Its looking like the top again but ES didnt broke even the 40MA. The smart money is very fast to close out easy $ chances, VIX hit 28, up 10%(Lots of hedge funds must be pilling into options). By the time it reaches the 50MA it should be at 33, thats the dilemma, you can get in now and risk get green shooted in the face but with good odds or wait get poorer odds but with more technical safety
I agree with most of what you are saying. However looking at this Bloomberg chart (it's the best I could find quickly): http://www.bloomberg.com/apps/quote?ticker=.LOIS3:IND the 3-month LIBOR-OIS spread was still as high as 100 bps as recent as April 2009. In any case I think it just boils down to the fact that you're happy to take this risk, whereas I'm far more reluctant. If and when you make (more) money on the calls you'll definitely deserve it. Meanwhile I'm still thinking about the merits of Fed Funds Futures / 13-week T-Bills / 3 month OIS / 2-year T Bonds / maybe a short term UK govt interest rate instrument.
Olivier Blanchard from the IMF "Q:One of your predecessors as chief economist at the IMF, Michael Mussa, predicts a strong recovery, saying there is a rule of thumb that sharp recession are followed by sharp recoveries. But the IMF report doesnât discuss that theory? Why? Blanchard: With all due respect to my predecessor, I have no clue where this rule of thumb comes from. The general proposition that when things go down then they go up is hard to disagree with, but that doesnât seem to settle the case. We have studies of recoveries after banking crises and on average the recovery is slow. Bank credit acts as a brake. Based on historical evidence the case is fairly strong the recovery will be weak." Looks like Jim Grant might have to file for jobless claims pretty soon
"The slowing in core prices is more of a concern, said Michael Feroli, an economist at JPMorgan. The core rate fell following three prior recessions in which unemployment rose above 7 percent. That âsuggests that core inflation could well be below zero within two years,â Feroli said in an interview. Core CPI fell 5.3 percent following the recession of 1973- 1975, 10.7 percent following the recession of 1981-1982 and 3 percent following the recession of 1990-1991." http://www.bloomberg.com/apps/news?pid=20601068&sid=ame31IjWda6w Core CPI went from 2.75% to 1.15% yoy during the 2000-2004 cycle
Geithner QE began this week. $34B worth of UST bills purchases(through reting debt) U.S. Treasury, supplementary financing account 164,945 -34,987 week over week Morgan Stanley strategists said this is keeping upward pressure on T-bills. This in turn might be the reason the fed funds rate is trading so low
Whitney on the crunch http://online.wsj.com/article/SB10001424052748704471504574445470989162030.html Lots of anectodal evidence. I find simply better to look at the macro picture, and it aint pretty(Item 9 Loans and leases in bank credit) http://federalreserve.gov/releases/h8/current/ Bank credit going down
So I like the bet that the Fed will only raise rates by about 1-2 years after banks start to net loosen credit standards. The stock market looks headed to a 20-30% correction as economic pessimism takes over. I'm still short COF ACC CAL PPD(although I had to cut back some as they rallied), long XLF puts(staging a comeback after yesterday), ZQ futures, E$ calls, long ACTS and a bit of VLO. Will add more XLF puts if ES breaks a bit lower. I'm up a little less than 20% YTD and if things go according to the plan, it looks like the year end could be strong
Heads up (just in case you haven't seen it): CIT diluting existing common stockholders - bondholders to get at least 91% of the company (if not more). Stock still trading at $1.27 (+21 cents this morning). Looks like an attractive short to me, even more so if you buy the bonds to offset the short position. More information here: http://www.elitetrader.com/vb/showthread.php?s=&postid=2592286#post2592286
ES broke 50MA in the pre-open trading here. July NFP was revised quite lower. The fed hawkish brigade couldn't have timed their bluffs any worse "U.S. Sept. average workweek falls to 33 hours" - This is supposed to be a labor leading indicator
Today is the day, depending if the selloff holds till the open I will buy more XLF puts here. Today could easly be one of those trend days where the market gets hammered all day long. VIX should open quite high too.