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Late Friday Same Old: Volume Plunges, Stocks Drift Higher, Diverge From Bonds
The late Friday afternoon autopilot has kicked in: with carbon-based traders hoping for an early start to one of the last workable Hamptons weekends, volume has plunged, after a promising start. The result, as always, is a gradual meltup in stock, which as has been the case recently, now diverge from bonds on a regular basis. Yet, as we showed previously, the convergence earlier this week was dramatic, and fully on the back of the algos. Take opportunities like this to short or at least, bet on convergence: short stocks, short bonds.
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ES plunges overnight on wednesday, market opens thurs, all the yahoos pile in.
ES plunges drops overnight on thursday, market opens fri, yahoos keep piling in.
Regardless, OpEx next week = higher.
Please correct me if I'm wrong, but it seems for the past few months options expirations week hasn't been very profitable for long positions.
opex and vix... the odds favor long gamma, but given the "amazing" summer option volume, it may not be that crazy...
I wish I could do these convergence trades with my spreadbetting account... I got the S&P on there but no US govi bonds... Or does anyone have an idea how to play this on a normal spreadbetting account?
Thanks!
A bit basic, but couldn't you just do it with ETFs...short SPY with SH and find an etf that shorts intermediate us bonds. PST does it, but that's an ultra short. Can't find a 1x short etf for that...
TBT or TLT.
does TLT have decay associated with daily movements ? I know TBT gets slaughtered from its 2X leverage.
Those are longs. Could short intermediate bonds with DTYS
COIN.
Not Converted Organics, that I know of though.
Most of these spread betting firms do quote Treasuries, but for some reason you have to request access to the quotes. My advice is to call them up and ask.
thanks for the replies! Ill give 'em a call!
You have to work out the ratios for this. Little bit complicated as you would be trading in £ but on a $ ETF or bond.
hi,
when i'm hearing spreadbetting, i assume you might be in the UK too?
try http://www.cmcmarkets.co.uk/ i've been with them for years: you can trade 2, 5 & 10 years + TBonds.
i think www.igindex.co.uk will have the US treasuries too and is as good as cmc.
What ratio of £ per point would you go at on a bond compared to £ per point on the ES?
first of all let me say that i'm not the greatest fan of 'supposed divergence' especially on short term timeframes; on cmc you trade the price of the 10Year rather than the yield (if price goes up, yield goes down and vice-versa) so if you think there is a divergence as proposed by ZH you would need to be short ES (ie S&P Cash) AND short US Treasuries (TNOTE10YR) because you trade the price NOT the yield.
For example on Friday you had roughly highs & lows between these 2 instruments at the same time (7.15am & 1.30pm); inbetween, the S&P Cash moved down 162 points (1090.8 - 1074.6) & the TNOTE10YR moved up 37 points (124.73 - 124.36), giving you a ratio of around 4.4.
But next time you hear of a divergence in here, do a quick count on the day, to make sure you are as close as possible to the true ratio.
Anyone concur or disagree?
HIgher is right - to create "favorable market conditions" to float GM and reignite the KKR IPOs - the banksters are licking they chops for these massive fees...
R2K stinking up the party. I'll stay short.
"bet on convergence: short stocks, short bonds" ?
The chart shows yields. So yields would need to go higher for convergence.
Meanwhile the EUR is in a death plunge pointing to at least 1.2525
Yes, I like to keep an eye on intermediate to -longer term SP-500 and 10 yr yield charts together. Major divergences don't always pan out, but often they do. I have found them to be one of the better broad-based equity accumulation/distribution indicators.
The sale of 03/11 3-month ED calls (GE-H11,9950 at 13.5 bps) looks like a low risk, contrarian bet vs. zero interest rates, which are not working out so well in the Eurozone. http://bit.ly/cumonH
Can always roll for credits if it doesn't break by expiry.
Yesterday was the first sign of a top in EDs I've seen in months. May go short the futures outright considering the calls can't price in too much potential upside to the ED with how low rates already are. Plus you're limiting your upside if we get another euro banking event...
-jon
excellent points...good luck with the trade if you take the plunge..seems to have a good risk/reward, since they broke 70 tics post-event. Also, shorting gov'ts (as opposed to ED) outright scares me in the event of a geopolitical event (Iran, China, N Korea). Thanks Again!
Or stocks lower.....
Of course, The machine was off for a few days due to maintiance, But now it's back. Did anyone really think the markets decline over the last few days was due to actual market activity? The machine had to make it look like there is a human element in the market. The Tricon 238 is a total spectrum machine.
Upgrades, they have been discovered. They will increase the speed of their bids/offers
by a factor of 1000.
If an Index starts at 100, goes up 10% on Monday and down 10% on Tuesday - it ends Tuesday at 99. For a 1% loss Right?
A 2X Inverse ETF would go down 20% on Monday and up 20% on Tuesday - providing you a return of......??
Answer : Minus 4%.
http://bit.ly/9rs4tT
No meltup tonight...
Its kinda like the stimulis argument. Without the PPT you would have to turn you eyes from the savergy.
Perhaps not - but given the absolutely pathetic volume it would be somewhat interesting if they couldn't ramp this up to at least a flat close today.
BB wants to refi all the short term debt on the long bonds at 1%.
put your helmets on and enjoy!
a weekly close below 1083 should take us to 965 - 970 pretty fast
was about to say - weak close today. PPT throwing in the towel / gassing up the choppers?
Oh hmm. What we need is a good old fashioned slow speed chase in LA to liven these dog days up!
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