Skip to main content

Morning Update

The Australian Dollar / Japanese Yen currency pair traded down overnight after reports showed Australian housing prices significantly weakened and Japanese cut its assessment of its domestic economy. This caused a repatriation of the Yen as traders went into a "risk off" mood and unwound carry trades. However, as of now the pair has rebounded and the US dollar is weaker against all major currencies. European equities remain in negative territory however, and S&P 500 futures are 3 points lower.
The latest round of data out of Spain is again dismal: the economy contracted 0.4% Q/Q and contracted 1.3% Y/Y. Additionally private-sector bank deposits in Spain fell from 1.583 trillion Euros to 1.509 trillion, a nearly 5% decline. This shows that people are rapidly losing faith in Spain's financial system despite a 100 billion Euro bank bailout fund and Draghi's promise to bail out the country should they ask. The only good news out of Europe this morning was that the rapid outflows of capital out of Greek banks slowed in July, likely due to the results of the country's June elections.
This morning in the US the S&P Case Shiller Home Price Index was released and came in stronger than expected at 0.5% versus 0.4 expected and 0.9% last month. Later today consumer confidence numbers will be released, with expectations for a moderate decline from 65.9 to 65.8. NYSE volume continues to make new yearly lows as the market looks forward to news from the Federal Reserve on Friday. Today Mario Draghi, expected to speak in Jackson Hole on Saturday, announced he will no longer be attending the event, citing a heavy workload.


Popular posts from this blog

FED Rate Hikes Could Cause Unintended Volatility Shock

Last week the Federal Open Market Committee surprised no one when they raised rates 0.25 basis points to increase rates to between 1% and 1.25%.  What did surprise the market, was the revelation that the FED is committed to normalize rates, even if inflation does not meet their target.  This was reiterated this week in a speech by William Dudley, President of the Federal Reserve Bank of New York, who stated he feels the FED needs to raise rates, despite low inflation, to be ready to act if the economy does slow down.
The market has been quick to respond, and nothing was hit harder by a reduction in inflation expectations than commodities.  Gold, since the announcement, is lower by 2.39%, and oil is down -3.18%.  Crude futures have broken their upward trend line and appear poised to test the previous low of $39.56.
While, oil has been under pressure all year, the S&P 500 does not seem to care, as it continues to make all-time highs.  Oil is down 23% year to date, while the S&P…

Gold and Treasuries Say “RISK OFF”, But VIX Says "RISK ON"

Today we are seeing a modest rebound in the market after yesterday’s small selloff.  Volatility remains extremely low, with the VIX hovering around 10.  It’s important for traders to recognize how low the VIX has been lately.  Since 2010, the VIX has only closed below 10 five times, and each of those five times has come in the last month.                   However, the market is not without risks right now.  Gold has rallied 6.5% since May 9th.  Treasuries have rallied, pushing rates to below 2.15.  So, the market is currently in a risk off mode while equities are in a period of historically low risk.  The VVIX (the VIX of the VIX), for its part, is not sounding the all clear signal, 87 is in the medium range for VIX volatility.  Tomorrow we have a potential market moving event with James Comey’s testimony to Congress.  The last time Comey’s name was in the news, we saw the VIX move from 10.5 to over 15 in one trading day (a 50% increase) on a day where the market was down over 2%.  …

Markets Soft without Stimulus

Markets around the world pulled back the reigns as central banks look to taper quantitative easing. Japan’s central bank decided to leave their current pace of monetary policy unchecked, which has effectively cut the Nikkei down 1.5% on the day, affecting nearly every market in-between, scaring the DJIA 165 points off the start this morning. US Treasuries have now notched the highest yield in 14 months on the 10 year note.

This morning 55,257 EEM July 35 puts were purchased by a trader for $0.29 each, costing him a large $1,602,453. This is a bearish move on the Emerging Markets ETF, with expectations that by the July expiration, the price of EEM will dip below $34.71. EEM opened today at $39.32 and if this trader was to pass the breakeven point, the ETF would have to drop by more than 11.7% within a little over a month.

EEM opened today 1.9% lower than its closing price yesterday and since the 52-week high the ETF experienced in early January, it has lowered by over 13%. While this …