******************************** store to read remotely. read again to understand: research a bit. http://www.zerohedge.com/news/2012-09-23/fed-has-another-39-trillion-qe-go-least 6 day rally in bonds and dollar(UUP). Everything in mild risk off correlation. Failed breakout in gold 2 days ago. QE euphoria over for now? GLD ma(5) of corr with SPY very strong (+) when risk on. ma(5) corr (-) recently when risk off with GLD PA stronger (excluding today) AVG day % change(20) = .61% vs. .42% SPY. Looking to do (1GC-2*ES).Wait. SPY looks stronger tonight. Approx 50k(20k due to volatility) GLD exposure IF corr holds. Spread is up about 7% in 30 days. More bullish on GLD than SPY but seems OIL and GOLD hard assets not encouraged by FED, GOV etc.. inflationary. Margin increase on gold deadly . Look into silver vs. gold spreads. GLD SPY very strong risk on recently. Could use GLD and SDS etf to do the same thing smaller size lower risk no overnight liquidity. TLT 122.50 0.78% FXY 126.12 0.36% TLH 135.29 0.34% UUP 21.80 0.23% SPY 145.65 -0.15% FXA 104.38 -0.28% FXE 128.43 -0.48% GLD 171.05 -0.53% USO 34.09 -1.16% VXX 8.57 -1.49% SLV 32.93 -1.64% Snippets from Marc Chandler on seekingalpha.com: Good summary of events in news. The U.S. dollar is firm to start the new week, except against the Japanese yen, amid a general risk-off tone. The U.S. dollar is firm to start the new week, except against the Japanese yen, amid a general risk-off tone. The fifth consecutive decline in the German IFO . Talk that the ESM can be leveraged through selling bonds to the private sector is not helping peripheral European bond markets It is generally assumed now that when Operation Twist is complete at the end of the year, the Fed will replace the bond buying by extending QE+. The Fed's balance sheet will expand by roughly $1 trillion. The ECB plans to sterilize the purchases it makes under the Outright Market Transaction program and unless there is another LTRO, the ECB's balance sheet is unlikely to expand very much. European developments may overshadow central bank balance sheets in the days ahead. There are several developments/events to monitor in Europe. * In Portugal, the recent public protests have the government looking for an alternative to the planned hike in the social security tax from 11% to 18%. It has already been given another year to meet the fiscal target, but European officials still have not acknowledged what this means. It is unlikely that it will be able to return to the capital markets in nine months like it is expected to under the 78 billion euro aid package. Spain will release broad strokes of next year's budget. It will also announce a package of structural reforms that are meant to anticipate the conditionality that may be required if it asks for assistance. Among the measures discussed are freezing pensions, accelerating the plan increase in the retirement age, and lowering the threshold of the wealth tax. The results of the bottom-up analysis of Spanish banks is expected to be released at the end of the week. They will be compared with the early estimates of around 60 billion euros, which at the time was met with great skepticism on the part of investors. Since then, the bad loan ratios have increased and deposits have fallen. There is some talk that Spain could use the remainder of the 100 billion euro backstop for other purposes (like supporting its own bond market), beside bank recapitalization, but this seems highly unlikely. Some observers expect Moody's to conclude its rating review by the end of the month, though there is not fixed date. Moody's gives Spain the lowest of its investment grade ratings. We(Chandler) suspect there would be strong market reaction if Spain were to lose its investment grade status. Finally, we note that the region of Catalonia is seeking formal guidance from Brussels on the legality of secession from Spain. Germany seems to be quite nonchalant about developments; displaying no sense of urgency. It does not want the ECB rushed into the bank supervisory role. Although some in the EU are pushing for a resolution on Greece at the heads of state summit in the middle of next month, Germany seems content to wait until November, which some reports link to the aftermath of the U.S. presidential election. The IMF is also taking a very strong stance on Greece, perhaps in order to drive home its point that another debt restructuring is needed (official sector, including the IMF, has 2/3 of Greece's debt). France and Italy reportedly were encouraging Spain to request aid soon, but Germany's Finance Minister was unequivocal. He had "unshakable conviction" that Spain does not need additional aid. This perhaps foreshadows the difficulty it would be now to get German parliamentary support.
