Hit and run

Hit and run.

On the one hand, it's a cowardly and morally despicable crime that involves high-tailing it away from the scene of a traffic collision, regardless of the severity of the injuries caused by the perpetrator.

On the other hand, it's a strategy occasionally used in baseball in which a runner on first base breaks for second and the batter attempts to direct the ball through the gap left by a fielder who moves to cover a putative throw from the catcher.

On the third hand (if you're an octopus or swim too often in Springfield's river), it seems to be the only way to trade profitably at the moment.  Consider market price action since the payroll number.   The dollar gapped higher and actually held most of its gains through Friday's close.  Since then, however, the euro has more than re-couped its losses...

...and it's not like you can blame it on some nonsensical Greek headlines.   For the first time in while, price action in USD/JPY has turned poor, as it too has given up all its gains (and perhaps the ghost?) since payrolls:




Fixed income has fared a little better in holding on to its moves, though it still looks a little squeezy.  Macro Man posited on twitter last Friday that the whites would give back their losses by Wednesday; although EDM6 is still the first red contract, simply extrapolating the last 30 hours' price action makes the forecast look accurate.


Interestingly, the one market that hasn't shown much sign of any giddyup is equities, where Spooz are currently trading at their lowest levels in a month.  In terms of elegant thematic consistency, this market is sadly lacking.

All of this leaves punters with two choices:  trade for the long haul and try to live through the noise (probably the best  course for maximizing risk-adjusted returns but the worst course for keeping the boss off of your back), or go full-on five minute macro and trade hit and run.   Sadly, this is probably the most realistic option for many punters, which in  many ways renders it a self-fulfilling prophecy.

The trick, of course, is to do it in the baseball sense (looking to score runs in small increments) rather than a vehicular sense, leaving a trail of injuries (including, potentially, your own!) in your wake.
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abee crombie
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June 9, 2015 at 3:14 PM ×

MM, I agree with you on the WIHTEs but I will wait until after retail sales.

European equities are WEAK WEAK here. Large cap health care and cons Staples leading the index lower. Dax now has an official 10% correction. More concerning is the lack of buyers in both S&P and Europe. Particularly we havent see a string of positive days for a while.

EM FX is also interesting here. Taking a run at March highs (and breaking in a few instances) but I am not sure if it will hold. But with the specter of higher rates, shoot first I guess.

Leftback, what is catching your eye here. I am looking at Muni's and MLP's

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Anonymous
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June 9, 2015 at 5:00 PM ×

Totally agree with MM. Still waiting for the next big trend. Just what could it be? The dollar bull after the June FOMC?

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Leftback
admin
June 9, 2015 at 9:25 PM ×

Watch list for LB for late June/July:

Munis, check. REIT preferreds, check. The Long Bond, check.

Not quite ready yet, we need a real panic selling rout in bonds to clear out the tourists and set up a nice Summer squeeze. Patience. Recall the pain of the Taper Tantrum? There was a lot of torn and shredded Kevlar that Summer. It's almost unbelievable the depths to which decent assets can plummet when people completely lose their minds and liquidity takes a holiday. Let's wait for auctions, FOMC and "Grollover" to happen and for bunds to find some kind of reasonable yield. Once that is over with there will be some more blah US data points in July and August and the fixed income market will settle down again.

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Mr. T
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June 9, 2015 at 11:14 PM ×

FI has been a momentum trade for so long I'm not sure where the market thinks "reasonable yield" even is anymore. Backing out SPX into a fed model has 10yr at around 5.5% - I know its seen as backwards for FI to be "wrong" and stocks to be "right" but maybe thats where we are after a half-decade orgy of CB bond buying? I, for one, have zero interest in using yield as a metric to pick bottoms. Frankly, I think the fixed income space is coming undone.

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abee crombie
admin
June 10, 2015 at 1:33 PM ×

So today EM FX is reversing back in a nice way, even as rates continue to take CTA's to the cleaners. Perhaps it is oil, or perhaps nothing is correlated in the same way anymore. I heard Bloomberg talk about all these "minimum variance" poerfolio's bieng taken to the cleaners lately due to the positve correlation btwn stocks and bonds now.

I dipped my toes in some more European stocks and MLP's the past 2 weeks and thats enough for now.

Equities will break when 30 year mortgage rates go above 4.5%, IMO The recent jump in mortgage application is likely to lead to a burnout over the next few months.

THe bigger question is what is the bund going to settle down at?

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Polemic
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June 10, 2015 at 1:36 PM ×

I too an in that 'smell a (short term to start with) turn ' camp
more here - http://polemics-pains.blogspot.co.uk/2015/06/short-term-market-thought-picture-book.html

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Bruce in Tennessee
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June 10, 2015 at 2:20 PM ×

In my opinion, this is unprecedented...in the past central banks have raised or lowered rates depending on the way they saw the economy...the difference this time is that you essentially said money costs nothing to take risk with (ZIRP), but from here forward it will have a price ...This great difference in the extent of lowering rates, and the time these rates were in place, is what makes the future here interesting...

