The rates strategy team at RBS remain neutral on Tsys, saying “it’s too late to sell Treasuries and too soon to buy them.” The team says there are conflicting signals right now and they await more clarity. On the one hand, RBS says the following are supportive of Tsys: 1) A priced-in Fed tapering at the upcoming meeting; 2) Syrian conflict; 3) A “tired” stock market; 4) Expiry of the continuing budget resolution on 9/30; 5) Weekly momentum in 10s is oversold. On the other hand, RBS cites the following negatives: 1) Daily bear trendlines from May are still intact on 10s; 2) Govt bond mutual funds and ETF redemptions ongoing; 3) Could be decision on Bernanke replacement this month with a Summers pick.
Today started with 192k ESU and 1.2k SPU traded on Globex, SPU trading range was 1642.00 – 1635.30. Tuesday’s SPU pit session trading range was 1631.00 – 1649.80 before settling at 1639.10, up 7.8 handles. In Asia, 7 out of 11 markets closed lower (Hang Seng -0.31%, Shanghai Comp. +0.21%, Nikkei +0.54%). In Europe 11 out of 12 markets were trading lower (DAX -0.69%, FTSE -0.48%). Roger_Volz Beige book…G20…MS downgrades MSFT…UK Services Business Activity Index at 60.5 in August (highest in over six-and-a-half years)..EURO-AREA JULY RETAIL SALES INCREASE 0.1% FROM PRIOR MONTH, exp +0.4% prev -0.5%… *EURO-AREA 2Q GOVERNMENT SPENDING UP 0.4% VS PRIOR QTR… Euro area GDP up by 0.3% during 2nd quarter 2013, down by 0.5% compared with 2nd quarter 2012. Market Vane SP1 58; ND1 71 still strong pos; GC1 49, still slow developing not too bullish too quickly. U.S. trade deficit widened 13.3% to $39.1 billion in July as the U.S. trade deficit with China topped $30 billion for the first time. Lastly, we would prefer to trade off the reaction to the news versus guessing at what headline may be coming next…for most of last week and this week the chat room was reminded by william_blount WHO OWNS 1632.5????????
Today’s pit session opened fractionally lower at 1638.50 – 1638.00, traded 1635.50 low before trending higher throughout the morning session without much of a pullback – taking out yesterday’s high of 1649.80 – on its way to printing 1653.50. [AAPL] was retesting the $500 ahead of a new iPhone launch next week and Roger_Volz (07:08) Cantor analyst starting aapl with buy and $777 target; NOTE: he was formerly with Topeka and at one point had an $1,111 price target on Apple…as AAPL goes, so goes the tech sector, and the financials rode the wave as well as the [DJIA] was up over 120 points. Also, August U.S. auto sales checked in very strong – as an example [F] sales were up 12.2%, beating estimate of 9.4% increase, light-vehicle sales up 12%, est. up 10% – F-Series trucks were at their highest levels since 2006. However, mortgage applications checked in down 5.5% in August – leading some to point to higher rates slowing sales – time will tell…
The equities continued to grind higher without any significant pullbacks even as the 10yr yield was trading 2.86%. iceChat (09:06) Chatter – Syrian decision/vote may not be until 9/12 even as the FRENCH PM SAYS NO ACTION OVER SYRIA CHEMICAL WEAPONS USE WOULD SEND NEGATIVE MESSAGE OVER IRAN’S NUCLEAR PROGRAMME.
