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What Do FX Traders Know That Stock Momos Don't?
Two days ago we highlighted the growing divergence between Italian sovereign credit spreads (tightening) improving while EURUSD was deteriorating rapidly - suggesting (for those with deep pockets) an interesting convergence trade. It seems that whatever message the FX traders are hearing is being ignored by equities too now as today US equities diverged even more dramatically joining the rest of risk assets in their divergence from strong USD, weak EUR flows. It seems risk assets broadly are pricing in 'an event' and then thinking ahead to the subsequent 'intervention' that will inevitably float all boats. However, what is clear, in our view from the EURUSD price action, is that unlike many who expect the Fed to save the day, EUR weakness implies some form of monetization by the ECB (or reduces the market's implied expectation for Fed QE3/4). Given tonight's weak equity futures performance (ES -7pts from late highs), we suspect the FX market has it right and momos are over-thinking the reaction impulse function as a given - or more clearly - if Greece exits and no other risk-assets drop (having already anticipated the central bank reaction), will the central bank reaction come?
Either equities and Italian Bonds have it right and EURUSD should be more like 1.28 (with the ensuing short-squeeze causing chaos in currency futures); or the S&P 500 should be under 1300 and Italian Bond Spreads over 60bps wider at 480bps?
We can't help but think the latter seems more reasonable here - whether as a path or the end-point given the event risk potential.
It does seem that the other large and majority professional market for swaps is following EURUSD's path lower also (though interestingly implies a EURUSD level similar to US equities aroudn 1.2700) while the more manipulated peripheral bond market and algo-driven chaos that is ES are pushing higher on hope...
Chart: Bloomberg
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major breakout for the dollar. Pain straight ahead
If /DX goes above 82 for extended period, let it be known we are in a full blown economic melt down (not that we ever avoided / cured it in the first place). FX traders know -- there is only one bet, that's to short ALL these pieces of cr*p. Gold, gentlemen.
http://comparegoldprices.com
This week's breakout was huge. If we close north of 82.25 tomorrow and stay above 82 early next week......nite nite to S&P. 1150 very soon
and once the dollar has been goosed to 90, we can declare an all out war on our debts and tell anyone who doesn't believe in our strong dollar, stealth printing policy to SHOVE it
So, in other words, manipulating the market by just saying something but not doing anything. Yeah, I think that will have a very short lifespan.
HA
It's worked with Greece for over a year.
It's worked for Ben.
No dice on buying the other side of capitulation before it happens - whether it be gold, EM bonds or equities. Another case of investors asleep at the wheel, and a set-up for a panic. There is virtually no reference to what is going on in the FX markets in the headlines. Just crap about American Idol, etc. Everything is eirily quiet. Treasuries and USD are definitely not seeing an optimistic outcome.
Kudos to the Fed for once. They are not printing money yet, which means they are not futher leading lemmings to the cliff. Give everybody a safe place until this has passed.
I think FX is wrong in the short term. I see strong retracement pressures and a short squeeze ripping eurusd back towards 1.29. All of my models are showing a poweful retrace impending. I can't say much about the timing of it, but the pressure is building and soon this thing's going to either blow up or break. Furthermore, I'm seeing the exact same pressures in gold which is very telling.
So... "things" (and gold) are going to blow up or break but you can't say when, why, or how. Lovely. Do you write an investment newsletter?
No, I don't, but thanks for your lovely input. I won't bother junking you because your statement speaks for itself.
True, a super strong dollar kills everything. For India, as an example, Rupee is on a super slide....and gas prices are on an upward tear.
If you want to see another country's pain, do see the 1 year chart on USD/Rupee.
Very very telling.
http://in.advfn.com/p.php?pid=qkchart&symbol=FX%5EUSDINR
ori
Hey Tyler's is it okay if we post links to our web sites and blogs in our posts? It is the least you can do because I am sick of seeing endless Obama banner ads. Bring back the Snorg Tees or anything else. F this.
Freddie do yourself a favor and install this: http://adblockplus.org/en/
Dude just click on the ad. Make Obummer pay for the privilege of advertising here.
Just one question for all you trader types. Is this a good time to buy stocks? If so, does Facebook look good now that the price has gone down a little?
Uhmmmm. No and No.
Options trading on FB starts Tuesday. That is when the big boys will come out to play with FB ... and potentially cause Morgan Stanley's death.
The Dow is off 1,000 points in a straight slide. Ten years ago, it would be a good time to look for at least a correction up before further downswings.
Today - the HFT's own the major markets through being able to close a trade at a given bid price on any given stock before the bid price has been posted.
