Stock market analysis and commentary from a trader's perspective

Wednesday, September 28, 2016

Wednesday -- DB, IMF, Stiff Bull

S&P E-mini Futures:
Holding on to modest gains.

News:
Deutsche Bank having a much better day thus far, yet a tepid response from E-mini futures. Maybe it was the flat Durable Goods Orders news.

They don't ring a bell at the top, but headlines like these appear:


"Standard Life Investments has become the latest [UK] financial institution to announce plans to reopen its suspended property fund after declaring that the commercial property market had stabilised."

Check out this latest whopper from the IMF which wants more globalization to remedy the negative opinion of globalization:


"The International Monetary Fund has warned that free trade is increasingly seen as benefiting only the well-off and that help is needed for those whose job prospects have been damaged by globalisation in order to put fresh momentum behind removing barriers to international commerce."

Where are all the barriers? This herbal Viagra coffee stuff is from Malaysia, and might be the perfect metaphor for the aging bull:


FX:
Slight tilt toward USD strength, along with CHF.

Treasuries:
2s & 5s showing much less volume than 10s & 30s, which could end up as inversion if it deteriorates.

Energy:
WTI crude higher on increasing hope of OPEC harmony. NG continues to backfill from its recent high.

Metals:
Once again, metals under pressure with palladium and now copper leading.

S&P Outlook:
2139.57 held yesterday, which should keep pressure on higher prices, yet the action was largely unconvincing.

No reason price can't test higher before lower. And since it hasn't broken, no reason why it can't be in wave 5 to new highs.

Not leaning that way, however. Still thinking lower needs a look at least.

Tuesday, September 27, 2016

Tuesday -- Futures Fizzle As Deutsche Bank Won The Debate

S&P E-mini Futures:
Near complete retracement of overnight rally.

News:
Last night's post-debate rally has fizzled due to much larger concerns that perhaps the rally of the past seven years is coming to an end soon no matter who becomes president.

Thus the presidential "reward" could be counter-intuitive: to the victor the spoils.

Behold Deutsche Bank, which hit record lows today after a failed bounce and its CDS (credit default swaps) rose to new all time highs (stress).

Bloomberg also noted that Germany's second largest lender, Commerzbank, was down 3% in sympathy, not a good sign.

FX:
USD stronger. JPY and CHF back flip to weakness.

Treasuries:
Low volume levitation continues.

Energy:
WTI crude crumbles as Iran said it was not willing to freeze, dashing hopes for OPEC production cut.

NG low volume rally after sharp reversal days ago.

Metals:
Under pressure with only palladium bucking the day's weakness thus far.

S&P Outlook:
Price did trade below 2151.31 yesterday and kept the ABC scenario alive. The decline, which should be a "C" wave, is unimpressive and choppy, however.

I continue to be on guard for other scenarios that could eventually resolve higher, yet below 2139.57 could result in a test of the lower zone mentioned days ago: 2094.55-2103.25.

Monday, September 26, 2016

Monday -- Deutsche Bank, Saudi Arabia, OPEC, Arnie

S&P E-mini Futures:
Down but off worst levels.

News:
Once again, European bank trubs are in the headlines, and who would have ever thought it would be Deutsche Bank having issues. But that's what derivatives do: cause unexpected outcomes.

The same could happen to JPMorgan at any time, and it could spread.


Maybe a cash crunch is why Saudi Arabia has suddenly opened the door to production cuts (to engineer a higher oil price).

Saudi Arabia has just launched a new "supportive monetary policy" too.

Sounds familiar, doesn't it.

The supportive policy comes as Saudi's foreign reserves "have declined by almost a quarter in the past two years amid the oil-price slump. The country is weighing plans to cancel more than $20 billion worth of projects and slash budgets to repair finances," Bloomberg reported.

Counter-intuitively, Saudi troubles could end up supporting crude.

Elsewhere, in Puerto Rico, yesterday was the first day in several without a brownout following the blackout that affected the entire island. So that's progress.

Sad news: Arnold Palmer died, a stand up professional with integrity. He will be missed.

FX:
Same warning of late: strength in JPY and CHF.

Treasuries:
Prices have breathed a big sigh of relief but on little volume.

Energy:
WTI crude has been quite volatile of late given the news from Saudi and pre-OPEC positioning.

NG has back off from its recent high in 5-waves. Watch and wait.

Metals:
Gold remains at the upper end of its range and is slightly green as silver, platinum, palladium, and copper struggle.

S&P Outlook:
This chart was a good road map.


Now a new scenario may be needed unless price trades below 2151.31. The larger point is that a 5-wave to new highs is still expected.

The issue is that the larger "B" had very strong ticks and A/Ds which doesn't feel right to me if truly a "B" wave, but could possibly be part of a 5th wave. Too soon to tell.

Take a look at Europe, though. Not looking good thus far.

Thursday, September 22, 2016

Puerto Rico Goes Dark

Decades of corruption, mismanagement, and neglect have left the people of Puerto Rico with an ailing electrical grid which failed spectacularly yesterday afternoon.

The island's electrical utility is a monopoly. It is also insolvent as a result of excessive borrowing in the municipal bond markets.

Local business owners tell me that billions upon billions in debt have done little except to expand payrolls through cronyism while intrastructure has been left aside resulting in frequent blackouts.

Meanwhile the utility blames migration to the mainland as the cause of its pinched cash flow.

Perhaps the Puerto Rican people have simply had enough.

Wednesday, September 21, 2016

Wednesday -- BOJ Underwhelmed

S&P E-mini Futures:
Up but off best levels.

News:
BOJ tweaked when they were expected to turbocharge.