Markets have traded 9 days since QE with these results: Yesterday was the 1st day since JUN25th that SPY down > 1% FXE and GLD still above Ma(20) after leading the riskon rally. US0 -8.68% SPY -2.24% SLV -2.20% FXA -1.63% FXE -1.01% GLD -.88% FXY -.25% UUP .60% TLH 1.57% TLT 2.89% VXX 7.89% **EUROPE last 9 days** EWI -7.51% EWP -4.84% EWQ -3.74% EWG -2.24% Concensus is Europe is dominant driver and I am late to recognize this. Chandler.... http://seekingalpha.com/article/889361-a-few-observations-about-europe-on-hump-day bond recap:http://www.breifing.com/investor/ma...-issues-weak-equities-underpin-treasuries.htm Post FOMC for approx a week I was thinking bull flags/ mild if any pullbacks even though short term technical sell signals(ignored).Now a trendline 35 days old has been broken. A 90 day terendline hasnt yet. Horz. support level at 142.5ish. 5th occurrance in this 90 day uptrend (sometimes for a few days but always losing momentum) that ma(20) has been crossed. Must maintain HL at approx 141. look for long in the 140-143 area. Bonds were an excellent tell in this risk off period. Remember selling volatility at inflection point has been the best of trades in the past. Watch these areas and keep up with Europe. Thurs/Fri have some important numbers due out. Date ET Release For Actual Forcast Prior Sep 25 09:00 Case-Shiller 20-city Index Jul +1.2% 1.5% 0.5% Sep 25 10:00 Consumer Confidence Sep 70.3 62.0 61.3 Sep 25 10:00 FHFA Housing Price Index Jul 0.2% NA 0.7% Sep 26 07:00 MBA Mortgage Index 09/22 +2.8% NA -0.2% Sep 26 10:00 New Home Sales Aug 373K 390K 374K Sep 26 10:30 Crude Inventories 09/22 -2.446M Sep 27 08:30 Initial Claims 09/22 Sep 27 08:30 Continuing Claims 09/15 Sep 27 08:30 Durable Orders Aug Sep 27 08:30 Durable Orders -ex Transportation Sep 27 08:30 GDP - Third Estimate Q2 Sep 27 08:30 GDP Deflator - Third Estimate Q2 Sep 27 10:00 Pending Home Sales Aug Sep 28 08:30 Personal Income Aug Sep 28 08:30 Personal Spending Aug Sep 28 08:30 PCE Prices - Core Aug SEP 28 08:30 Chicago PMI Sep 28 09:55 Michigan Sentiment - Final Sep Read more: http://www.breifing.com/investor/calendars/economic/2012/09/24-28#ixzz27cqw70Ps
Summary for last week and some of upcoming week. WEEKLY NET CHANGE: SPY -1.3% FXE -1.05% FXA -.64% USO -1.07% GLD -.04% TLT +2.2% FXY +.1% VXX +3.45% On Monday, stocks began the week on a down note after Germany's Ifo Business Climate Index missed expectations Monday: AAPL 667.10, -14.21) ended lower by 1.3% after reporting selling just five million iPhone 5s over the weekend, while some expected sales to reach as much as 10 million units. Tuesday dow down 100 points. Riots in the streets in Spain due to austerity, regions of Spain wanting to govern themselves, creditors against using the unfunded ESM for Spanish bailouts, Rajoy readying budget. Very poor macro data late in week. Thursday's session got off to a strong start despite a string of negative economic data. The third estimate of second quarter GDP indicated growth of 1.3% which was well below the prior reading of 1.7%. Elsewhere, durable goods orders also showed notable weakness as new orders declined by 13.2% during August. Excluding transportation related items, durable goods orders decreased by 1.6%. Weekly initial claims were the sole bright spot as the reading of 359k was below the broadly-anticipated 379k. The major averages extended their gains after Spain announced its 2013 budget which included spending cuts and no tax hikes. Spain's budget announcement Thursday was initially greeted with enthusiasm as it appeared to demonstrate Spain's commitment to cutting its budget deficit and qualifying for a bailout that would remove default risk for the near future. However by Friday many analysts were already noting that the budget was based on unrealistically optimistic assumptions about Spain's GDP declining by only 0.5% in 2013. For example * BofA Merrill Lynch forecasts -1.7 % GDP * SocGen expects -2.2 % * Citi predicts-3.2 % If these predictions gain