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.
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.
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
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.
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
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.
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
Daily Lean Hogs For February seems to be bottoming out.Strong resistance at 58.85 ,if market can close above that level a buy signal will be triggered.The Fisher transform has already given buy Signal which may give me some pause to the extent of breakout,but wont dissuade a buy above that level.
Natural gas touched 2.410 yesterday afternoon on mid-day weather forecast,today it traded down 2.268 on report that Nat gas in storage touched a record 4 trillion cubic feet!Today’s storage build was lower than consensus,but that doesn’t matter one lick due to gas in storage.Their is a small possibility that next weeks Storage report could also show a build,not good for any nat gas bulls(doubt there is any out there) Historically this week should have been the first of the winter withdrawal season as the 5 year avg. stands at a draw of 12.
Treasury complex sees 10 year yields down about 9 Bps ,30 year yields down 12 Bps since Tuesday.Swap spreads still negative from 3 out to 30 years,a true anomaly.Swap spread are telling us the U.S. Government is riskier than than banks! crazy.
Post FOMC Dollar is down 100 ticks in 24 hours,already discussed reasons why. Spus are up 80 handles from Monday lows as markets head in to the “Santa Rally period”.The assault on 2100 look s like will take place early next week.
platinum and palladium look like they are turning around, finally. I would think purchasing a few units in platinum is a smart choice