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...
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...
27 comments
Click here for commentsIt isn't an head & shoulders pattern at all.Right now it isn't anything but a consolidation of an uptrend and if you believe in probabilities then you go with that trend.If it breaks what you take to be a potential left shoulder going down THEN it becomes the pattern you suggested.
ReplyASSUMING patterns before they confirm what they are offers no edge at all.
Gee...if it doesn't break the neckline then it isn't a head and shoulders? Tell me something else I don't know....like which compass point the sun will rise in tomorrow.
ReplyBit caustic that ,but it's ok afterall I'm not the one that's been getting whipped to death by this market noise so perhaps some kind of "compass" for you wouldn't be such a bad idea.
ReplyMM,
ReplySurprised you would waste your time responding to such idiocy.
What idiocy dear Anon 11.57?
ReplyYour comment says a lot about you!
Do you see a head and shoulders on the chart or not?
-I dont as well as many dont.
Did Macro Man projected his hopes/beliefs on the chart?
-Maybe, maybe not. BUT, I have read his blog long enough to know he prefers equity index short. Even though the chart has been something else!
Has he been wiped around?
-He says so!
So what is your reasoning to belittle anyone? Who are you and what did you accomplish to have such bold wordings? You should open up your mind, and study charts. Moreover, respect other people's opinion is the key component to submis the EGO. Once you accomplished that you might have a chance to make money trading.
Moreover, I found this blog an informative read. However, I see the markets from completely different angle.
fxpanther
I see an island reversal, but I guess it won't get any follow-through.
ReplyGood grief, it's not "Technical-Man" it's "Macro-Man".
ReplyI think every momo muppet out there is looking at that as a potential head and shoulders.
I'm here for the witty repartee and market musings.
I think that big puffy cloud looks more like an elephant. But who am I to argue?
Replyhey MM,
Replywhat do you mean when you say "However, the strip is now pricing the rise in euribor to be relatively front-loaded, which opens up some interesting curve trades."
what does the front loaded mean?? are you talking about the spread between June (which was on the screen) and say Dec 11??
i'm trying to learn how to trade short rates as I think this will be the space to be in a couple months time (fingers crossed for positive non farm!)
Something to make you laugh while you bang your noggin on the desk.
ReplyObama and Hu Jintao
http://www.youtube.com/watch?v=8ZXEShSIFks
that SNL is gold.
ReplyYawn, not much going on here except the gradual uptick in rice. EM inflation looks to be very much on the cards sooner rather than later.
wow this is an angry thread.
ReplyMe, I'm sticking with long stocks.
abee crombie,
ReplyMM simply means the market is pricing in a change in rates/eonia in the relatively near term (presumably sooner than MM himself expects).
In terms of curve trades, I would have thought MM would be looking at trading Jun10-Sep10, Jun10-Dec10 or somesuch.
Jun10-Dec11 is a tougher trade as by looking at Dec11 you're taking a bit more of a view on longer term monetary policy.
The simpler the better is usually the best way to play *ibor futures.
- CS
Ach, I would love to cheer you up today MM but alas, all my jokes are irrelevant to today's news. However, with the purchase of the "Right Honorable" Senator Landrieu's vote for 300 million worthless US dollars on Saturday towards the health care debacle, an exchange between Winston Churchill and an unnamed socialite comes to mind:
ReplyChurchill: Madam, would you sleep with me for five million pounds?
Socialite: My goodness, Mr. Churchill... Well, I suppose... we would have to discuss terms, of course...
Churchill: Would you sleep with me for five pounds?
Socialite: Mr. Churchill, what kind of woman do you think I am?!
Churchill: Madam, we've already established that. Now we are haggling about the price.
So, that being said, anybody like ultra-gloomy SocGen analyst Albert Edwards latest rant about a 2010 synchronised global downturn, yuan devaluation and trade barriers?
Abandoned baby... abandoned baby!
ReplyIBs getting a "routing" sounds good, but not as good as a really good "rodgering".
ReplyVery bitchy thread today. Lots of people not having any fun in this market, apparently. Drink deep and eat too much turkey, it will all still be here next Monday.
Now I must get back to this latest H&S formation....
"... the most accurate market commentary now comes from a bunch of comedians on SNL..."
ReplyTrue, Gary, too true indeed, as apart from the bunch of comedians on other cable stations...
How's yer Treasury market apocalypse trade coming, Gazza? (He asked, politely..). Seriously, what did you make of the Friday T-bill action? Much debated in this space.
"Gold has made (another) new high, seemingly dragging the DXY down in its wake."
ReplyOr DXY drags up gold.
Leftie -- Trading US treasuries is for losers. It hasn't been a free market in at least a year.
ReplySmart gamblers know there are two types of players at a table -- the guys making the money, and the suckers. If you don't know who the sucker(s) is/are, check the mirror.
The Fed has rigged the market to bail out dozens of politically connected, but insolvent banks. They are the "winners" in the US Treasury game.
The Chinese are starting to realize they are among the suckers at this poker table.
Hedge fund guys, who were quite convinced that CDOs were AAA, are now running around assuring each other that US Treasuries are "risk free".
Hedgies are in kind of a Wil' E Coyote moment -- were he runs off the cliff but doesn't realize it yet. Gravity is suspended for a second or two, before the road runner beep-beeps and leaves our hapless bond hedgies to the fate of gravity.
Of course, the coyote never gets the proverbial tap on the shoulder after his capital is decimated.
I have even less doubt than the Chinese that US Treasuries aren't worth par ... but I know better than to play in a rigged game.
MM linked to an FT article where the author (Gillian Tett?) asked if sovereigns are the next subprime... reminds me of all the articles about the housing bubble that Wall Street so readily dismissed
I don't know if "investors" will lose more to the ravages of duration as yields return to "normal", or if they lose more to Iceland like defaults -- but I know not to pick up 0.05% in front of a steam roller
i get the feeling december is gonna be a long month for most. too much money chasing too many divergent views means things will stay in limbo for a long time untill we get some other 6 sigma event.
Replyif a g19g oes into default or we get serious credit migration beware what you all wished for. it just may happen.
Anon 9:30
ReplyThe largest economy in the world is being centrally controlled by people who can't balance a checkbook, think that spending $1 trillion more equals savings, and they are getting economic guidance from an incompentent twit that doesn't know how to operate TurboTax
What could possibly go wrong?
Gary, I am with you on the topic of Tiny Tim. But the amazing thing is always to see exactly how long these metastable structures can persist before they eventually do self-destruct.
ReplyLeftie -- if you ask some of the 10+% of the population that is unemployed, and another 10+% underemployed ...
Replyafter they finish beating you with a baseball bat they might take a few moments to tell you that this "metastable structure" of yours is nowhere near as stable as you think
LB - These metastable structures do last a long time ... but with every cycle the bubbles get shorter ... The 2002-2007 version lasted five years, this one will be lucky to go one. I still think it may be turning in a distributed top right here, but I doubt it lasts past March at the latest.
Reply"So you think my singing's out of time,
Replyit makes me money
I don't know why
I don't know why, anymore
Oh no "
No money for my own singing, but my metals are holding up well.
Funny, health care bill gets 38% Rasmussen support, with 17.5% unemployed or underemployed. Assuming those 17.5% are in favor, that leaves support at 1 in 4 gainfully employed folks supporting the bill.
ReplyI'd rather be a bearish macro trader than Obama right now.
38% in favor of DMV healthcare?
ReplyI don't claim to understand the new math that the government is teaching in schools now -- but isn't 38% well under 50%?
And if this was a democracy, aren't the majority of ALL people (not just corrupt congress members) supposed to support something for it to be law?