Guest posts today and some exciting MrTopStep news
I am out for the next couple of days, so please enjoy our guest posts in the meantime.
I do have an exciting announcement and that is the launch of a new MrTopStep trading room specializing in options. Read about that announcement here.
And don't miss this weekend's MrTopStep webinar with our own Henry Marchell of Stanton Analytics as he talks about the impact of the upcoming U.S. elections on the energy markets. Read More
Have a good weekend all! – Danny Riley
Guest post from Henry Marchell, Stanton Analytics:
Risk Markets Rebound, But Will It Last? The bulls have a reprieve Thursday thus far. The equity and energy markets have pared losses from the Wednesday deluge of selling. The earnings coming to the fore in equities have been a mixed bag. The bellwether AAPL will get earnings following the close of the NYSE Thursday. This will be closely watched to see if its leadership to the upside continues. The equity bulls desperately need this to occur. However, the Fed did its thing Wednesday with the release of the FOMC minutes.They promised to keep rates extraordinarily low (near zero) for an extended time until 2015. This is as expected. The Fed held steady on its policy. They are walking a fine line. The removal of all the stimulus will mean two things that this feeble mind can conjure. First, a buyer needs to be found, which gets to be more difficult as rates rise. The other consideration is the apparent desire of the Fed chairman to step down after his current term.
To that end, U.S. CEOs have called for a comprehensive resolution of the fiscal cliff peril.They have acknowledged that to avoid the fiscal cliff will require both tax increases as well as spending cuts. The business community is stunned that officials have let it go this far, said one of the executives. Most if not all embrace some form of Simpson-Bowles to manage the transition. The question is will it be too late and too little. The Congress has until Dec. 31 to address the problem or the U.S. can expect a severe recession.
Moving on to the Middle East, Egypt has brokered a cease-fire deal with militants in Gaza. Both Egypt and Israel have been upset by the incursions from militants in that area. The concern of the energy markets was that would spill over into the surrounding areas. With fighting in Lebanon and skirmishes in Turkey, one can see the worry. But the energy markets are more concerned with the slow growth prospects than with stimulus or belligerence for the time being. This was demonstrated Wednesday when the energy markets sold off following the Fed minutes briefly before regaining the upside. But by far the more bullish outlook for oil is the comment by Iran this morning that exports would be sharply reduced and would be completely halted if more stringent sanctions are imposed.
Guest post from Roger Volz, BCG Partners:
A tight 1 hour trading range into FOMC announcement bounded by a 1412.00 to 1407.50 range is resolved to downside after a brief 2 way chop first to 1405.00 then again to 1411.50-1411.25 following the Fed announcement essentially holding a retest of the top of the range.
FOMC Announcement: No major change in policy – MBS purchases will be maintained at $40B/month, Treasury purchases (Operation Twist) will be maintained at $45B/month, and rates are expected to stay near zero until mid-2015. The Richmond Fed's Jeff Lacker continues to dissent from FOMC policy. Household spending has “advanced a bit more quickly” vs. last month's “continued to advance.” On the other hand growth in business fixed investment “has slowed” vs. last month's “appears to have slowed.” The WSJ's Fed Statement Tracker here.
Large SPY hedge is noted with a big disaster hedge put up away in SPY: cost $1 mill, $25 mill delta notional, $200k vega, buying December puts financing some of it with Jan puts +120k Dec 115 puts +50k Dec 110 puts -30k Jan 115 puts -25k Jan 116 puts -5k Jan 117 puts
AAPL stages a brief recovery post FOMC 614.50-621.75) lends overall support but but each rebound attempt in the ND 100 futures is quickly snuffed out with lower highs (2663.25 / 2657.50)
as AAPL gains are given back to FOMC lows.
SP 500 futures sees new session lows into the last hour….
