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Global Macro Morning Update
From Nic Lenoir
First off let's follow up on 10s/30s in the US. The market saw almost to the tick the topside of the channel resistance and is flattening quite a bit this morning (see attached chart). Given how steep the curve is and over-extended the move has been, I expect a correction of at least 20bps if not more here. I have been recommending conditional flatteners in TYZ0/USZ0 and I stick to the strategy. It isn't late to get on board, levels are still relatively attractive and one can enter the trade premium/delta neutral. I have added the Japan 10s-30s chart as well to put things in perspective, both with respect to how boring a stealth depression can be, and to give an idea where we stand in terms of steepness historically. Interestingly if one charts 10s/30s in Japan on the same chart with the Nikkei, one can realize that with the exception of 2005 when 10s30s flattened as the Nikkei rallied with markets believing Japan was about to embark on a hiking cycle, 10s30s and Nikkei have traded in synch for the past decade. Flattening has traditionally been bull-flattening associated with Nikkei weakness and conversely (see NKY Vs 10-3- chart). The other exception? Right now! The Nikkei is 5,000 points cheap to the curve!! Or is it the curve which is 50bps rich to the Nikkei? Obviously as one can see on the SPX Vs NKY chart the Nikkei is where it is because of USDJPY as the strong Yen hurts Asian exporters. So based on that either the Yen should be 40% weaker, or more likely the SPX is 35% overvalued and the curve too steep due to excessive liquidity expansion in the system which is not reflecting underlying economic activity. Something certainly has to give, and for those who do not favor outright positioning in either the curve of equities, it seems like trading the curve against equities in Japan is starting to appear like a good relative value opportunity.
Regarding equities, it appears my worries about the Dax having one last leg up materialized. I have added the 2-minute and 10-minute chart showing the wave structure. It is hard to give a specific target as wave 5s can be truncated or extended (for equities usually the former, especially in a bear market rally). There is no divergence of note on the 30-minute chart yet, so as such I would wait a bit more before expressing outright short positions. Receiving a bit over 1 tick for the November mini S&P 1,205/1,220 call 1x2 is a good way to position for a final extension in low volatility and velocity of the rally.
Good luck trading,
Nic
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Huge number of stops about to be taken out.
If the NYA moves up any further, the odds of the spring highs being taken out increases greatly.
And millions of "underinvested" managers will be bandwagoning the imminent breakout.
What I've learned is that markets can do anything at anytime. Up or down. Correlations don't mean anything. Just have to follow the bouncing ball.
Best watch your back, Robo. We're moving
into cannibal time and you don't
want to be eaten, do you?
that water analogy yesterday was extremely difficult to follow..marla?
Should I still be short the S&P at 11550?
So this market is being held up by the Feds so the status quo can be restored to poltics. They certainly do not want a landslide or Republicans so they prop up the market until the elections then KABOOM. this will not and cannot last.
So this market is being held up by the Feds so the status quo can be restored to poltics.
Not restored, maintained. Dem/GOP is really irrelevant as long as the status quo ante-crisis is not only kept but expanded. Notice candidates in this election never use the words "More opportunities for all Americans". That's because they want exactly the opposite: to maintain the power and wealth of those with power and wealth. And being for "more opportunities" won't attract the funds and backing they need to get elected.
GOP/Dems are just 2 heads of the same monster, in the pay of the banksters in the financial industry and a few remaining large corporate sectors, like the oil industry.
To get elected to national office in the US today requires money that nobody has unless they're incredibly wealthy. That's why there's lots of billionaire candidates this year. But for most they have to get money from the paymasters. When it comes to presidential politics, it now costs close to a billion to get elected.
The elite want elections to cost more so that they can control who can afford to campaign and who has the funds to get elected.
The game goes on: they play aide off against the other so no "Party" gets too powerful and decides to go rogue on them. When there's a GOP president, the midterms go Dem. Dem president, GOP midterms victory. RInse, repeat.
The key to it all is that US economy will continue to act as a wealth concentrator, not attempting to bring up the average. And that key distinction is what makes the US nearly alone among the developed nations.
Looks like gold and equities have finally decoupled. Guess in whose favor.
Nope. All your seeing are the desperate acts of a desperate woman.
Blythe is throwing everything she's got at holding back the gold market here. For proof, look at the barely budging OI numbers. Her bluff is finally being called and, in her desperation, she is selling as much paper gold as possible. Like any kind of wager, if you're not intending to pay off, then who cares about the size of the bet.
No, gold has, most assuredly, not uncoupled from the $ or, by proxy, equities. Just give it a few days.
Equities have underperformed when denominated in gold vs dollars. That tells you that equities are losing the battle against dollar devaluation. Who cares if you make $1,000 in stocks if the price of one egg is $852.95? Gold will continue to rise as the buying power of the dollar continues its decline
Chart: SPX
Topping tail.
http://99ercharts.blogspot.com/2010/10/spx_21.html
http://www.zerohedge.com/forum/99er-charts
Trying to make ANY sense is obsolete, the only thing that makes sense is POMO-Benjie, until it doesn't anymore, who's to know when IT will go down(i.e. CRASH TO OBLIVION), these are all just mere speculative thoughts, nothing concrete! Until then I short whenever this "market" goes higher, at some point, something's really got to give, eh?!
dow soaring
11258 next?
Top sector today is gaming.
You cannot underestimate the consumer. Especially when he has no more mortgage payments to worry about.
This article sums up nicely what could be occurring in terms of chart patterns:
http://blog.afraidtotrade.com/unusual-similarities-in-structure-for-current-rally-and-prior-creep-up/
PMs red with dollar red; something has to give here. if PMs are right we could get another vicious dollar bounce
Nic, you post charts here almost daily yet none them seem to ever be good predictors of anything. That's the problem with trying to use T/A these days - it doesn't work.
Technical analysis does not work as well when investors are acting either depressive or manic...I think we can characterize the markets as the latter right now...so no one knows exactly when a correction will materialize but it will as sure as the sun rises.
Hell, somebody has to try. TA is limited in its predictive ability but Nic sure can shed some light on what would otherwise be total nonsense.
Anglo Irish Bank Corp. offered to exchange 1.6 billion euros ($2.2 billion) of subordinated debt at a discount, paying in new bonds at a rate of 20 cents on the euro as the nationalized lender seeks to generate capital.
Anglo Irish will ask bondholders that don’t take up the exchange offer to accept just 1 cent per 1,000-euro face amount to redeem their floating-rate notes due 2014, 2016 and 2017, the Dublin-based lender said in a statement today
Could this be the first domino?
I suppose FA works then? Or is it technically fundamental banalysis that works? Give me a break. Nada works- except reaction, POMO, and scalping pennies that the HFT crowd does.
Fundamental
(Reuters) - Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) may need as much as $215 billion in additional capital from the Treasury through 2013 to offset losses and maintain a positive net worth, their federal regulator said on Thursday.
POMO that.
How many ants does it take to overcome a grasshopper? I don't know either but I know this bullshit market - even with POMO - is a finite bet.
Chart: COMP
http://99ercharts.blogspot.com/2010/10/comp.html
http://www.zerohedge.com/forum/99er-charts
yeah, who needs TA when you already have an opinion?
Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic.
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