Roll Over Beethoven

Team Macro Man can't help but notice that the common theme of the summer thus far - gappy, trendless markets with no clear theme aside from slower (but not that much) growth may be coming to an end. Squeezes are happening across the board, indicating either some serious conviction on the part of some parties, or that positioning has got a touch too one-sided, with the winners doubling down and those bruised by the last few months' price action limping off into cash. Price action in commodities remains an amplified version of life outside of it, with one house allegedly deciding to corner the market for Freddo Frogs and Body Shop products. The wife and kids will NOT be pleased. Similarly crowded action in Yen crosses has led to more volatility as more observers expect Japan to go thoroughly Network on us.

Throw in a few more improbable events:

  • Greek Current Account moved into surplus for the first time since 2005 - something the optimists will point to as evidence that things are improving, and something the bears will point to as increasing the probability of a restructuring & devaluation, given the lack of need for external funding. This could be the first candidate for TMM's new Flying Donkey Award.

  • Some heavy volume early in Eurostoxx, which is either someone trying to freak everyone out or someone who is actually freaked out (and has a spare EUR 1.6bn). Who knows?
  • Has anyone seen a Eurocrat recently? Or have they all escaped down a secret tunnel to join their Euros in Switzerland before Friday's well-timed 6pm (European Time) bank joke test announcement. That maximises the head start they get on the markets before they open on Monday morning and find them missing.
  • The early whisper for The Vampire Squid's earnings is $2.04 vs expectations of $2. Now, in TMM's book, that's a $1.00 miss against the usual "Consensus plus a Buck".
Yesterday's poll was interesting too, thank you. So much for fat tails. Either this blog's readership is not representative of the market (to be fair, which passive equity manager would be reading this), or we are well out of court. Nice distributions around current levels with a bias to the "stress" side of things again (EUR/USD to dip, SPX to fall), but we were most taken by the disappearance of the Gold bugs, with only 15% thinking we will be above 1250 at the end of August, the same number as think we will be below 1050. Y'all out buying bullets...?

And all Team Macro Man can say is that it may be a Summer of going nowhere, but it's going to be a hairy journey getting there. The end of the week probably isn't going to be the snoozer that the Summer has been so far.

Next Post »


Click here for comments
July 20, 2010 at 2:52 PM ×

I usually post your blog entries on twitter. I always get comments when you say something sensible about Gold :)

July 21, 2010 at 10:59 AM ×

A squeeze in Euros against E Europe currencies might occur if the German/Spanish banks are given a clean bill of health - and could trigger a move above 1.30 in EURUSD, just as JPY continues to strengthen.

A break above 1.30 would apply COLD STEEL to the nether regions of a substantial number of dollar bulls.