Tag Archives: SPY

The Divergences Screaming, Hello?!

Rambling about nothing is better than proclaiming some truth based on limited information.

And as we know, we know very little when it comes to predicting market moves. Just this morning, for example, terrible numbers hit the tape and the S&P continues oozing skyward. Good is Good, Bad is Good, the Fed is Good, indefference is even good. Until it isn’t.

So I thought I’d ramble about a few divergences which have me perplexed.

The first jumped out at me yesterday while the VIX was climbing on momentum WITH the S&P. Technically that happens but it was screaming  “look at me” yesterday. Options in general and puts in particular were getting bid up while the market was climbing. Fear of a rising market?

VIX ES DIVERGENCE

The second has been obvious all year, but it’s worth thinking about. The Gold Story – some would call it the Apple Story…

If you take the premise that gold is a hedge against inflation, gold isn’t worried, atleast paper gold isn’t. That surprises me, because there’s another argument: easy money from the central bank leads to inflation. This argument seems on firmer footing, every central bank in the world is printing. Yet it’s the divergence which has me looking for a trade.

ES GC Divergence

Here are some other good divergences, credit/macro/vix/10yr, labeled ‘just plain silly‘ from ZH.

 

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.

What does it feel like to lose $2,000,000,000.00?

I’m reacting of course to JP Morgan’s loss and thought this deserved a proper obituary. RIP

2 Billion Dollars up in smoke, derivative trades and trendset in 2009, dies at 3

JP Morgan’s ‘London Whale and banking extraordinaire’ died a press-induced death on Thursday after suffering from implications of a credit crisis. JP’s 2 billion deposited by the 1% in hiding, trusted their spokesperson Jamie Dimon to reflect on “bad judgement and sloppiness”. Jamie remembers fondly, breaking eggs to make omelettes.

The risk of infection spreading from the 2 billion sadly remains unclear, but optimism remains as “lessons have been learned”. The well dressed hedgers that came out for the funeral were looking weary. “Long nights were spent trying to save the patient”, said a source close to the defunct.

In his earliest role 2 billion provided sustanence to the wealthiest of our compatriots, nice cars for the proud, and great food for the refined.

2 Billion is survived by a trophy wife, Ben Bernanke, and a shelved risk model. The $SPY might not have survived and hasn’t been seen since Jamie spoke.

SPY Weekly Chart

Already?! Friday was just here.

I feel like writing last Thursday’s post again. We could have taken the week off!

SPY Weekly Chart

It’s mid-day and lots might happen before the EOD. So I’m hedging… A good amount of air has been let out of the balloon. Today’s numbers were mixed and have been mostly digested. Nothing really market moving in either direction. With the exception of my natural gas futures position NG_F we’re sitting on pivots all over the charts. Oversold some say. It’s a tough spot with the VIX hovering around 20 (but well off it’s highs of yesterday) and Europe under duress. I’m watching the volume today and tomorrow. There has been an increasing daily volume and 135 on the S&P will be key if this downward trend is to continue.

I’m hanging out long on my Natural Gas Futures (QG), added to the position at $2.43 on the pull-back, but it’s very volatile, might still get stopped out. The chart’s are working well with $2.50 as a hard ceiling… I’m expecting some consolidation here.

Good EOD Trading.

After the elections, spy and CAC40

A Curiosity

Unexplained phenomenon are frequently observed during highly skewed (or expecations of) market moving events.

Monday was one of those days where the weekend expectations for turmoil in Europe, particularly France and Greece were highly anticipated. The market fell all day Friday with the assumption that Françoise Hollande would be elected president of France, which finally he was.

The strange thing happened on Monday. Here are two charts from Monday: the S&P and CAC40.

After the elections, spy and CAC40

The weak opening was expected, a socialist French president and neo-nazi Greeks on the front pages would be enough to spook any market, so all seemed normal. Strangly, the market climbed on both sides of the atlantic all day long, little by little it climbed and climbed. How could you explain this? Short covering all day? I really looked on, perplexed. There was no way I was going long, but it continued to climb. I sat out Monday. In fact I often sit out Mondays, and though I have no data to back up my argument, Monday’s are bad entry days for me, this was just another example.

I was feeling confident the EURUSD wouldn’t hold $1.30 and markets were in for some downside action. Here we are Wednesday and the downward trend has quickly taken over again. The CAC40 is rapidly aproaching 3000 again and the $SPY looks to open under 135. The $EUR.USD is now solidly under $1.30 at $1.2936. All of this is good for my trading but leaves me still unclear on Monday. What or why did the market behave this way? I’ve yet to hear an explanation. My thoughts at the time were that the markets like clarity and now that the elections were decided, the market might continue it’s oozing upward. It’s an unconvincing argument.

Good Trading.

Doesn’t it Feel Like Friday?

Yesterday’s terribly long debate between Francoise Holland and Nicolas Sarkozy helped me reduce the differences between a never-ending American electoral campaign and the well regulated French contest: Americans strive to create a 5 word 5th grade soundbite for Fox or CNN, the French try to loose you in 500 word incomprehensible discourse. Obvious but in the context of a busy week, chock full of earnings, announcements, and a battered VIX, it saps my energy. It feels to me like a Friday but it sadly isn’t; tomorrow brings the payroll and unemployment numbers. The SPY is consolidating at the 200 DMA in anticipation.

I’m observing:

  • Gold (and Silver) are staying in strong correlation with SPY.
  • If you are trading a flat channel in the $SPY we’re just breaking out under the lower boundry at $139.50
  • Natural Gas continues to contradict the pundits. See this post. I’m long and buying the dips, and intelligently setting my stops, I hope.

As for sentiment which is always hard to pinpoint, few traders want to be long before tomorrow’s payroll number especially after the ADP miss earlier this week. The irony is that the ADP number is effectively useless, so I work to ignore it…

SPY Natural Gas Divergence

Tout Simplement

This is maybe the clearest reason why I’m looking long natural gas and short the S&P.

SPY Natural Gas Divergence

 

Good Fin Trading