...For >6 years Lefty has brought the loo to his neighbor's coat pocket...it appears it is time for a new coat..

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Funny Money
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June 10, 2015 at 4:21 PM ×

So equity indexes are up 1% in the last couple of hours. Did you all follow the FM model & buy the dip like good boys & gals?

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Leftback
admin
June 10, 2015 at 9:35 PM ×

Munis getting killed, starting to look interesting, be nice to see those 7-8% yields again in the closed end funds, along with 8-10% yields on the REIT preferreds. Not sure the bond bloodbath is over yet, not with Schatz at -17bps. Would like to see most of that brainless Draghi front running trade in German govies unwind and take US yields higher with it before jumping in. USTs are fantastically over-sold at the moment, and as we all know, what oversold markets like to do is become even more over-sold, while severely damaging anyone standing underneath wearing whole body Kevlar suits...

Waiting to see some signs of illiquidity in one or more markets, the obvious candidates being US corporate bonds and that Chinese version of NASDAQ. We are going to have another dollar surge before long, and then punters will scoop up USDs and USTs again in a switch to a risk-off environment.

There are some interesting parallels between 2015 and 1987 in terms of a slow rise in long rates that gradually eroded both breadth in risk assets and liquidity during the Summer. Spring 2011 is another example of a slow rise in rates. "death of bonds" media noise, and of course that was followed by JC Tricky's masterpiece, hiking rates right into the teeth of a crisis once again.

Anyway, it's still Hammock Time, for my money. FM will be able to buy several more dips.

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Anonymous
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June 10, 2015 at 10:16 PM ×

Well NZD just lowered rate. The 1st DM country raising rate after 2008 now is cutting again. Is this a lesson to FED? Maybe NZ is too small to ring an alarm.

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Mr. T
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June 11, 2015 at 4:26 AM ×

Yeah, NZD cut because they are worried about slow growth. But they cut from 350 to 325 - if there is a lesson to the fed it should be "it's nice to have interest rate ammo when things get slow", not "this is no time to raise". Just my .02, but in my opinion there is no debate - slow growth or not its time to normalize rates. It's never going to be easy.

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Leftback
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June 11, 2015 at 2:37 PM ×

So the obvious question at this point for Dame Janet is: if we are hiking in September and December, as seems to be the new consensus, when do 3- and 6-month T-bills get the message? The long end (even from 5y out) may well have priced in a couple of hikes already, but the short end has some catching up to do. Who gets hurt when very short-term money becomes more expensive? Banks and members of the speculative community....

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Funny Money
admin
June 11, 2015 at 3:23 PM ×

After yesterday's huge up-day in equities we have: Nikkei up +335 (1.7%), Eurostoxx up 1.6%, & US equity indexes up circa 0.5% for the first hour.

The FM model will rule for a thousand years! ;-)

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Anonymous
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June 11, 2015 at 4:53 PM ×

You can make your money short too FM. Like 6mins after you posted.

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FunnyMoney
admin
June 11, 2015 at 5:14 PM ×

@Anon 4:53 - Yes that was quite amusing... I post, Dax falls thru floor lol. We're still up though. I look at ES these days and I think of that old pit saying "run the buy stops, run the sell stops"...

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hipper
admin
June 11, 2015 at 7:41 PM ×

So EZ equities were already responding to strong US data ($) and the major bund reversal (which have been major drivers so far) today and then the amazing IMF/Greek duologue clown show came in crashing the party for a change. I guess my view on this issue is clear but just to recap, since it's so important right now:

-No opening of Pandora's box
-No grexit
-More kick the can and smoke and mirrors
-Haircuts coming in
-A new package
-Eurogroup fold
-IMF - who cares and just be quiet Lagarde. Go bully on someone in your own league like Ukraine

Any (purely Greek) created headline is BTFD, if the major drivers strong US data ($) and bund reversal persist. Fundamentally speaking I see more value in EZ than spoos anyway but acknowledge any spoos weakness might correlate positively with EZ anyway.

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Leftback
admin
June 11, 2015 at 8:29 PM ×

Another face-ripping squeeze in bunds and Treasuries today, but it's not over yet. This is what mini-bear markets do.

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Anonymous
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June 12, 2015 at 7:11 PM ×

OK, who is buying some BTU today? Show of hands.

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Anonymous
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June 15, 2015 at 12:40 AM ×

"...the greater the divergence between asset values and GDP and the greater the divergence between broad MS growth and GDP growth, especially in slower growth frames, the “fatter the tail of the distribution”."

