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Market Recap: 12.20.2010
A snoozer in stocks today – which maybe is the best that could be hoped for after risk assets opened very poorly to start the week in Asia. The nearly 2 handle drop in the VIX on Friday makes a lot more sense following today’s 8 handle range in SPX. SPX closes up 3 at 1247. The DOW closes down 14 at 11478. The NASDAQ closes up 7 at 2650. Didn’t realize it until I just looked, but those are new yearly highs for both SPX and NDX. Sneaky Santa Claus rally it seems.
The VIX closed up +.30 at 16.41, holding sub 16.50 for the second time in over seven months.
The EURO again under pressure – fundamentals not getting any better and technicals getting worse. EURCHF looks destined to see 1.25 and a close below 200d (1.3102) in EURUSD would suggest a retest of the December lows before the year is out. EURO flow was light. Leveraged demand for EURAUD downside options. Real money selling EURUSD in spot. CAD trades poorly today, undoing some of last week’s outperformance. Elsewhere in the world of FX weakness, TRY continues to trade very poorly. The pair is now up 13% since the November lows. On the flipside, BRL trading better after Friday’s disappointment.
The rates market rallied early in the day only to change course at the end of the morning and finish slightly worse on the day. Bonds were the worst performer on the curve, finishing down 4.8bps on the day, and the curve steepened after the 11am buyback in the 10y sector into the afternoon buyback in shorter intermediates. In swap space we saw overall better receiving in spreads, mostly from fast money looking to unwind positions on the back of the recent rally and ahead of the new year. Flows and volumes were very light and tomorrow should be similar with no data and two Fed buybacks.
Commodities were quiet today with light flows. Nat Gas and RBOB finished up on cold winter weather in Europe and US. Flow-wise, we saw some long-rolling of final oil contracts on today’s CLF1 WTI crude expiration. It was a bullish day for beans, wheat, and sugar on the China resource and we saw leveraged buying of sugar and cotton as cotton traded 2x limit up.
An uneventful day in credit as everyone seems to have closed down for the year. IG closed marginally tighter at 85.75 (-0.5 bps) and HY was unchanged.
Tomorrow brings CPI and retail sales for Canada, a BOJ meeting, and the latest minutes from the RBA.
Detailed FX commentary from Talking Forex:
EUR/USD
The pair finished the session lower on Monday amid renewed concerns over the ability of weaker EU states to refinance looming 2011 debt obligations at favourable rates. Also, vague market chatter of an imminent Belgian sovereign downgrade weighed on overall market sentiment in spite of complete absence of any action or of an announcement by the main rating agencies. In addition to that, Tuesday sees the Spanish debt agency attempt to auction around EUR 4bln worth of T-bills of which the outcome will likely be the main driver behind investor appetite for the currency. The move lower on Monday saw the pair briefly slip below the 200DMA at 1.3102 but by the closing stages of trade the pair was above the key support level. Nevertheless, the fact that the pair was able to easily make a temporary break on the support suggests that further EUR weakness should not come as a surprise. Worth noting that Tuesday sees a 1.3450 intraday option expire at the 10am (1500GMT) NY cut.
GBP/USD
Similar to the EUR, GBP failed to gain against the greenback but crucially ended the session above the key 1.5500 level. Even though there was scope for further session, the currency remains somewhat resilient to the risk averse sentiment largely due to report from the CBI which sees the BoE hiking rates within six months in order to curb inflation. In terms of technical levels, to the downside a major support is seen at the 200DMA at 1.5390 and Tuesday sees the release of the Public Finance and Public Sector borrowing data, all to which the currency is expected to be highly reactive to.
USD/JPY
Despite a stronger USD which benefited from renewed geopolitical tensions in the Korean peninsula the pair finished the session in slight negative territory. By the closing stages of Monday the pair was trading below 84.00, implying that a convincing break below 83.50/30 will indicate a potential for further losses. Much of the attention will now turn to the BoJ target rate policy meeting where the key rate is expected to remain unchanged, however investors will scrutinize whatever comments that are subsequently released by the head of the central bank. Also worth noting that Tuesday sees 83.00 intraday option expire at the 10am (1500GMT) NY cut
Commentary compiled using Goldman Sachs and Talking-Forex.com
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Bears could be in a world of pain if:
1) New Zealand and Australia break out of this range and make new 2-year highs:
The Nikkei has been the most resilient during recent down days in the S & P 500.
2) China prints a bullish spring at 2,800 and advances off this base:
3) CRB Index keeps moving to new highs:
Why not mention how much Asia loves precious metals?
can't disagree...wait, I've gotta pee.
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Wow, this is truly scary and absolutely real consequence of the financial collapse of 2008. What can we do to stop it??
GW, I thought about clicking on your link. Instead, I clicked "junk" as a more efficent use of entropy.
Precious metals look strong after being heavily manipulated all day; silver during NY trading and platinum after hours.
until China sets the Yuan stronger against the USD and the EURUSD takes off. so much for the dollar safe haven trade idea guys......
Here we go.....
Can't wait for you to do an HW and say I got out 3 weeks after the collapse.
Those patterns very much resemble failed bull flags.
Just sayin'.
:/
No mention of Feeder Cattle at all-time highs? 120 represented monthly resistance 4 or 5 times since 2003. Steaks are on me @ 130+.
think we'll might get some Lean Hog for Christmas
or maybe some of that pale Pork Belly with Lipstick on -
No need for Turkey this Christmas ,
we had plenty of that through-out the year -
..and Pork Bellies were not exactly on short supply either...
So census numbers are released today....and I know everyone is looking for the how many new representatives may need to be elected. My question is...what will the impact on the unemployment numbers be? This will impact the participation rate, employed to population ratio and NILF.