wider acceptance, which is likely given Spain's history of dubious reporting standards, then disappointed markets could sell off on renewed anxiety that the ongoing game of chicken between Spain and the EU could resume,. These could potentially be THE big market mover this week. This article is a good look forward to this week. http://seekingalpha.com/article/895941-this-week-s-12-market-movers-and-6-things-to-consider is a good calender primer for this week. Bottom line, we were oversold last week into Spain budget. Knee-jerk risk on followed for one day or so and gave it all back. Bearish. QE3 remains the top in SPY onb Sep13. This is a pullback retracement to ma(20) and uptrend from JUN1 intact. Bonds are notably riskoff. Last two daily bars in Euro prety big and give me a range to watch as a tell as to which direction thigs go. FOMC minutes released this week. Recently have moved markets. Details on conditions/expectations/Rationale for QE3 could be negative. Dont see any upside to the minutes. NFP Friday. ADP earlier in week wrong last 3 of 4 times.
Last Monday strong ISM Index which was reported at 51.5 against the expectations of a 49.7 reading. Most regonal reports have been bad recently but... Tuesday was riskoff as Spanish aid request is not imminent. Wednesday flat/chop On Thursday, stocks began the day with a bullish bias. Romney rally after great debate. August factory orders report indicated a 5.2% decrease. The number was not positive in itself, posting its worst reading since January 2009. However, it was better-than-feared as expectations called for a 6.0% pullback. Friday NFP = 114k. big increase inpartime workers. Big adjustment from last month 96k to 140k jobs added. WEEKLY NET CHANGE: SPY 1.51% GLD .42 USO -2.26% FXE 1.38% FXA -2.17% TLT -2.47 FXY -.82% VXX -5.2% Strong + correlation in everything excluding FXA. Risk on week.US dollar reversed and sold off all week. SPY up 1.5% for the week no selling/red days Bonds down only the last two days hard with Romney rally and NFP and better news in general. Easing in Austalia , not ECB. China next? Bonds are trending down in risk-on inflationary trade since QE3. Long bond looking to to 3% YEN down with dollar and bonds GLD mixed , lagged up .5% this week but PA still very strong and advancing. FXA rate cut and caution of weakness in China and rest of world. FXA strong correlation with SPY and risk on in general fell apart. Strong + correlation in 4 major European markets with US markets.ECB no rate cut and Drahgi says ECB has done enough. Next move is Spains. ISM Monday 51.5 better than expected even though recently most regional manufacturing reports bad. NFP 114k but unemployment 8.1 to 7.8. Lot of part time workers added. Big up revision to last monts 96k added to 140k aded. Early in week there was some dissapointment that Spain may not request bailout soon. Earnings start this week. Possible that market looks past earnings to Spain, our election and fiscal cliff. Lets see. But , we are well int a swing high and approaching high in SPY. Due for pullbacks/countertrend trades here. http://www.marketwatch.com/story/brace-for-bleak-earnings-likely-surprise-2012-10-05?pagenumber=2 Light week US data upcoming Fed beige book and ppi (WED,FRI). AA Tues then JPM. AAPL effect is a big deal recently. Europe: 17 Europe finance ministers meet to discuss Spain.Next day all 27 members meet. Rajoy to France. Merkel to Greece taken as symbol of no Grexit. Spain 10 year = 5.69 down 25bp. last week. This delays bailout request so they say. Elections in Spain this month , austerity not popular, yeilds falling, there is leverage in threat of systemic risk to get less severe austerity measures, Drahgi has said measures needn't be severe but Germany doesnt agree. Spain wants conditions on the table before they make a request. I read that some beleive it will be about a month before the request. Time to discount this bullish event. This seems to be the main news event in the market for a time to come.