Stop and think about that for a second.
Hence, Tyler's term "fantaseconds" for this logically impossible but all too frequent real life occurrence.
Meanwhile, it is no exaggeration to say the EU/euro has ALREADY struck the iceberg of financial death but that won't stop the Central Banks and various whores (i.e. politicians) from re-arranging the deck chairs and arguing over what the band should play next.
Clear enough?
barliman
This is the bottom, it's safe to buy now said somebody on CNBC.
http://money.cnn.com/data/premarket/?iid=MKT_Sub
I can't imagine that much movement in 24 hours, but it does look like a trapdoor for the euro. Great opportunity provided to take risk off the table at good prices (at least in equities).
My math and charting says ... 975
And I'll give you odds it still will not be enough to UNLEASH the BERNANKE!
The more I see, the more convinced I become the next QE is the LAST QE or
QEEND - the QE at the end of the Worldwide Ponzi will occur as kindly Uncle Ben pulls down our collective short pants and ass rapes the living shit out of us in a futile attempt to offset the capsizing of the EU/euro
(QEEND is a registered trademark of Barliman Buggers Bernanke, Inc - All rights reserved; may be used for non-commercial purposes provided credit is given. DO NOT FUCK WITH ME on this CNBC.)
barliman
No dude, they will fire it back up, but the Euro has to come down. Also at issue is that we are 3 years out from major fiscal action - I believe they see it as dangerous to continue acting without fiscal accomodation in tandem. Maybe Bernanke will prove to be somewhat sane. To me, the Fed lost all credibility after the scale of QE2.
Wait? Your asking about buying FB but you are going to regurgitate CNBC anchor semen in reply to my post?
Now, I remember why we normally castrate people who ask simple questions like the one I answered for you.
barliman
Sorry brother. Yours was a well thought out reply, but most of my posts are sarcastic, including FB.
Then throw in a /s until you get known well enough.
For every one person posting there are a thousand innocents out there just reading and trying to catch a break. Who wants to be the person the gets some MORE slobs fucked over by FB and the scum peddling it?
barliman
start buying. buy with both hands. don't be outdone by Marc Cuban.
I agree the next QE will be the last. But I believe Ben will still do it. I don't see any way out of it. Ben is backed into a corner and there is no way out.
Oh yes, he'll do it - the sociopathic cunt. (A word I normally abhor, virtually never use, and Berrnanke deserves more than anyone ever has in the history of the world)
Long ago, when I was first taking an economics course at a certain southern college, the professor (PhD in engineering NOT economics) took pains to point out one of the choices REQUIRED TO BE CONSIDERED in any economic analysis of potential courses of actions was:
DO NOTHING.
Unfortunately, the ChairSatan never crossed paths with this professor ... he only went to that asylum of inbreeding known as Harvard.
barliman
"The next QE will be the last"
Not likely. If they don't, what's the alternative.
One possibilty - The Obama machine wants to win at all costs and is willing to burn down the house to get it.
After he wins, the economy goes to zero
In the ensuing chaos he strips us of more rights and grabs more power to impliment the change we all can believe in.
Think about it - the ultimate power trip - will make him one of the most powerful presidents of all time.
Game Over
er.. I mean Game Over - Bichez!!!
HarryM is right on. This has been the 'endgame' all along. If he is too far behind in the polls, he may pull out the biggest 'October Surprise' of all times and declare martial law. Why else post the Executive Order on the White House website? Remember, Communists believe in elections--as long as they are rigged. Has anyone checked the electronic voting machines lately?
What happens if the EU/euro falls apart?
No more common currency. No more economic open borders. How will all those outstanding AR/AP accounts be resolved when the euro the are recorded in is no longer a traded currency.
Tell you what. There is a simple home version of the game. Take a loaded gun, put the barrel in your mouth and pull the trigger. You are now the EU/euro.
What are the alternatives of what to do with you?
The same holds true for the EU/euro.
barliman
so far the EU had "done nothing" exceptionally well.
I tend to agree. Spider to 1,000ish and DX to 90ish. Gold to 1,200ish.
You feel that will not make Shalom move. I am not so sure. Should be interesting. I think he wants the QE expectations drained out and people truly begging for it and then as you say the "all in" move.
Nobody has a fuckin' clue whats going on... the mayans were right, were doomed!
EUR, Meet ZWD.
wait'll those ZWD shorts are forced to cover, BiCheZ!
