts.They added to net short in Heating oil  by 8k contracts.

net longs increased In Sugar  Cocoa  and net short added to coffee