Collective Intelligence!
Today started with 283k ESU and 1.2k SPU traded on Globex, trading range was 1645.70 – 1631.60. Wednesday’s regular trading hours range was 1654.70 – 1636.30 before settling at 1636.50, down 14.1 handles. Was the FOMC just noise in the markets? China’s HSBC Flash Manufacturing PMI M/M 50.1 vs. 48.2; 4-month high – Eurozone Manufacturing PMI 51.3 vs. 50.8 – highest since June 2011 with Germany checking in strong. — Flash U.S. Manufacturing PMI at 53.9 in August (five-month high)… Well, another round of better global economic data lifts the premarkets as interest rates continue to climb. Too bad the economic data is not consistent… Roger_Volz (05:51am CT) TF sneaking in higher lows 1023.50 closing relief to turn down leg from shoulder line — 2.927%-2.946% wkly 10y — YM partial daily OS <14825; full read if 14755 — china data helping CAT/ FCX-copper early/HPQ woes — EMD trying 2x baser against channel 1191.30; repair > 1211.50 close — Unemployment rate in #Brazil fell slightly to 5.6% m/m in July – IBGE. The U.S. JUNE HOME PRICES RISE 0.7% VS PREVIOUS MONTH, FHFA SAYS, exp +0.6 and jobless claims rise by 13k, checking in at 336k vs exp of 330k, rising to the highest level since July 19 and biggest miss in 6 weeks. Bad news = good news… Four-week average of U.S. jobless claims reaches lowest point since November 2007. The ugly continued in the retail earnings as [ANF] also lowered guidance to .40-.45 cents per share versus analyst consensus of $1.06. [BONT] [PERY] [SHLD] [SSI] all miss.
Rich Canlione posted: OverView: The VIX rose 1.03 (6.9%) yesterday to 15.94 as the SPX moved 9.55 points lower to 1642.80. The rise in the VIX on an absolute basis, does little to encapsulate the level of uncertainty that surrounded the release of the FOMC’s July 30-31st meeting minutes. 25 minutes following the release the VIX dropped 1.16 pts as the SPX rallied 14.20 pts only to see both fully reverse into the close. While the minutes reaffirmed to us that the decision to start tapering asset purchases remains data-dependent, the words will likely continue to be digested and parsed today by market participants in the hope of finding greater clarity on Fed policy. If anything, the most interesting take away from yesterday’s release was how bifurcated the analyses of minutes were, adding to the overall uncertainty. For those who believe the onset of tapering is still data dependent – as we do – the ultimate determinant will be the September 6th release of July payrolls. As a play on either a better or worse than expected payroll report consider: Buying EEM August(30th exp) 37.50 / September 37.50 put spread for $0.19 or conversely Buying EEM August(30th exp) 37.50 / September 37.50 call spread for $0.20 .
Overnight, very strong PMIs in China and Europe helped brighten sentiment considerably with almost all European markets up 1%, giving up a boost to U.S. equity futures and bond yields. The reading out of Europe provides additional support for the idea that the Eurozone economies may be turning a corner. Team this with the idea that Draghi will likely (be forced to) counteract the effects of reduced liquidity (as a result of the LTRO repayments) and international market dynamics by either reducing the rate corridor or launching another LTRO, we would continue to recommend buying EFA January 65 calls for $0.65 (ref 60.45, 14 vol) and selling SPY January 178 calls for $0.81 (ref 164.56, 12 vol) – collecting $0.16 net credit.
The Jackson Hole Economic Summit starts today without Bernanke or Draghi …
Today’s pit hours gapped 8 handles higher to 1644.50 – 1643.50, marking the low before trading a high of 1654.20 at 9:45, holding just below yesterday’s post-FOMC & daily high of 1654.70. 9:00 U.S. July index of leading economic indicators checked in at .6% vs exp of .5. The SPU held 1647.50 area at 11:57 post the Nasdaq halt of trading at 11:20. The PMI’s did the heavy lifting for the equity bulls and the snafu at the Nasdaq did briefly dent the rally and added to the already light volume, but once the fear of the unknown dissipated the equities continued to grind sideways to higher throughout the midday trading a new high – by a tick – of 1654.30 at 13:37. iceChat (14:26) DJT new highs, dragging the indices with as the SPU traded a new intraday high of 1657.50 at 2:38. The closing imbalance showed a fairly well matched imbalance of just $4M to the sell side. The cash close traded 1654.50 area before settling at 1654.80, up 18.3 handles on the day. S&P futures have closed down 9 out of the last 16 days and down 5 out of the last 7 sessions.
