NDX

Nasdaq +47 handles today and 13 handles away from the all time highs.We all know that FANG and NDX have a Positive Correlation either to upside or downside.The other big Component of NDX is  Bio tech  . I monitor these by watching the Biotech ETF,IBB. This sector appears strong is it is making close to a 2 month high and Rallying for 4th consecutive day,FANG Index also Higher for 4th consecutive day.When these sectors re rallying hard to keep NDX down.

Below find   daily graphs of IBB:

ibbb

The Morgan Stanley FANG index of stocks:

fng

Plenty of Movement

Hard to categorize the trade this morning with one broad stroke.Spoos higher,Bonds higher,September Rbob +26 handles, Oil higher ,Dollar steady and Euro lower.Markets have rallied ,Sold off,  chopped around for no apparent reasons.Crude oil and Brent trading higher by 3%  which is exact opposite of early this week as gasoline traded higher and Oil moved lower.Crack spreads are still higher so some  fears of gasoline shortages  due to  the Motiva Refinery  in texas ,the countries largest shut down till Sunday and The biggest gasoline pipeline running low on product to ship  so shutting down a portion of it.Natural gas catching a bid  and grains spiking /rotating higher  all basically done without  a specific or one macro headline to drive action.Month end activity in thin markets  ? Sure I can buy that.

10 and 30 year yields  Approaching June lows   Trend has been down so lets hope for strong Wage growth in tomorrows number.

Morning 8-31

Eurozone CPI was uninspiring as the core reading came out at 1.2 % in line with consensus. Three out of last six Monthly reports have resulted in a reading of 1.2% and the last time Core printed above this level  was 4 years ago .This report caused the Euro to trade lower, following the trend of last few days and then got shoved  further when ECB sources said members are getting worried about Strength of Euro. She is down 50 ticks, with a range of 70.A big reason for the Weakness in Euro has been the turnaround in the dollar based on technicals, a solid reversal signal has been given this week plus  Strong US data all add up to a but mentality.. Today we do see The PCE Inflation reading, the Feds favorite Inflation Metric. The weaker Euro=Stronger European stocks with Italy’s Mib +1% and Dax +.6% A risk on  Feel in stocks but Bunds and Bonds appear  Complacent or have their collective focus elsewhere say on Debt ceiling or North Korea as they stand little changed. What isn’t little changed is Gasoline. October up another 5 handles   +25 % in 5 trading days. The latest Catalysts is that the largest gasoline pipeline in the Country which supplies product to east coast is shutting due to lack of Supply to ship. Oil still heavy as Oil demand destruction still evident.

A decent PMI number from china is a good enough reason to buy Copper (.7%), Zinc (1.2%) and aluminum (2%).Gold a little bit lower, but still above $1300

 

A few notes:

  • Yesterday during A trump speech He said he has a great team of people working on tax plan, he didn’t mention Gary Cohn. Some are saying this is a sign of a fallout between two? Something to monitor
  • The Cost Of rebuilding after Hurricane Harvey may very well slow down the Tax Break wagon as Government will have to fund recovery
  • Month End action today

Gasoline!

Why prices Spiked lower in RBOB   and Brent

 

EPA OKs Emergency Fuel Waivers for Gulf, East Coast States 12:40
Exercised emergency fuel waiver authority to help ensure adequate supply of fuel throughout the South, Southeast and Mid-Atlantic as a result of continuing effects on refineries and disruption to the fuel distribution caused by Hurricane Harvey.
• Waives requirements for reformulated gasoline and low volatility gasoline through September 15 in: Alabama, Florida, Georgia, Kentucky, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, Texas, Louisiana and the District of Columbia
• Granting short-term waiver was consistent with public interest
• EPA and DOE continuing to actively monitor the fuel supply situation
To contact the reporter on this story: Ben Livesey in San Francisco at blivesey@bloomberg.ne

 