How many times have the EUR shorts been squeezed? Why not one more time
They will get squeezed again, but the trend is down. A lower Euro will help the periphery and narrow bond spreads. Maybe that is why US equities are relatively stable. Lower Euro means a bit of pressure off southern Europe. That said, forward earnings are going to be a problem big time.
exactly Germany does not want a weak Euro, and does not want ECB printing.... There will be a snap back, in the Euro. Not sure I have balls enough to play it yet though.....
"Event horizon" comes to mind.
....where we ALL get sucked in !!
US equities are the kid wearing the helmet, standing in the center of the room, clapping for himself. He can't be wrong, can he?
more slewienomics:
mercury-based grand mal economic injections + strobe light = zH + Cdad +(+){+}[+]
Perhaps some of the MENSA members of the ZH audience can give the rest of us a dumbed-down explanation of this article.
It don't take no MENSA member to sum this up:
Something's fucked up, and you only lose if you play the game.
But the big boys will continue to play the game, because they really have no alternative, correct? The only bank run the elite fear, is a grid run (in other words physical bullion), and that isn't an option for the funds, pensions, etc. So the money just sloshes from one side of the boat to the other, but never goes overboard. It seems like this could go on for a long time. Am i missing something?
First, skepticCarl, you should provide some sort of assurance you will not post moronic level posts ...
(Shit, I remember when slewie was a noob.)
Short version:
Stocks are the where the "masses" play and they are known for being behind the curve of financial knowledge. This is where the "short bus" MBA's from Wharton are sent to play.
FX (currency) markets are the advanced version of financial investment. Trade correctly, make 5 - 10% overnight. Trade incorrectly, lose 10 - 25% overnight. This is a good training ground for your "bright kids".
Credit ... is always right ... unless you were Jamie Dimon who placed to much faith in your CIO division. Nonetheless, credit is the Darwinian threshing machine of financial investment and not only can, but does devour whole countries that get on the wrong side of it.
In this case, the FX markets are saying REALLY BAD things are happening with regard to euro (its value is decreasing) while the "short bus" stock traders are saying, " I heard a rumor! Let's buy lots of equities!"
999 times out of a 1000 ... the FX markets are right and some of the stock traders get sent home missing their head.
Please don't make me regret spending the time to answer this for you. Ok?
barliman
so "where are the masses"? As noted here outflows have been continuing for over a year. "i'm sure that Facebook IPO will get the retail investor to jump right in" as well. The fact of the matter is you're a noob. I had to bring up the fact that a surging dollar is one thing that's bad for equities here...this site is dedicated to the idea that "soaring gold prices will kill equities." HAHAHAHAHA. Sorry to see that hilarity get tossed overboard actually as this site has been one of the greatest contrarian plays ever. Now as commodities get suffocated by literally a gazillion tons of debt, the break up of the EU, the collapse of China's housing market, the collapse of the Indian Rupiah, the total annihilation of the BRIC bloc and the assertion of an American imperium "Eastward" (with zero percent financing no less!???) watch equities as they "toodle-loo" since they've had nothing but bullet proof balance sheets since 9/11. Save for the financials and state and local governments of course.
"Masses" is a generic term not equivalent to retail investor in the general use of the English language. It is necessary that you not only sound out the words but learn to discern their meaning in context.
"Masses" in my specific use refers to the TBTB, hege funds, mutual funds and the ever popular but always stupid institutional investor - which given the reasoning of your post, must be your day job.
If I've said it once, I've said it a hundred times in reply to people of your "special needs"; Reading Is Fundamental.
Equally valid is a lesser known but even more true life lesson axiom: Rigid Ideology of any sort will get you killed.
Let's take the first one. Go back through all of Tyler's articles and extract the occurrences when HE has stated, "soaring gold prices will kill equities." To save time, the rest of the class is dismissed ... this idiot has a long and fruitless search in front of him.
If the "surging dollar is one thing that's bad for equities" statement was true, the S&P would currently be below 1100 and not hovering at 1320. You've neatly illustrated my Rigid Ideology point. Since you no doubt have the courage of your convictions, your short positions on SPY have undoubtedly bankrupted you in the last 30 days. I will hold my sympathy till you have completed the assignment above.
The assertion " ... as commodities get suffocated by literally a gazillion tons of debt, the break up of the EU, the collapse of China's housing market, the collapse of the Indian Rupiah, the total annihilation of the BRIC bloc and the assertion of an American imperium ..." is counterfactual to the point of delusion. Commodities are no more debt specific than bird migrations. The break up of the EU is having infinitely less impact on commoditity pricing than the slow down in China's economy which is not being driven by a -1.2% YoY drop in China's housing market which, in your world, equates to a collapse. Please call the nearest Chinese consular office and clue them in. I am sure they could use a good laugh at your expense.
