Tag Archives: S&P Futures

Shifting Fed

Now we can explain why bad news is good and good is bad.

This morning the claims numbers missed slightly and the ES is rallying. Personal income rises, and spending falls. Ok. The logic apparently is: if the economy slows or stays flat, The Fed continues buying. A stock market methadone drip. This is now the only factor of any import, left for investors. How much have central bankers primed the system? (source: FT):

  • $12 trillion of financial asset purchases by the big 5 central banks
  • 520 central bank rate cuts
  • $33 trillion of fiscal and monetary stimulus according to the BIS1 (an amount equivalent to (46% of the world economy)
  • The lowest US government bond yields in 220 years
  • 50% (or $20tn) of global government bond market cap trading with a yield below 1%

The effect withdrawl will have on the EMs or Europe, is unclear. And yet I have gold in the back of my mind… Gold remains the outcast, only recently she was the prom queen. What to make of the paper selling in gold?

S&P-Gold Chart

All of last weeks worry was unwarranted. Really? That was quick. Is the VIX buying it? She can’t decide what to wear to the prom and gold is not in fashion.

VIX Chart

So when will QE end, slow, stop or be spun into such schizophrenic confusion that rehab is the only option? Never? I find that hard to believe. When the economy starts working on its own? That’s vague. Maybe they can take it in 12 steps. Friends of Ben.

The risks of shock to the equity euphoria are huge. Being long here feels dicey to me, but based on the charts it looks smart. We met one of my pull-back targets, but I personally traded it poorly. I was expecting more time to pass, end of July was my target time horizon. Here’s the chart and my logic is here.

S&P500 Chart

Leaving aside the BOJ, ECB, and Fed, the most confusing action for me is gold.  Is it not a safe haven investment after-all? Have we been mislead? Where’s the simple reasoning that gold will protect against inflation? Is that no longer a major risk? Check out the gold chart. Ugly.

Gold ChartGood Trading.

 

ES ZN Weekly Chart

ZN and ES Divergence

ES ZN Weekly ChartHas the strength in the 10 Year Treasury Note (ZN) been keeping a lid on the S&P Futures (ES)? Looks like equity investors are getting cold feet pre-QE.

Over the last week the 10Yr has shown consistent strength climbing from a low of 132.055 to 133. 275 while over the same period ES as come from $1424.91 down to $1411.50.

Under popular logic this divergence is normal. If the two trends continue we should see weakness in the S&P Futures.

This chart is worth considering.

Bloody Mary Cocktail

Pre-Market Indicators July 26th, 2012

Bloody Mary CocktailGood Morning NY.

Pre-Draghi

  • EURUSD (1.2128) – 0.24%
  • Gold Futures (GC) holding over 1600 at – 0.32% 
  • Oil Futures(CL) – 0.88%
  • S&P Futures (ES) – 0.41%
  • Europe: CAC40 – 0.31% FTSE – 0.19%
  • Asia: (NKD) flat
  • Grain Futures are weak and flat

Post-Draghi

  • EURUSD (1.2128) + 0.44%
  • Gold Futures (GC) holding over 1600 at + 0.21% 
  • Oil Futures(CL) + 0.22%
  • S&P Futures (ES) 0.47%
  • Europe: CAC40 + 1.25% FTSE + 0.73%

Things looked red and flat until Draghi started pledging he’ll do whatever he needs to do to save the euro, now all is well in the world. “ECB Wants To Break Link Between Banks, National Govts.” Yet… “The Exact Scope Of Supervision Still To Be Defined.

The markets are waiting on 8:30 EST for the claims and durable goods numbers. Expect volatility just before the open.

Monday’s Pre-Market Assumptions

Regular readers know I hate to trade on Monday’s, but today the bias (atleast mine) is for an upside move. I think we’re going to take a short break from the selling, step back and listen to what European politicians try to sell us, and start looking at the advantages of oil pulling back. My short term assumptions this morning are:
  1. No bad news is good news
  2. The European spin machine worked wonders (BNP up +4%)
  3. The VIX will be taking a rest today

Back to Discipline

  1. One long ES Future, for fun.
  2. Condor Spread Adjustment, probably on the short side this morning.

Good Trading.

Calvin and Distraction

Still Searching Mr. Discipline

Scattered comes to mind.Calvin and Distraction

I’ve spend the better part of this year working to find the products and indicators which correspond to my trading style. The books I read profess all sorts of strategies, techniques, psychology, and speak of discipline. One of the purposes of this blog has been to keep a journal, of sorts, adding at least one element of discipline to my routine.

Expectations revisited.

I recently reviewed my successes and failures from a financial perspective. I mention “scattered” because scattered distraction has been my personal sand trap. I dabbled early with equities and day trading, even though  options were by far my preference, I stumbled on some irresistable futures swing trades which swung the wrong way, I spent a large amount of time digging into large option trades and researching option pricing, I worked hard with vertical, calendar, butterfly, condor and spread adjustment strategies.

I’d expected that a decision to continue or to stop this adventure would be self-evident, I’d have lost money or made money and the distance along this curve would represent conviction. I was half right. In the end, I’ve made money and I am reassured, but I’m not far enough along that conviction curve. The surprising thing is that it felt as if I lost money, I saw more failures than successes. Obviously, you enter trades with conviction. My successes were fortunately larger, which is critical, but what I didn’t expect was that psychologically, loss after loss, against fewer wins left me surprisingly unsure.

I found that I enjoy trading the SPY options, the ES_F, and even the CAC40 futures. In the end, I lost money on equities and made money with my options and futures trades. I was most successful trading options, but worked harder on these. I’ll continue this year with options and futures, but leave the equities behind.

This year.

Discipline and Structure are going to be the keywords. Thinking like Calvin, considered them entered into my mission statement… I’m going to spend more time with the charts this year and I’m going to work on letting the market move into my trade. I wrote about the EUR.USD yesterday here, this might be a good way to kick things off.

Good Trading, it’s been an interesting day, already!

Ping Pong

Looks like we’re moving back into a ping-pong/ying-yang market.
Which way is ‘up’?

Channel surfing is the smart option strategy.

Good Trading.

SPY Levels and Volatility Rising

Here are the levels I posted last week (here).

  • 138.22
  • 136.63
  • 135.80
  • 134.25
  • 133.72
  • 131.50

This is starting to get interesting if you’re a seller of volatility. Look at the weekly chart today:

*Chart Lost During Migration*

I’m seeing a good range here, but as I mentioned earlier we could pull back a full 5% and still be on a nice upward trend.

There’s some other good charts here, which give more of a bearish outlook.

Gold is holding up well which makes one wonder… I’m a buyer at 1650 if it takes another leg down, otherwise I’ll be watching.