Technically speaking, william_blount (09:32) be nice to see pattern look like an upside down U and the SPU went on to retest yesterday’s high as the [VIX] fear gauge was down 4% just after the European markets closed. Along with the better macro news, the two-faced, double-talking politicians were at their best today as some who backed the retaliatory Syrian military strike have now reversed their earlier position or at the very least are throwing caution to the wind as 6 out of 10 American citizens do not back the strike. mts2 (10:36) The leadership of the Senate Foreign Relations Committee is weighing a delay of an expected Wednesday committee vote on the authorization of the use of military force in Syria. The committee’s top Republican, Sen. Bob Corker of Tennessee, said he doesn’t want to rush into a vote given that the draft language of the authorization was released on Tuesday night. Read more: http://politi.co/14rbdtj And the band plays on…Roger_Volz (14:01) McCain now likely back on-board -> Senate panel adopts two McCain amendments to Syria resolution…
At 1:00 the Beige Book showed: Fed says ‘modest to moderate’ growth spurred by home, car sales. Roger_Volz (13:11) nothing there to speed up taper process…. Yesterday the NEWS overwhelmed the stocks as Speaker Boehner and GOP Leader Eric Cantor endorsed some kind of Syrian military resolution – and today’s price action appeared to be the exact opposite – raising the question, have traders as well as investors become too comfortable with the pending news coming in the near future? After all, much of the news has been played out on the airwaves over the last few days and going back to the last few months in the case of the 9/18 FOMC tapering decision… Yesterday’s note from the eurodollar pit: jmatthew As of yesterday’s day’s settlement the market has priced in a 50 basis point rise in Fed Funds rate by January 2015. Oh yeah, how about the bear turned bull … Morgan Stanley’s Adam Parker is calling for the S&P 500 (SPY +0.9%) to hit 1,840 over the next 12 months, but that 11.2% gain is just his base case. Parker’s bull scenario has the S&P gaining 40% to 2,327.
william_blount upside DOWN U dead — would require event IMO – died at 3:07ET no follow thru south.
The early look on the closing imbalance showed (14:21) MiM – MrTopStep Imbalance Meter showing 87% to the buy side – over $600M. NYSE 420mm vol, volume below yesterday’s level/ pre-Rosh Hashanah holiday trading. NEWS: Roger_Volz (14:26) Senate Panel Authorizes Limited US Military Strike in Syria – Senate panel passes authorization for use of military force in Syria by 10-7 vote – knocked the SPU down about 3 handles, holding the 1649.50 area iceChat (14:21) MiM – early imbalance indicator showing 87% to the buy side – over $600M / (14:37:34): MiM – showing 88% to the buy…The SPU was trading 1650.50 area when the closing imbalance showed the SPX MOC IMBALANCE $1.4Bil to the BUY side. The cash close traded 1651.70 and the SPU settled at 1653.40, up 14.3 handles on the day.
Headline news continues – Central bank decisions overnight/tomorrow BOJ/Riksbank/BOE/ECB – The ECB has the highest likelihood of making news given the press conference and Draghi’s tone. Also, the ADP and jobless claims will garner much attention, but how much will the Rosh Hashanah holiday affect the markets and volume? The NFP is out Friday. Yesterday, the ISM manufacturing PMI checked in at 55.7 vs exp of 54.2, highest since April 2011; prior data was 55.4. However, the employment data dropped 1.1 points to 53.3 – leaving some to suggest that Friday’s NFP data is likely to come in UNDER 200k highest.
Followup: 21 @ 23 quoted at 12:11 today >> Posted yesterday by Carley_Garner (09:15) we are selling puts in the Euro this morning. post labor day trade tends to see strength in the currency. we like the october 128 puts for about 37 ticks. http://bit.ly/13adonR
DON’T MISS THIS: @tbg4321 aka Kathy Garber of Structural Trading & @mrTopStep: When the price of a market is indecisive, moving sideways, it is often between opposing emerging harmonic patterns. http://bit.ly/1fyRYDi Also, be sure to join us tomorrow (Thursday 9/5) for a lunch & learn w/ @tbg4321 aka Kathy Garber of Structural Trading and @MrTopStep to learn about volume profiles http://bit.ly/1eaad3Q
Aside from Syria, the U.S. government is scheduled to come back from vacation on Sept. 9 for both House and Senate. That is 9 legislative days before the end of the fiscal year and before the current spending authority expires. Without action (including a month-long emergency extension) shutdown on Oct. 1.