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.
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.
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.
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.
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.
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…
A friend recently suggested I read: A Brief History of the Paradox, by Roy Sorensen. It’s a fascinating look at paradox over time and the games philosophers play. The paradox that I’m thinking about when I see the $SPY up 1.09% on the ISM print is called Meno’s Paradox of Inquiry. It goes something like this, and I’ll quote from the book.
If you know the answer to the question you are asking, then nothing can be learned by asking. If you do not know the answer, then you cannot recognize a correct answer even if it is given to you. Therefore, one cannot learn anything by asking questions.
The natural solution to Meno’s paradox of inquiry is that the inquirer has an intermediate amount of knowledge – enough to recognize a correct answer but not enough to answer on one’s own.
The markets as I see them are a living, evolving paradox. I’d be curious how these great thinkers would approach the trader’s daily paradox of inquiry with central banking, inflation, politics, and investing all playing the philosopher’s tug of war.
One of the many questions I like to ask is: how will a specific release effect the market? For example, this week there’s a relatively large number of market moving numbers getting thrown about. Yesterday was the Chicago PMI and Personal Spending. Both of these numbers missed expectations and the market fell a bit, though with little conviction. Today’s beat was the ISM which sent the market skyward, very quickly. And tomorrow we see factory orders.
I’m forced to admit that today’s intraday market answered my question correctly, even though I don’t like the answer.
This upwardly trending market, has me looking for direction.
The range bound back and forth between worry and optimism, GS publicity tours and European electoral politics leaves my normal confident self, unsure. I’m holding S&P short spreads for May expiration, waiting and watching.
The good thing about this ‘pause’ is I’ve had some time to play with the IB Java API which looks promising, if I can get anything interesting out of it, I’ll let you know. My GoogleDocs experience has been less than rewarding, like a teaser.
Long Natural Gas Futures are worth looking at, this has been under the radar for a while and is starting to come forward in the press and politics. 3 or 4 days over the 200 day moving average is triggering some interest.
Yesterday’s high volume correction helps me enjoy trading, but today’s low volume bounce is like sitting in a French cafe on a cloudy day watching people pass.
I’ve been looking at two possibilities:
One, we bounce of the 50 day moving average and continue our slow crawl skywards
Two, we get a CPI/PPI shock Thursday and Friday.
Lets take the second, what kind of spread on the $SPY could I put in place for OPEX next week? I’m going to propose a 131/134/137 April butterfly. The IV has fallen off of yesterday’s peaks and I find, ‘the day after’ is usually the better day to enter this kind of trade. You’re giving the market a chance to follow through, or not.
If the CPI/PPI numbers are good you’ll probably lose on this trade, on the other hand if they’re neutral or bad, you’ve got resistance in the right places and only 5 days until expiration.