Good Morning. A rather uneventful weekend in terms of global news and the Sunday futures open is rather quiet as well. No major economic news on Monday but this week is packed with lots of data and Fed speak including Chairman Bernanke.
As discussed in this weekend’s video (Market Recap Video) currencies are critical to watch this week, especially the USD/JPY. Oil is probably going to be the most watched asset class though to see just how much higher it is going.
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Good morning traders, Tony if you have time today, I was wondering if you could explain risk reversals. They always come across the wires and I understand them somewhat, but just wanted your take and if they have any value in following them. Thanks
Morning / Afternoon – here’s an updated EMD (mid cap futures) chart. The top of the ascending wedge held last night.
http://dl.dropbox.com/u/49250221/Charts/Feb%2027%202012/Screen%20shot%202012-02-27%20at%206.29.21%20AM.png
Caleb I’m not well versed enough to give a good opinion on risk reversals. I assume you mean a long call, short put to finance the call type of trade? Such a trade is pretty risky in the sense that the short put is naked. In this current market I wouldn’t recommend such a trade. If I missed your question or the nature of the question please post again. If the goal is to finance the long side of the trade I would use a diagonal strategy.
Nice to see market weakness pre-market but currencies are going the wrong direction. AUD need to be closer to 1.0600 not 1.0700 and EUR/AUD is right on a backtest (slightly below) of the bear flag. Watch UST today though they look good.
Caleb you still long ZN?
I don’t trade them. Currency dealers quote them several times a day on the wires, just curious if they were helpful to gauge direction. They are quoted in terms of vol. Thanks though.
There would be some value similar to the CSFB which measures how far out of the money you need to go with a put based on a 10% out of the money call. Similar to skew it shows a shift in volatility. So in that sense there would be some value. Lots of stuff to measure out there for sure.
Yep, still long ZN, would like to add if we got some resolution to the upside of this 5-6 month range.
Keep an eye on MUB it has actually tracked treasury well and did put in a two day reversal last week. Just something else to check. I am surprised treasury has consolidated for so long though.
There is some breadth to this weak open down 1600 issues on NYSE. We know it can reverse but it is somewhat strong.
Anothers view as to more QE:
http://wallstreetpit.com/89686-on-gas-cars-and-bernanke
“The thing is, if Ben tried another form of QE/LSAP the price of crude would be up $20 in a week. Bernanke is another of those who likes to intervene in markets. He also thinks it “works”. It won’t work this time; it will blow up in his face.”
This is officially one bizarro morning. Treasury at session highs. Transports reversed. Equity going green. Breadth negative on NYSE. Oil down.
Yup, very frustrating
Don’t ask me why but for some reason I sense a reversal here today. Not adding short here but something just has that feel. Pure speculation on my part though.
Hi all, out of the blue the Indian markets tanked today , a good +470 points . The market here has entered an intermediate downtrend .. broke a few key levels. The headline news was though Oil prices.
If you ask me .. sense a reversal today in the US markets as well , basis behavious of the Asian and European mkts.
Nice to hear Divya. The fact that oil is struggling seems odd and look at UST especially the volume behind the move. NYSE breadth very weak and how many times have equity been rejected at these levels. AAPL back at all time highs again is ripe for a reversal.
I’ve got a nice 4H chart of AUD here. Price has been backtesting the channel that AUD traded in for about 2 months.
http://dl.dropbox.com/u/59021800/AUD%202012-02-27-TOS_CHARTS.png
This morning’s SPY bounce makes sense as well considering it bounced off support of the bottom trendline of the rising wedge.
http://dl.dropbox.com/u/59021800/SPY%202012-02-27-TOS_CHARTS.png
Bleak news from the UK:
http://www.telegraph.co.uk/news/politics/9107485/George-Osborne-UK-has-run-out-of-money.html
Many traders are still quite bullish, casting today’s price action (dip buying on weakness) as a sig of a bull market.
I agree w/ Tony, something smells like exhaustion, VIX is up, but anything can happen, so caution to front run this.
Depending on how one draws this channel, EUR/USD has already run into resistance, reversed and perhaps allowing the DX to bottom as well. We’ll know soon enough.
http://dl.dropbox.com/u/59021800/EUR%202012-02-27-TOS_CHARTS.png
Interesting post regarding Greek CDS
http://www.forexlive.com/blog/2012/02/27/greek-cds-could-go-soon/
Ok, no Greek CDS decision on Wednesday only a deliberation to take questions on the issue: http://ftalphaville.ft.com/blog/2012/02/27/899511/isda-greece-credit-event-around-here/