DJ Transports crumbles on NSC's miss in rail sector, reversing yesterday's divergence…
SP1 makes a last push against yesterday's low at 1402.20 with a 1401.75 3x test into last 30 minutes but bears fail to convert and bust the 89-pd moving average at 1400.00
NYSE IMBALANCES had been running 85% to the sell side over the last half hour providing pressures
Market on Close imbalances
Overall (15:45:25) $ 248.46 M / -827.42 M ——————————————————————————–
Oil / Gas : $ -89.75 M
Basic Materials : $ -11.01 M
Industrials : $ -87.49 M
Consumer Goods : $ -26.37 M
Healthcare : $ -71.72 M
Consumer Services : $ -31.93 M
Telecommunications : $ -27.79 M
Utilities : $ -0.40 M
Financials : $ -186.60 M
Technology : $ -45.91 M
Thursday, October 25th: US (Chicago Fed, Durable Goods Orders, Cap Goods Orders, Initial Jobless Claims, Continuing Claims, Pending Home Sales); EuroZone (Spanish PPI, EuroZone M3, British GDP, Italian Retail Sales);Other (Hong Kong Trade Balance, Japanese CPI, Chinese MNI October Business Sentiment Indicator)
Thurs Oct 25: earnings before the open (AET, AUO, AVT, AZN, BASF, BEN, BIIB, CELG, CL, CLF, CME, COP, CS, DBD, DNKN, DOW, HOT, HSY, IP, JBLU, JNS, LAZ, LSTR, MHO, MJN, MO, NOV, NVS, NXPI, NYT, OXY, PCP, PG, PHM, POT, RTN, S, Sandvik, Santander, Schneider Electric, SHW, SPG, TEN, TSM, VLY);
earnings after the close (AAPL, AMZN, CA, CB, CERN, CLWR, ELX, FII, IM, KLAC, MCRL, MXIM, VRSN)
SP 500 Futures 15 min Chart and Indicator…..late day test of yesterday's low 1402.20 with additional support levels at 1401.50 and 1400.10 basis daily charts. Globex session should see scaled up resistance into EU open with resistance concentrated 1409.75-1411.00 and key resistance at 1415.00
China's flash PMI manufacturing data checked in at 49.1, above last month's 47.8, but is still below the 50 mark equaling contraction or expansion. Along with other recent economic data out of the republic, the region is showing signs of stabilization, buyers beware…The Eurozone PMI readings were disappointing and in line with other recent economic data including a weaker German business confidence report. Germany has been one of the leaders in the Eurozone and certainly the most vocal in regards to the European Union. Here are some comments from Draghi's speech in front of the German parliament today: German Conservatives Say Draghi Convincingly Showed OMT Not Boosting Inflation / German Conservatives Welcome That Draghi Makes OMTs Conditional / German Conservatives Say Draghi Makes Convincing Monetary Policy Argument For OMTs / ECB's Draghi Tells Lawmakers Euro Breakup Most Expensive Outcome For Germany. Whether it was a good speech or not, Germany has been against the Bernanke way of printing money and the plan still appears to need cohesion. The US PMI checked in at 51.3 vs exp 51.5 and remains in line with the slowing global growth conundrum as this morning's earnings reports were mixed at best, while leaning to further economic slowdown as the housing market remains bid as sales of new homes climbed to 2-year high in Sept as rates remain artificially low thanks to QE stimuli.
Morning observations: FOMC announcement: No major change in policy – MBS purchases will be maintained at $40B/month, Treasury purchases (Operation Twist) will be maintained at $45B/month, and rates are expected to stay near zero until mid-2015. The Richmond Fed's Jeff Lacker continues to dissent from FOMC policy. Household spending has “advanced a bit more quickly” vs. last month's “continued to advance.” On the other hand, growth in business fixed investment “has slowed” vs. last month's “appears to have slowed.” The WSJ's Fed Statement Tracker here.
Monaco (13:20:38): IMBALANCES ARE 85% SELL SIDE STILL
imcy (13:24:03): Guys, is that old game of FOMC release, reaction 1, counter reaction 2, reaction 3 in the direction of reaction 1 still valid? (if so, does that suggest a trend move down now)?
elway (13:32:03): big disaster hedge put up away in SPY: cost $1 mill, $25 mill delta notional, $200k vega, buying December puts financing some of it with Jan puts +120k Dec 115 puts +50k Dec 110 puts -30k Jan 115 puts -25k Jan 116 puts -5k Jan 117 puts
Roger_Volz (13:53:56): I assume close below 200-dayer opens test of 233 dayer at 2610 where daily OS reads should be issued
elway (14:01:53): 2651 is ndx 200 day fwiw
Randy (13:51:53): just had a conversation with a trader i regard very highly……we noticed the naz leader made higher low after BEN yet was leading by weakness this morning to new daily low…….if there is an UP that lower high NQ new relative strength the clue…..we all know how ugly the down idea becomes
MrTS video: http://www.mrtopstep.com/10-24-2012-tim-haefke/
Wednesday started with 280k ESZ and 1.4 SPZ traded on Globex, trading range 1404.75 – 1415.00 / Tuesday's RTH's, pit range was 141414.20 – 1402.20, settled at 1406.80 down 23.3 handles. The RTH's gapped nearly seven handles higher to 1413.80 to 1413.20, traded 1414.60 before losing the premarket momentum and trading 1406.50 low at 11:00CT. Apparently the DJT's were repositioning themselves today following yesterday's strong performance. The transports were bleeding throughout the day an by 1:00 were down 80 points at 5025 area. Following the European close the markets traded sideways in light volume as the suspense was building for the FOMC announcement at 1:15CT. The FED left rates on hold, reiterates low rates language through mid-2015; $40B/month in agency MBS purchases to continues as planned. FED REPEATS ‘EXCEPTIONALLY LOW' RATE THROUGH MID-2015 Fed doesn't change its MBS purchases under the QE3 scheme. FED REPEATS IT WILL CONTINUE OPERATION TWIST THROUGH YEAR-END. After the announcement the spoos traded a new low of 1405.50 up to 1410.50 and on to a series of new lows 1403.50, 1402.20 by 2:25, holding Tues low 1402.20 in light volume. At 2:42 1402.00 traded and minutes later the closing imbalance showed the broader market with a medium $579M to sell followed by a new low of 1451.70 at 2:51. The spoos traded 1404.20 area on the 3:00 cash close before settling at 1405.20 on the 3:15 futures close, down 1.50 handles on the day.
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