Tuesday, July 14, 2009
Yesterday started off so brightly. Macro Man's first trade out of the blocks was to buy some July upside in Eurostoxx as a half-hedge, half-punt. It was 2% out of the money when he bought it, and 2% in the money at the close of play yesterday. That was Good.
Unfortunately, he was greedy, and worked a limit order rather than just saying "mine." So he was only filled on half his desired amount. That kind of Sucked.
Then he did four separate equity futures day trades. Each of them was stopped out, including a cheeky purchase of Spoos at 878 that would have come in handy in the main-session squeeeezzzzzeeeee. That really Sucked.
That's Good, that Sucks. The letters "G" and "S" featured prominently in Macro Man's day yesterday, and look set to dominate today as well. The reason is hardly a secret; yesterday's weak opening was swiftly reversed by a Meredith Whitney research piece upgrading Goldman Sachs to "buy" and raising her estimate for today's earnings to an above-consensus $4.65/share.
That, combined with the NY Times story highlighting Goldman's trading successes, helped spur an equity-markt love-in that was more than a little painful. (Never mind that Whintney's medium-term outlook on the banks in general was less than rosy.)
Now, regular readers will know that Macro Man's standard earnings forecast for GS is consensus plus a buck; eviently Whitney has stolen his model! Ironically enough, on the only occasion over the last 3 years that GS failed to beat consensus, a) Macro Man was having Christmas lunch lasy year with GS and their erstwhile merchant of doom, Jan Hatzius, and b) the stock and the market rallied.
Given the ongoing squeeze, it's hard to know exactly what's in the price for today's GS earnings report at 8.30 local time. Frankly, given the magnitude of yesterday's squeeze (which has thus far carried into today), Macro Man has no idea what to expect. A few banks are now suggesting that the whisper number is as high as $5/share, and that anythign less than that will disappoint. But given the break back above the old head and shoulders neckline, Macro Man wouldn't be totally shocked to see the market rally on a $4 print. (Consensus is ostensibly $3.65)
Elsewhere, the equity recovery ahs had a few knock-on effects that are starting to become interesting. The rally in some fixed income markets is starting to look rather tired, with Bunds offering the cleanest chart. If today's ZEW delivers a strong print and equities hold up, we could be looking at quite a retracement.
Finally, it's worth pointing towards that most frustrating of creatures, occasional nemesis of macro punters everywherre, the flightless bird, the NZD. The kiwi has once again squeezed against the dollar/Aussie/euro et al. ove the last few days, despite the fact that NZDD 2.775 billion of eurokiwi bonds mature tomorrow. That there were substantial redemptions this month has been a very-flagged event; a little too well-flagged, actually, because punters loaded up on kiwi shorts early and often, thus rendering the little bugger vulnerable to a short squeeze....which duly ensued.
But now we're at the sharp end of the stick, with an imminent redemption flow in the next 24 hours, and NZD is near the top of recent ranges against a whole host of currencies, including the AUD, pictured above.
So there looks like quite a nice little opportunity to play for an overnight pop in the cross. Macro Man can only hope that it does not emulate the fortunes of his equity book yesterday and Go South.