" During periods of excess monetary flows demand changes are not in totality covariance issues (ie. relative attractiveness of one asset to another) but absolute flows that suppress relative price reaction. In other words we see a fall in volatility throughout most of the distribution."

http://blog.moneymanagedproperly.com/?p=4516

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Anonymous
admin
June 15, 2015 at 3:24 PM ×

US Housing more messed up than I thought...

http://www.zillow.com/research/negative-equity-2015-q1-9905/

Demographic research says the U.S. homeownership rate may reach its lowest level since the 60s

http://www.wsj.com/article_email/new-housing-crisis-looms-as-fewer-renters-can-afford-to-own-1433698639-lMyQjAxMTE1NjE2NDYxMzQ2Wj

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Mr. T
admin
June 15, 2015 at 6:05 PM ×

Does anybody here actually believe that the Greek/European masters will not pull another rabbit from the hat? If this is a magic show its the worst I've ever seen with the same tired old trick done over and over again.

My Pavlovian response this morning was to buy some exposure to ASE.

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Nico G
admin
June 15, 2015 at 7:57 PM ×

travel to Greece and get an idea

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hipper
admin
June 15, 2015 at 9:36 PM ×

Mr. T, the next version of the "final ultimatum", part LXXIX is currently set at June 30th a couple weeks from now where they bundled all the IMF payments. No real progress is probably going to take place before then. That's where the real action should be but it isn't inconceivable that things turn really apocalyptic between now and then based on the Media noise where participants communicate with that medium rather than directly which is interpreted as the REAL outcome, and by the end of June most of the negatives would (which won't materialize) already be priced in. Peripheral vs core yields widening seems to support this but FX is just "meh, I'm going to sleep wake me when something really happens".

Marc is on the mark here. There really are much bigger issues going on, like *cough* Italy *cough* floodgates, but guess it's nicer to live in Alice's wonderland where the big issues go away by sticking ones head in the sand.

http://www.marctomarket.com/2015/06/after-greece-what-keeps-european.html

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Gnome of Zurich
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June 15, 2015 at 10:22 PM ×

I think Greece will be let go. Everybody is fed up with them by now. And not wanting to cut the pensions that on average are even higher than in Germany and three times the Level of Eastern Europe is just ridiculous. Syriza's core clientele will get their pensions but of course they will not be able to buy much for it...

Anyway, I think we now have the perfect set up for the mother of all European relief rallies if Grexit finally becomes a fact. Worst would be another extension of the final deadline.

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Anonymous
admin
June 15, 2015 at 10:49 PM ×

Here's what will happen regarding Greece - everybody will kick the can down the road some more.

Forget this sh*t about deadlines. There are no deadlines - there is no precedent for this situation. The EU will talk tough, Greece will talk tough. There will be delays and posturing. The banks will use this media cover as an excuse to run your stops.

The Greek crisis has been ongoing for years, they're not going to fix this by Friday.

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Anonymous
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June 16, 2015 at 2:56 AM ×

" ... the Wall Street Journal quotes the EC estimating that the gap between Athens and the official creditors is about 2 bln euros of government revenue a year. Two billion euros a year. Is that really worth senior European and German officials claiming the increased possibility of a Greek exit? Would not a Greek exit cost Europe many times more than this? Consider that a full default would cost Germany and France together about 160 bln euros. It would demonstrate once and for all that EMU is reversible. It would turn any little strain in negotiations with Spain or Portugal, or perhaps down the road, Italy, into an existential crisis."

http://www.marctomarket.com/2015/06/dollar-gains-limited-despite-greek-talk.html

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Nico G
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June 16, 2015 at 7:27 AM ×

from a contrarian point of view i would have to close my Europe shorts soon considering that Greece is now on everybody's radar, where as noone seemed to care about the exact same existing issues some weeks ago as they were buying Dax futures with both hands 1500 points higher

and to think that spoos have not even started a real correction yet - can't imagine the morale of world markets when the dip levels are finally stopped below. Is this a healthy set up coming into summer? no

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Anonymous
admin
June 16, 2015 at 10:27 AM ×

@Gnome, where are you getting your pension numbers from?

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Anonymous
admin
June 16, 2015 at 5:55 PM ×

@Gnome "we now have the perfect set up for the mother of all European relief rallies..." - you should have just stopped there. Whatever happens.

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abee crombie
admin
June 16, 2015 at 6:29 PM ×

Nico, I hear you regarding the divergence btwn spoos and Dax. You cover shorts when they are in the headlines. Sure you might miss a final blow off but its the right trade most of the time from a macro point of view (for single stocks it is a bit more complicated, as many times getting entering a position after the first cockroach appears isnt so bad)

I am worried about the spoos but they cant seem to do anything but frustrate longs and shorts.

If Dax is going to bounce it shouldnt go down much further. If it falls below the initial QE rally that would be a very bad sign IMO. I'm still long Eu equities but waiting for a clear sign the sell off is over before buying more.

US 5 year rates hit something of a ceiling and have come back in. If that ever breaks, could be a good trade

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FunnyMoney
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June 16, 2015 at 11:39 PM ×

Those who BTFD in equities did well again today (the SP500 bouncing in the same manner as last week). Just sayin'...

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River
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June 17, 2015 at 4:04 AM ×

"Crude Coils Under 12 Month Trendline".

http://www.dailyfx.com/forex/technical/elliott_wave/oil/2015/06/16/eliottWaves_oil.html

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