This is Your Markets on QE3

Yesterday MrTopStep announced its relationship with the Trader’s Almanac, and today we want to introduce you to Nanex. While everyone was watching the S&P futures, gold had some big moves too. Just after the Fed announced its bond buying program and the S&P futures took off to the upside, so did gold. But before we jump into the gold, let’s talk about the S&Ps. Yesterday the S&P closed at multi-year highs, up another 1.6% and at the highest level since Dec. 31, 2007, while the Nasdaq closed at its highest level since 2000.  The VIX tumbled to 14.

Below is a screenshot of the depth of market for the Dec Gold contract on the Comex. The middle graph shows size of the depth of market, clearly showing how there was no size around the announcement, no one posted any orders and then after the announcement, a large flood of orders. The chart posted by Nanex also noticed at 12:15 ET there was a drop in price and size, I included a shot of that time period too.

From Nanex : 13-Sep-2012 Gold and Silver meet Bernanke
Trading was so furious in Gold, that the Futures market apparently tripped circuit breakers twice. First on the downside, then on the upside.

1. December Gold Futures (GC.Z12) ~ 1 second interval trades with depth of book color coded by how much size is at each level. Note the gap showing the halt after the drop. The depth of book shows orders continue to be added/removed from the book during the halt.

2. December Gold Futures (GC.Z12) ~ 1 second interval trades with depth of book color coded by how much size is at each level. Another gap, this time after the meteoric rally.

3. GLD ~ 2 second interval chart showing trades color coded by reporting exchange.

At MrTopStep we are constantly striving to bring you the very best and most up-to-date information. As we have said in the past and will say again in the future, we live in a new world trading order and traders need to keep up and acquire new tools to battle these markets and today should be no different. MrTopStep feels that the real-time data and analysis offered by Nanex (http://www.nanex.net)  is a great tool to add to our arsenal.

MrTopStep Closing Print Video: http://www.mrtopstep.com/2-6mil-esu-1-3mil-esz-33k-spu-and-38k-spz-trade/

Our view:
After a rally and a 7-handle selloff the S&P’s came  ripping back. It is and has been a “buy breaks” market. With the Fed out to buy $40bil of mortgage securities a month, the S&P has the potential to go a lot higher. I will admit I have been a bit hesitant that we would get some type of “sell the news,” but this is just too big. That said, we have several economic releases to get past this morning. The trend is your friend and the S&P continues to say that almost every day. As for today, we lean to selling the early rally and looking for a good spot to be a buyer. Now that the Fed has moved, it’s going to be all about … buying the dips and selling the rips. See you on the IM and as always, keep an eye on the 10-handle rule and please protect yourself with buy and sell stops.

Too rigged to fail… FOMC prints it up, the superhighway to nirvana and beyond! Now, show us the JOBS … as the open-ended QE relieves the Fed speculation. Vote was 11-1, Lacker opposed to additional asset purchases and wanted to omit description of time period for exceptionally low rates. From across the pond, just as some major Eurozone hurdles have been recently kicked aside, now the IMF reported Greece cannot fill the funding gap on its own, Up to the Eurozone and the ECB to find the money for Greece, Greece met only 22% of the program targets for 2011 and Euro exit would set Greece back by many decades. Apparently, the Greeks are trying to stay ahead of Spain and Italy in the race to stay above the fold, top headlines. Spain remains in the news as the EZ powers try to lead them to um, the safety of some bailout monies, in return they will have the comfort of big brother in their affairs – gently guiding them to a soft landing…right?Midmorning observation: Goldman selling about 800 September big S&P in the pit every hour. FOMC quantitative easing expectations were set fairly high both here and abroad. mts2 (11:04:25): Some large buying of the Week 2 (expires this Friday 14th September) SPX 1450, 1455 and 1460 Calls, total across the strikes of some +25K (Nominal exposure of $3.6bn)….Chatter European Fast money covering an aggressive QE statement from FOMC tonight that might trigger a spike to new highs on the current up move!
Thursday started with the switch, December front month. 220k ESU and 80k ESZ traded on Globex, ESZ trading range 1432.75 – 1428.00 / Wednesday’s December pit range 1433.20 – 1426.30, settled at 1432.600 up 9 handles. Today’s RTH’s December contract gapped 2 handles lower, opening at 1430.70 – 1430.20 marking the early high before trading 1428.50 and trading in a tight 2 handle range. By 10:00CT the spoos took out the opening range/high and the SPZ traded up to 1432.70 going into the European close and traded sideways into the 11:30 Fed announcement. The Fed exceeds expectations of many and down went the dollar…Without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market – and rates will remain low until after the outlook for the economy improves substantially. Market reaction, money managers eager to chase performance, “The Pain Trade” as risk was back in air. Conversely, Goldman continued to sell about 800 SPU in the pit every hour. Equities and precious metals rip higher as the long end treasuries pulled back and the short end pops moderately higher. When the dust settled the SPU testing 1455 and the SPZ was testing 1450, up 15 handles as the VIX crumbles 13% – these types of explosive market moves generally take a couple of days for trends to come back to earth. The 1:00 forecast headlines showed Fed cuts forecast for 2012 GDP growth, holds steady forecast for 2012 unemployment rate and forecast for 2012 core inflation little changed and shortly after Bernanke’s presser began the SPU topped out at 1463.50 and the SPZ 1456.80 at 1:27. The SPZ held the 1450 area and going into the cash close was back to 1454.50 area. The closing imbalance showed 23 of the Dow 30 to buy decent size and the broader market showed $130M to buy. On the 3:00 cash close the SPZ traded 1453.70 and the SPU traded 1360.50 area. Settlements SPZ 1450.40 and SPU 1457.30, both settled up 17.8 handles. Goldman’s total sold in the SPU was about 6k on the day.
MTS video:  http://www.mrtopstep.com/9-13-2012-brian-shepard-price-discovery/

• It’s 5:00 a.m. and the ESU is up 6.25 handles at 1463.50, crude is up 1.82 at 100.13 and the EC is trading 1.3063, up 77 ticks.
• In Asia 11 out of 11 markets closed sharply higher (Shanghai Comp +0.64%, Hang Seng +2.90%)
• In Europe 12 out of 12 markets are trading higher (CAC +1.68%, DAX +1.37%)
• Today’s headline: “World Stocks Jump on Fed Bond Buying Program.”
• Today: CPI, retail sales, industrial production, consumer sentiment, business inventories.
• VOLUME: 2.6mil ESU and 56k SPU traded
• SPREADS: 41k SPU/Z spreads traded
• FAIR VALUE:S&P +4.50, NASDAQ +13.00