Friday, 29 November 2013

Difficult November

Its generally its been a difficult month as volume has been absent for most of the month. The last two weeks of November has barely been worth trading. We have been drifting slowly downwards as the easy stimulus gods reign supreme, killing the volatility and the interest. The beginning of the month with the rate cut was the best period of trading, lots of volume and opportunities, and luckily I made a bit of money at that time, since then we had a strong Non Farm, and mediocre data else where which provided the perfect ingredients for the storm higher in Equities, and drift higher in Bonds.
Coming into December, its likely going to be a quiet one, although the first couple of weeks hopefully will have a bit of action, with the raft of data that is coming out. Some good data could give speculation for early taper, although it will likely only be speculation as the FED wont do anything for a long time in my opinion.

Its funny they continue to maintain their need to purchase $85 billion a month, despite signs of improvement. The Fed should show some confidence in the economy by tapering a slight bit, they wont be raising rates, just tapering as if there is a time to do it, it is now as we are up 30% in stocks and so even a slight pullback wont dent the years gains too much. But they have no balls, looks like its going to stay this way for a long time. 

Sunday, 24 November 2013

New Highs for Stocks as QE is here to Stay.

The more I see these stocks move up, the more dire the markets become for day trading purposes. In fact there were some decent moves in the Euribor on the back of ECB comments that they may implement negative deposit rates, which was then countered by Mario Draghi himself saying that they would not be looking further into this, which give a good buy opportunity on the initial comments, then a good exit on Draghis comment. Come Friday though we just had the same slow sideways low volume movement.
Looking ahead, we have US Thanksgiving Holiday this week, which will mean lighter volumes then the already light volumes, so what I expect to happen is the usual drift up in Equities to new highs, and the blips of movement in the Short Sterling and Euribor Contracts on the back of limited data in the week.
I think as a whole the rest of the year is going to be very quiet, with winding up trades earlier then usual.

As far as the easing bias by all Central Banks goes, I don't see it ending any time soon, the markets absolutely love it. I saw a pop up in equities when the Japan minister said they will engage in more QE if needed, so looks like the 'Markets Heroin' is still coming thick and fast and despite the lofty levels we are at, there's still room for more upside on any more QE talk.

Europe is still in a mess, so they will keep their murmuring of negative rates which will intern push European Stocks to new highs, as the economic recovery is still way of track.
The Fed, will keep head faking the market into the threat of tapering, but this will not come about, since the economy is now built on leaner workforce's, better technology, and less need for mass employment, hence the numbers wont stack up to what the FED wants and so full force QE will still be in effect.
As far as the UK is concerned, they are the most likely to move on rates if one was to do so, but again, I think they will be too scared to do it first, although if the housing market remains as hot as it is now, then they may have no other option.  
So in conclusion, my feeling is that easy bias is here to stay, which is good for them rich folks, not good for the general market.

Wednesday, 20 November 2013

Thursday, 14 November 2013

Yellen defends QE - Means Dow 17000 by Year End

The Fed seem to have made there thoughts clear, that the economy is performing below potential, hence a good reason to keep QE going. This intern brought about further gains in the Stock Market, despite the fact the market rallied hard because of the rumour of this happening in the first place.
The appetite for stocks are so high right now that any sign of weakness gets snapped up. The Nasdaq was down 25 dollars pre open yesterday and finishes the day up 40 dollars, with 4 ticks making up a dollar, that's more then a 240 tick move up pretty much in a straight line, as fund managers chase performance coming to year end. This will lead to buying at any cost, and especially on any pullback.
Today's action paints a similar story, despite weak CISCO numbers, the NASDAQ is almost positive again, and ES making new highs, 12 points away from hitting 1800!! Up too much too fast? It doesn't matter, this bubble is getting bigger like the FEDs balance sheet, and it doesn't look like QE is going to go away anytime soon.
As far as Bonds are concerned, as you would expect Spreads have been shifting lower, as Yellen says QE is the best course of action at the present moment. We are trading 4.5s again in Dec14Mar15, after going to 6s a couple of days earlier, this presents a good buying opportunity again, enough for 1/2 tick at least.

On the UK front, slightly weaker retail sales pushed Short Sterling higher, after an initial downward spike on the higher estimates for GDP from Mark Carney in the UK inflation report. However the Spreads are pushing down along with Euribor and Eurodollar, although if one Central Bank is going to blink first, it looks like it will be the UK.

Friday, 8 November 2013

Bund Move - November Non Farm Payroll

There was alot of volatility just before the number on this non farm, with NASDAQ spiking and Bunds spiking too, for the number to come in much stronger, and having the reverse effect. If this was a guess, it was an expensive one, and if it was leaked then shame on them!

25 tick spike just before the number then a 90 tick move down! Ouch!

Thursday, 7 November 2013

ECB Cuts rates!

Well that was unexpected! It was out there but I didn't think it was going to happen given that it signifies everything is still in the dumps! I guess that's the message they are giving.
So the main reaction was in the Euro where a 200 plus pip move down was observed, as usual I saw someone pushing it down just before the number and all I can say is well done to them. Whether it was leaked or a punt, it doesn't really matter.
Euribors pushed up 15 fat ticks plus but what made this a nice report to trade was that the spreads didn't really come off to much, and it faded the move throughout the press conference. This made it easier to trade as there was plenty of volume and also we are at very low levels which made buys very compelling. I was buying all the way down, and lucked out when it pushed up. Dec14Mar15 traded as low as 4s, couldn't get that many off buy its now trading at 5s, so nice bounce there. Before the number it was trading at 5.5s so not much of a move there, but plenty of volatility to get in and out. Chart below of Jun15 Euribor.

The good thing about this type of volatility is that it gives you the chance to make back mistakes. I got caught plenty trading this, but my losses were easier to make back which always makes trading much more enjoyable.
I ended up doing over 400 RTs today so quite an expensive day, but ill take this over sideways markets any day, although I do fear now that we going to flat line for the rest of the year as rate hikes are totally of the table short term.

Tomorrow we have non farm payrolls which hopefully will provide some opportunities, and then we have BoE inflation report next week which hopefully will provide good volatility!

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,...