Bloomberg compiled a long list of quotes from unhappy traders around the world, and yet Marketwatch -- which seems to have had a recent editorial change -- is somewhere in la-la-land:

"Gonna be a bright, sunshiny day?

"The Bank of Japan has fired up traders around the world in the early going, and that’s getting some people even more hot and bothered about the Fed.

"Haruhiko Kuroda & Co. took the unexpected step of committing to keep 10-year interest rates at zilch. The BOJ also held off from going more negative with its deposit rate and pledged more allegiance to aggressive easing."

The unexpected step of doing not much.

Banks and insurance companies loved the news because the BOJ chose not to force rates even more negative since they're not working.

I like seeing the euphoric take by equities thus far, however. The final wave higher that I'm looking for must suck in all the bulls so that larger players can unload to them.

Here's the sentiment snapshot from Bloomberg:

"Recipe for disaster"

"...simple act of illusion"

"BOJ is not so serious about achieving 2% inflation rate so soon"

"BOJ didn’t add to easing, but delivers framework for further easing"

"Flexible monetary base target may spur speculation of reduced QE"

"...a bit underwhelming as there are no aggressive moves"

"...could be read as sign that it is reaching a limit with easing and isn’t as confident about monetary policy"

"BOJ’s policies are a 'pass'”

"Disappointing and underwhelming given all the pronouncements and rhetoric"

. . . . .

The thing about continual central banking shock & awe is that markets become desensitized.

Personally I'm with the limits of central banking theme. It's all about the bluff at this point.

FX:
JPY says it all thus far -- surging in strength. CHF stronger too. Not a good mix at the moment.

Treasuries:
Prices reacted negatively overnight yet stabilized and bounced.

Energy:
So much for 43. WTI crude ripped on API numbers, but has a long way to go if it wants to get out of its current bad neighborhood.

NG thrust as expected to new rally highs. 3.098.

Metals:
Precious metals like the BOJ news thus far, but copper doesn't. Another macro tell.

S&P Outlook:
Boring action last several days. Today should cure that. Leaning toward being a buyer lower and a seller higher -- unless whatever rally that did occur was so dramatic that it could signal the third wave of a developing impulse to record highs (overall expectation).

As previously mentioned however, a stall around the 2173.16 78.6% Fib retracement or the gap and volume shelf at 2181.30 above would have me try some puts.

A false break lower, around the cluster of Fib targets in the 2103.25-2094.55 zone below would have me trying longs.

Tuesday, September 20, 2016

Tuesday -- Barclays & BNP Paribas Bet On Hike

S&P E-mini Futures:
Overnight bounce took back much of yesterday's decline.

News:
Bloomberg reported that two of the Fed’s 23 primary dealers -- Barclays Plc and BNP Paribas SA -- are going against the crowd and betting on a surprise rate hike from the Fed on Wednesday.

Bloomberg also noted that it's the first time more than one dealer has gone against the consensus during the week of a policy meeting since last September.

As noted here yesterday, this would be an opportune time for the Fed to regain some much-needed credibility with a surprise rate hike.

Elsewhere, looks like Pot catalogs could be the next big thing:



FX:
Today's mix could become rough: JPY and CHF stronger. USD firm.

Treasuries:
Still a hot mess, especially given Barclays and Paribas are calling for a Fed surprise hike.

Energy:
WTI crude edging closer to breaking 43. NG at this moment needs just 4 ticks to blow through the 2.998 high.

Metals:
Gold, silver, copper, and palladium down. Platinum up slightly.

S&P Outlook:
Today looks like Risk Off may be brewing, yet equity futures are higher. Cash acted terrible yesterday yet didn't fully break down.

Sticking with the previous levels of the 2173.16 78.6% Fib retracement with the gap and volume shelf at 2181.30 above, and the cluster of Fib targets in the 2103.25-2094.55 zone below

Below 2135.91 could be immediate cause for concern.


Monday, September 19, 2016

Monday -- Private Equity, BoJ, Credibility, Target Levels

S&P E-mini Futures:
Continuing Friday afternoon's bounce.

News:
“These guys aren’t scared of an empty building."

Love it.

Once again, Private Equity plunges into real estate, just like it did in 2006-2007.


This time they're called *shadow lenders.*

Nice.

Meanwhile, the BoJ meets this week and chatter is that it could have a bigger impact than the Fed meeting.

Not sure I agree with that. Both are increasingly lacking credibility of late, and it should not surprise to see some bizarre actions...which could include the Fed too.

It's not a done deal that they won't raise. Perhaps they will just to save face.

Doubtful, of course, especially with the election close by.

But such one-sided opinion smacks of the one-sided opinion the night before the Brexit vote.

So let's just call it a potentially important week.

FX:
Last Friday's quiet FX tone didn't last. USD eventually ripped higher. Today there is some giveback benefiting AUD & CAD. JPY is weaker pre-BoJ.

Treasuries:
Price structure still looks confused across 2s-30s.

Energy:
WTI crude still might be looking at a break of 43.  NG has yet to exceed 2.998 but hasn't backed off much either.

Metals:
Silver and palladium leading today. Copper lagging.

S&P Outlook:
Currently, futures seem to have a more bullish structure than cash, but this includes Sunday overnight Globex. It remains to be seen how cash trades today in light of last night's futures rally. Cash is just too middle-of-the-page to play right now and would feel like guesswork.

Therefore, once more the wider upper and lower targets remain more risk appropriate:

-- the 2173.16 78.6% Fib retracement with the gap and volume shelf at 2181.30 above

-- and the cluster of Fib targets in the 2103.25-2094.55 zone below

Still feels like the market would be happy to just get back to the 2160 area if it continues to bounce.