Category Archives: Blog

420 Bob

The rates space has foiled the promulgated narrative of the media crowd. Monday, and for a few hectic hours Tuesday morning, the ridiculous idea that falling 10 year rates “were telling us something (that was leading to stock selling)” was the meme du jour. As we pointed out, this gross misunderstanding of, flows, low rates and macro economics is a convenient retro-fit for unexpected or knee knocking equity drops.

The fairly stable and attenuated range in the term structure is providing support to the economy. Corporations are utilizing the extended exit concept to lock in financing into 2020. Consumer balance sheets continue to heal and the Siren Song of borrowing is faintly tickling their ears from far away shores. As the annual smoke-in known as 420 Day approaches, the markets have inhaled a big toke of reality …and chilled.

Classical Thursday

30 minute atr

daily pivots

weekly pivots

upside retracements

downside retracements

regression channels

price support and resistance
On the economic calendar:-
 
08:30 Jobless Claims (Consensus 312 K v Prior 300 K)
09:45 Bloomberg Consumer Comfort Index
10:00 Philadelphia Fed Survey (Consensus 10 v Prior 9.0)
10:30 EIA Natural Gas Report
11:00 3 Month Bill Announcement
          6 Month Bill Announcement
          2 Year Note Announcement
          5 Year Note Announcement
          7 Year Note Announcement
11:30 5 Year TIPS Auction
14:00 SIFMA Recommended Early Close
16:30 Fed Balance Sheet
          Money Supply
POMO:-
 
None today

 

Classical Wednesday

30 minute atr

daily pivots

weekly pivots

upside retracements

downside retracements

regression channels

price support and resistance
The 2 charts below, on different time frames, show the importance of the 1.27% retracement level. Both targeted 135’09 as the high. The actual high? 135’10.

240 minute retracement

30 minute retracement
On the economic calendar:-
 
07:00 MBA Purchase Applications
08:30 Housing Starts (Consensus 0.965 M v Prior 0.907 M)
09:15 Industrial Production (Consensus 0.4% v Prior 0.6%)
10:00 Atlanta Fed Business Inflation Expectations
10:30 Petroleum Status Report
14:00 Beige Book
POMO:-
 
10:15 – 11:00 Outright Treasury Coupon Purchases between $0.90 – $1.15 billion
 
Speaking today:-
 
08:30 Jeremy Stein
12:15 Janet Yellen
13:25 Richard Fisher

 

Nasdaq Red Moon

The Nasdaq future (100) moved up enough to trigger a buy signal at 3463 and raced through the first objective. Quickly, the market reversed back through the Sell point at 3447 and is melting into the downside objective of 3394.

The price action is ringing in calls for a major market and economic contraction. The present reality is the market has returned to Feb. levels in a hard seasonal round trip. Traders continue to embrace the notion that the Naz Leadership is a harbinger of bad things to come. We are unconvinced.

A major theme of our understanding of QE is the higher elasticity of capital market prices to economic activity. A world focused on high speed trading has increased the link between markets and activity. Economic lags continue to be well behind the 400 millisecond capital investment. The other “analysis” we hear is the rising 10 year note price must mean something bad is coming. This myth was heavily hyped in the sub-2 % spike. Contrary to the “This must be bad” thinking, the economy bottomed and improved from that point.

As we mentioned in a note last month: Equity market gyrations are over analyzed both up and down. Behind the apoplexy, a 2+ economic advance struggles for traction and something faster. Certainly, tanks and shirtless egomaniacs complicate confidence but deep down Americans focused on missing planes and celebrity club hopping have little room for the Ukraine. We continue to believe markets have been “loose” from the underlying reality for some time. There’s less going on regardless of direction.