Stocks

The Impact  Disasters have on An Economy either locally or nationally happens in two stages.The first stage is negative  as Economy comes to a standstill  as Disaster unfolds,The second is the expansion of the economy as rebuilding of homes,Business and In Harvey’s Case Pipelines,Bridges and Roads.Early talk is that up to 20k new workers will be needed to fill these jobs to help Rebuild Houston area.A hit to GDP initially but then a boost to it later.Today Traders are already preparing for the rebuild as materials Sector is the leader within SPX and Lumber futures are higher.Some positive comments regarding Netflix and Strong Biotech stocks  lifts whole Big tech sector and pushed  Nasdaq +60 handles.As rain  finally stops in Houston  attention turns towards rebuild

Market update

Still  a weak “Risk on” For markets as Impact of  positive GDP and ADP are still lingering. Spoos +3 handles  Nasdaq +31.We do  see yield curve  trading flatter here as  Short term Yields trade higher  and  long term yields  are Steady to lower.December rate hike probabilities are 4% higher than yesterdays close they stand  at 33%.Most of Volume today is roll related as We find Dec and September with roughly an equal tally of today’s activity. A flatter Yield curve could be Aussie Dollar and New Zealand dollar being sold   here as Aussie failed to trade above 80 handle.   Dollar +57 ticks as Market is starting to price a Strong payrolls number and Month end activity

The Trade related to Hurricane Harvey has quieted down as rains have moved on .Rbob expiration tomorrow could be exciting.

morning 8-30

German CPI in Line/Higher and Eurozone Economic Sentiment at Multiyear high has done little to push Euro higher. Yesterday’s move above 1.200 may have been a little to fast too soon. Tensions between US and North Korea have not escalated beyond already high levels?? Is being tossed around as the reason for a Firm Dollar and a tentative Risk On sentiment overnight. The JPY /South Korean Won lower today, I use this as many do as the measure to determine tension in the region. If it trades lower tensions are easing. All European Stock markets are trading higher, Kospi closed +.3%, NKY +.75.Spoos little changed to higher. Gold in and a tight range but still above $1300.If it wasn’t for Hurricane Harvey, The talk would be about the waiting game for payrolls.
It finally stopped raining in Houston but flood damage is still present and Not fully known . 75% of refining capacity is shut in in Texas and as a result gasoline Futures are +22% From Fridays lows. Crude continues to trade lower as Demand destruction will continue for foreseeable future. Until Flood waters recede ,refineries are inspected and ports are reopened it will all be speculation on how much damage there actually is .Markets are pricing in the worst as they normally due.
Just released ADP was stronger than consensus a 1.5 Standard deviation beat. I will be on lookout to see if there are any revision higher for Fridays payroll Number .GDP release is first revision for Q2 data and still can provide some Movement for markets. Trump will unveil his latest tax proposal which will be short on Details but Long on Enthusiasm. Goldman Sachs has lowered odds to 35% for Government shutdown
Markets were trading with a subtle risk on attitude only strengthened by ADP report. All eyes on GDP here at 7:30.

Afternoon update

Spoos have made it back to Unchanged and it feels like they just want to sit here till the close.Oil is chopping around  and Gasoline is strong as More refineries in Gulf coast either are shutting down or cutting Run rates.Sep/Oct gasoline Calendar spread showing a nice rally today  higher by 3 handles ,25%  move!September Natural gas expires this afternoon and the front month calendar spread is trying to close at parity  as it trades currently with a spread of 6 ticks.Plenty of Shenanigans are expected in the last few minutes of trade.With a few minutes left till Pit close Brent has made a move and will settle in the green for the day.Lumber which was Limit offered at one point today will settle with losses of 3 handles.

Dollar has clawed back losses and trades Unchanged on day .This  has pressured Gold to trade down  below yesterdays Highs and  create a Risk On Sentiment,A Complete turnaround from this mornings doom and Gloom.Tomorrow we do see ADP and second revision to GDP.They should provide some excitement.

 

 

More Harvey

Why would A Hurricane  in Texas cause gasoline prices to spike in Chicago?take a look at this Pipeline map and it will answer your question. The explorer pipeline (orange line) which carries gasoline from Houston to Chicago is shutting down because there is no Product to ship.Obviously the longer the pipeline is down the higher the price of retail gasoline here in Chicago will be.

pipeline