Thursday, 22 October 2009

Bank of England minutes signal end of easing

The absence of any signs of Quantitative easing extension prompted a huge sell of in the short end yesterday as traders started to place there bets on the end of the easing cycle and that rates will start to be heading up.
Short sterling contracts came off over 20 ticks from sep10 onwards, with the front month dec09 mar10 spread trading 6 ticks higher. Cable jumped over 250 pips as the dollar lost ground again, and we saw a breach of 1.50 in the Euro dollar too.
Euribors dropped 8 ticks, and the bund was down over 80 as bonds started to reflect higher yields after being kept low for so long as the large availability of cash has been used to buy up the stocks and bonds.
However it remains to be seen whether we are really in a fully fledged recovery as, this morning UK retail sales came out weaker then expected and reminded as the consumer spending is still fragile.
Stocks are selling off today after a late sell of in the US yesterday night as an analyst downgrade of Well fargo prompted profit taking after a huge run up. However with many companies earnings still handily beating estimates, it is likely there wont be too much pressure to the downside for long.

Wednesday, 14 October 2009

Stocks continue to rise as earnings please..

The party continues as we are vey nearly approaching 10000 on the Dow and 3000 in the eurostoxx. Good earning from Johnson and Johnson and Intel have buoyed the positive sentiment, and lifting the futures this morning. We have a raft of earnigns reports with JP morgan being one of the big ones before the US market open this morning. It is likely they will beat estimates, but any shortfall could see a reversal in stocks.

Looking at the S&P the double top formation at 1075.75 in the S&P 500 Dec. futures appears to have only provided temporary respite from the underlying bullish trend. The only possibility for this being a turning point is if it develops into a larger double top formation, although looking at the underlying strength this does appear a bit of a punt. Above recent highs, the 50% fib. retracement of the entire down move is at 1126.25 in the S&P 500, and 5921 in the Dax 30. A break of these levels would really scare equity bears and would like lead to an accelerated move upwards.
Euribor spreads have fallen some what as traders bet on when the rate increasing cycle will begin. It is still not likely to happen until next year, but eyes will be mainly focused on employment data as that will need to improve for a true economic recovery to take place.

Tuesday, 6 October 2009

Bears have their say, earnings season start tomorrow

A trio of bears weighed in today. It's hard to argue with any of them.

Soros says our banking system is "basically bankrupt" and consumers have debt coming out of their ears.
Roubini thinks the market is discounting a "v-shaped" recovery and will therefore be disappointed with a "U"
Robert Prechter (Elliott Wave guru) says the bear market resumed in September. Prechter, of course, is predicting a full blown Depression.

Yet despite this we are rallying hard in stocks, as earnings season begins tomorrow.
The attempted pullback was short lived as it looks that we are heading for new yearly highs again.
Bunds remain elevated despite the equity strength.
Traders will be looking to a new direction from the ECB as the monthly rate decision will be taking place. It is unlikely that there will be any change in rates, but what traders will be keeping an eye on is whether there will be any signs of withdrawal of monetary easing.

Short Sterling spreads nudge higher on hawkish Fed; Walmart blowout

As most must know trading Short Sterling is a bit of a bore, and has been for a while. Having managed to get out of my 2 month hold before,...