You are a LARGE but very boring target so I'll stop at this point. I take you for one of the "in hiding" socialists who likes to cram the information available on this site through their ideological sieve. I am sure you find great amusement in the process and the end product but it is of no more general public interest than your other personal defecatory products.
barliman
Here's a shot:
At first blush, the markets (FX and Italian spread over German bonds of similar duration) seem to be at odds with each other, one signifying worry and the other stability of sorts. On further examination, it might be that credit markets are roughly on the same page as FX, but are gaming and frontrunning the possible policy response by the ECB, which in this case (as things worsen and the euro falls) would be ECB QE, that is, the ECB printing (theoretically bad for the euro) and using the funds to bid up sovereign debt, including Italian (which would lessen the Ital-Ger bond spread). Tyler goes on to wonder what happens if the ECB looks and sees that spreads are already at acceptable levels (as a result of the gaming/front-running by the credit market), so that if some "event" happens, markets are already where any ECB QE might have pushed them.
man read this and thought the futures were puking..checked the futures and down 1 handle....
Speculative shorts in Euro and Swiss Francs are enormous. I'd anticipate some kind of reversal. The catalyst might even come out of the US.
http://snalaska.com/cot/current/charts/EC.png
http://snalaska.com/cot/current/charts/SF.png
You're right. I think this will crash up before it unwinds. Euro is overdue for retracement.
It's all about Asia, FX markets are showing massive outflows and USD bids, hence the short covering rally on the Dow and S&P being very muted. We got a relief rally coming, but it will be capped.
Bank Run In Eastern Europe?
Greek banks including EFG Eurobank Ergasias SA (EUROB), Alpha Bank AE (ALPHA) and Piraeus Bank SA (TPEIR) own subsidiaries in Romania, Bulgaria, Serbia, Albania and Macedonia, where they compete with Austria’s Raiffeisen and Erste Group Bank AG (EBS) and Italian-based UniCredit SpA (UCG) and Intesa Sanpaolo SA. (ISP)
http://www.businessweek.com/news/2012-05-24/raiffeisen-increases-cash-hoard-on-greek-bank-run-concern
AND, THEY'RE OFF!
Lies in the lead, hard off the gate, with Fear stretching out.
Bank is running hard now, with Holiday coming up fast, followed by Default, and finally, Chaos, with Reason left in the stall.
And that money will come right out of the pockets for future generations not only in europe, but the us and across the world. This is globalization bailout style where everyone takes water out of their own boat and throws it into the boat of the other.
the Silver Liberation Army's boat doesn't sink...
in slewienomics, we have the italian bellweather @ 331/3% on the discount, and the s&p500 at 777
but that's with the "new dollar"
as in: "the new NW0 dollar"
but, clothing will still be optional and tyler can keep drinking b/c the zeroHeads have already shipped him 18 differently-designed stills for centralPlanning to decide upon... and we also have the 3Bears beer-making kits (S, M, L) and the new, uber-pi-radical solar-powered white light systems for all herbologisms, and seed? does zH have seed?
and clones? L0L!
lol
Avoid the Bernanke Kush seeds...
They grow really fast but only produce toxic moldy hermaphrodite junk buds.
Stick with the Corzine Crush. Great for vaporizing.
We will have a +15 s&p pre market tomorrow, going totally against any common sense seems pretty normal now adays. Oh wait, I think it's called "over sold".
http://money.cnn.com/data/premarket/?iid=MKT_Sub
actually "it's called new highs." and if it's up 100 "it's called a break out." leave it to New York City to discover bankruptcy while this is happening of course...
Expect an EOD (Friday/MemorialHoliday) selloff.
Bobbing heads been pumping Greek tragedy begins this weekend.
Aruhhhhh? "Bobbing heads been pumping ..."
Are you referring to a certain female co-anchor famous for her 30,000 feet blowjobs?
barliman
Remember when EURUSD went to 1.51? FX markets don't know shit. Any idiot American who recently travelled to Europe knows that the purchasing power between the two major areas should in NO WAY be that out of whack. EURUSD 1.25 to 1.30 is more or less the right range, no matter what Greece does.
These markets have a mind of their own. Now, even the Giant Squid is confused. That is scary. Market very stretched to the downside. Won't take much to move it higher for a while. Gold looks so ready to break to the upside. Miners always a good tell. Good or Bad.
Can you imagine using leverage in this broken piece of shit market. That is a suicide move. Will not work.
the spreads for all risk trades are so tight the leverage being used to make some $ would be massive.
so...other rogue trade will show up somewhere and probably soon.
