Monday, November 23, 2009
As we embark upon Thanksgiving week, thus ushering in the low-liquidity holiday silly-season, you can almost hear Slade (or is that Quiet Riot?) in your ear as you watch the screens. If you're a noise trader, there are rich pickings to be had; if you're a signal trader, thre's not much you can do but pick your spots and bear it.
Still, there have been a couple of interesting features as we kick off the week. Gold has made (another) new high, seemingly dragging the DXY down in its wake.
Speculation that the ECB is moving towards an exit strategy received a boost on Friday when they announced changes to the ratings requirements for ABS collateral from March onwards. While there's no suggestion that rates (either the refi or EONIA) will necessarily rise in conjunction with this change, given the relatively rich market pricing, it's probably not a surprise that the euribor strip has been sold on the back of the announcement. However, the strip is now pricing the rise in euribor to be relatively front-loaded, which opens up some interesting curve trades.
Meanwhile, the Brownian motion of the SPX continues apace, with short term chartists no doubt keying on the little head and shoulders pattern on the short-term chart. At this point, Macro Man has no strong conviction on how the price action will resolve itself; given holiday illiquidity, all it will take is a big order to confirm or negate the pattern. Yawn.
Thrown in some noise about soverign risk, and you've got the perfect recipe for a headbanger's ball this week. Whether that describes the noise of the market or the relationship of Macro Man's noggin to his desk remains to be seen...