It's On, Baby...It Is So On

Monday, July 06, 2009

A belated and abbreviated post today, as Macro Man's been busy dealing with both market and non-market issues. Keeping to the former, he's feeling a bit like Double-Down Trent from Swingers today, high-fiving Sue: "it's on, baby...it is so on....."

Risk assets of every description (other than Chinese equities, natch) are dumping this morning, for reasons that aren't immediately obvious. Perhaps it's the Indian budget (who said 6% plus budget deficits were just for Anglo-Saxon economies?) or perhaps it's just technical selling.

But it looks like commodities are breaking down (Dec 2009 crude looks awful)....
.....and equities are washing with Head and Shoulders this morning.

Macro Man has expanded his balance sheet, so to speak, this morning, by layering additional "risk-off" trades while increasing the delta of one of his "risk-on" hedges.

888, give or take, looms large on the SPX, as it's both the head and shoulders neckline and the 200 day moving average. A break (and futures are currently discounting a gap open just below the level) could bring some of Macro Man's fellow bears back to the party.

If so, Macro Man might have to consider doing more than just repeating Double-Down Trent's line.....

Posted by Macro Man at 9:19 AM  

16 comments:

Illiquidity seems to reign supreme, GbpUsd has cracker lower hard, Eur/ aud. Nzd holding up a tad better,
UsdCad cant seem to rally much higher either
Altho, some of the best breakdowns in fx occur on holidays

Anonymous said...
12:04 PM  

if we get a sustained, confirmed head and shoulders break across equity markets, plus a solid breakdown in various commodity mkts (oil, copper etc)...well - that's got to be worth a few cocktails at The Dresden...

EJ said...
12:18 PM  

if we get a crappy US services PMI out this afternoon me thinks its all over...... Should confirm the H&S.

Anonymous said...
12:31 PM  

maybe q2 bank reports will look ok and we will get a another squeese higher the stockmarket ..90 pct of all traders are bearish

Anonymous said...
1:21 PM  

5 weeks of sideways USD against the majors..is week 6 the decisive week?

Bit wary of stocks, the H&S seems a bit too obvious?

Anonymous said...
1:21 PM  

MM, I don't really understand your sentence here... can you decipher a bit? Much appreciated.

"Macro Man has expanded his balance sheet, so to speak, this morning, by layering additional "risk-off" trades while increasing the delta of one of his "risk-on" hedges."

Bruce Chadwick said...
2:44 PM  

Basically, it means that I have increased the size of my gross positions (and, ultimately, my net risk if there is a big movement) by doing a risk-off trade such as selling stocks, while at the same time buying back some FX carry spot that I had sold against a call that I own.

Macro Man said...
2:46 PM  

Indian equities are vulnerable even after today's correction. The market had a massive rally following the recent election - valuations are very euphoric - over 3 times book - growth expectations are very high and the new government does not appear to be very reform mined after all. Add to that the potentially large rise in the cost-of-capital - it could be very messy...

Anonymous said...
2:52 PM  

"You're so money and you don't even know it". Quality MM. JL

Anonymous said...
3:10 PM  

While I am very sympathetic to short positioning (and have been dollar-neutral since I sold into the Geithner Week rally), I would note that my best-performing position the last week or so has been a trash spec long I put on when it was trading in pennies like a London-listed fish. All my long-short-pocket-arb play is a rounding error by comparison. If the market is willing to bid up trash like this, I am thinking strangles or even outright deep otm calls instead of plain short beta.

FD: still zero beta, excepting Mister Trashy's Lucky Ride

wcw said...
4:01 PM  

Oh man someone totally got ahead of me with the, "you're so money and you don't even know it" quote.

I think you do know it in your case though. Any tasty summer interns strolling around the HF trading floors this summer?

Anonymous said...
4:05 PM  

Thanks, JL and Anon. The only intern I've seen this year has been some dude from Eastern Europe. Somehow, I don't think that qualifies as "tasty."

Macro Man said...
4:26 PM  

Maybe he has a nice sister he can bring in?

Anonymous said...
4:30 PM  

Head and shoulders may work out, but as someone else pointed out, it seems a bit obvious. I got a call from a client over the weekend who knows charts like he knows nuclear physics, worried about the head and shoulders pattern forming in all markets. He's very concerned that we'll break the tie line. Suddenly everyone's a technician.

Joe Calhoun said...
5:52 PM  

I have had to remove my head from the wall...what a pointless day of retracement...

It does appear that the market is still range bound.

Not sure what pushes us out of this. I thought the very poor NFP (at least at this stage of the "recession") would be enough to push risk asset pricing down significantly, but it didn't today. Look at copper, AUDUSD, GBPUSD et al. Still in their range at the close.

Crude being the exception, although the recent inventory build and YoY demand decline numbers seem to have given it more impetus down.

Still wondering where the straw will appear from to break the camel's back.

Anonymous said...
9:11 PM  

I wonder why everyone takes 888 as neckline instead of 875
best
Geert

Anonymous said...
6:31 AM  

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