Leverage? Man, you must be Old School. Nobody has to pay back borrowings anymore. Come on in. The money's free, and there's plenty more where that came from. In fact, they've even named the money after you.
Nobody has any idea what's going on. Bernanke destroyed the market and nothing makes sense. You get a short coverning rally because someone in Europe leaks a news story that turns out to be a false rumor, but then you have a "real" rally because there is a leaked rumor that the previous leaked rumor might be true.
The market has entered pure anarchy. There are no rules. A memo claiming that your company will return to growth is enough to double its stock in two weeks. A worthless stock may drop 50% and then go through a 25% relief rally because one analyst says it is oversold. If Facebook doesn't go down tomorrow it will be above its IPO price on Tuesday. One thing the Fed loves to do is fuck short sellers. Ben will add a few billion to the balance sheet just to make sure normal market forces are not allowed to work.
Instead of letting the junkie cleanse in rehab, fucking Bernanke and the rest of the central bank pinheads stick them in rehab for a few days and let them crash hard. He then says, you feel like shit don't you. Crack makes you feel better. You don't want to be in here again, take the crack. Keep taking the crack.
You are not a happy person.
Good luck with that.
barliman
Hey Tyler - I think your note here caused the Euro to rally a few pips. WE ARE WISE TO YOUR DOLLAR RALLY.
We're going to need a SuperRumor to get the markets into the US holiday weekend.
I'm going to go with: Eurobonds with a parallel peripheral currency and an extension of LTRO to 4 years while Bernanke lowers the SWAP rate to 25 pips and the there's an unveiling of The United States of Europe. Might as well put all Basel's on hold, too, and say that Maastricht always was merely a polite suggestion.
Bullish!
"US Army in Athens."
Check out the Max graph of S&P 500. It clearly shows that the FED QEs have created a much more dangerous economic situation. In other words they bought time to prepare for the collapse. That's all.
The first bubble was the Internet. The second was fraud. The third direct counterfeiting (money printing.) Shit.
Today has been a good day.
Stop it
You're scaring me.
I still aint ready
I think Mr. Market is pricing in an emergency ECB rate cut, taking the legs out from the EURO swap carry trade. Mind the Gap:)
http://capital3x.com/think-tank/charts-and-analysis-from-ny-close/
Charts and setups. The pair to watch is UJ
This chatter must be making Rummy roll over in his make-shift-grave.
When did 'Old Europe' matter again? These events that have transpired thus far prove his point.
THEY DON'T. " 'OLD EUROPE' IS IRRELEVANT"
And this is all filler fiilling in for nothing
SNB just getting rid of all the EUR they have been given in the last couple of days is what is holding EURUSD down. How much more can they take? Would you want to be long 20 Billion plus EUR going into Greek election?
EURUSD has its morning woody. Apparently those most afraid of a long US weekend are not going to be debt or equity markets, but FX players in a crowded trade.
TO ANSWER YOUR QUESTION: YES
Is it even worth looking at equities in the midst of all this madness? They are so consistently bonkers its probably a waste of time. As for EUR/USD, that push down to the 17th was weak, really weak, unconvincing given the shit storm brewing, volatility has not been that low in the pair since 2007(that’s fairly unbelievable right?), i was actually starting to fear that volatility was getting back to normal levels in that pair, but things are picking up again, only slightly, on the way down. The kind of sharp pullbacks that occurred previously were understandable, i.e. plenty of bullshit in the air and brand new shorts being tested, but now its beginning to look more like a market that has made its mind up.
Its going to take a brave (or coordinated) attempt to get a decent squeeze going with so few options on the table for Europe before the next summit, it‘ll be a squeeze for the sake of a squeeze and thats all, no consolation for shorts there. People are obviously losing it, the situation has been veering in and out of incomprehensibility for some time and the whole thing is now in the lap of the gods as far as im concerned (if Greece goes in a hurry we‘ll atleast have a template for what to expect). I’m looking forward to simpler times.
weeeeeeeeeeeeeeeeeeeeeeeeeeeeeee-USSA needs another Fartbook , it is the god for the Dollar
There is a reason they did not stress test the banks for a rise in interest rates. Because they will not be allowed to rise. This stuff with fx and equities is interesting. But I am going to stand in the end zone with my gold and wait for the hail mary. It's amazing how few people are doing the same.
$1.5B In One Week: Massive Outflow of Investment Money from Greece and China! Police Urge Greeks to Keep Money in Banks.
http://investmentwatchblog.com/1-5b-in-one-week-massive-outflow-of-investment-money-from-greece-and-china-police-urge-greeks-to-keep-money-in-banks/#.T79pK0VYuIA