Brian's Friday recap: OPEC, copper, coffee, Blackrock buying bonds, Carley's bounce trade

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The big news of the morning has nothing to do with the energy markets per se. It deals with the shooting of one of the bombing suspects and a picture of the two standing together in the crowd before the race. This will be a partial relief to the markets and may be responsible for a tick up in the risk values for a bit. However, as we peruse Europe we find MIT professor of economics Dr. Stanley Fischer saying Europe’s troubled economies and banks are not being fully addressed. The banks have incestuous relationships and the ECB together with said banks hold a ton of toxic debt that they call worth 100% on the dollar. One knows Greek debt or Spanish debt or Portuguese debt is not worth full value. It is absurd, yet that is how the banks are booking the debt. When the house of cards blows over it will not take any prisoners. It is likely that there will be discussions about Abenomics and the European situation at the G-7 meeting this weekend.

In the energy field the hawks in OPEC, Venezuela and Iran, have called for a special OPEC meeting to address falling prices. In the case of the former their output has sagged badly during Chavez’s tenure. In the latter’s situation, they are not allowed to sell oil under the U.N. mandated sanctions. That the market reacted to this news is not a surprise, but it must be taken with a grain of salt. The Saudis want to punish the Iranians. They are enemies from a religious sect standpoint and the Saudis do not want them to hold a nuclear weapon. This will get interesting in the behind the scene maneuvering. Rather we feel that the Shell force majeure has an equal part in the rise. That is responsible for a loss of 150k b/d - posted by Stanton Analytics.

We still like the upside in coffee ... there is some resistance near 140, but with prices at such a discount the risk is to the upside - posted by Carley Garner. On Thursday Carley posted, Many of our peers are starting to like the upside in coffee, and we agree. The market has been grinding to multi-year lows on very low volatility. Any freeze whispers in Brazil could send the market rocking higher. Here is a weekly chart of coffee: http://bit.ly/15pgTIW  Also, Carley shared: What is the best play on the board right now, you ask? Tennis balls might be the best commodity play on the board: http://twitpic.com/ckheqm  Thanks Carley Garner!

BlackRock’s Rieder Says He’s Buying 30Y Treasuries: Dow Jones 10:06 “We have added a significant amount of long bonds across a wide range of portfolios,” Rick Rieder said in an interview with Dow Jones. He didn’t disclose a dollar amount.

Looks like copper is following gold down 2.5% on a day when risk is ON. Commodities are imploding which is pushing up real yields that will kill the market eventually. Ben Bernanke won't let that happen. All in all, at some point, there will be an opportunity to buy commodities I think - unless people turn against central banks - posted by Chance.

Harmonics from Kathy at http://structuraltrading.com/: 6E initial test of bearish Gartley has retraced ideal min at 1.3078, heavy confluence here, a hold implies retest of zone, perhaps all levels within the zone this time, premkt chart: http://screencast.com/t/Qo6BG0cl , current chart: http://screencast.com/t/jrdaK5evOj    DAX premkt chart noted that a bounce into 7617.9 tgt implies 7260.9 tgt, premkt chart http://screencast.com/t/2OiBMYety    TF testing descending triangle support, also forming potential C pt of emerging Bfly, premkt chart http://screencast.com/t/wWxHhG4lkgoY current chart: http://screencast.com/t/kXcHvGoM


Friday’s S&P 500 trade started with 337k ESM and 1.9k SPM traded on Globex, trading range was 1545.60 – 1535.50. Thursday’s regular trading hours/ pit session trading range was 1531-1549 before settling at 1534, down 12.1 handles. At (08:29CT) John Monaco posted the opening NYSE imbalance was 75% to the BUY SIDE. So far, the corporate earnings have checked in mixed and the economic data has softened. The concern remains economic expansion, growth. We get a number of economic reports early next week that should give a good look at the current growth picture as well as the housing market.

The regular trading hours opening range was 1540-1539. The early trade was a bit choppy in light volume. The trannies [DJT] and the Russell 2000 [RUT] weighed on the overall market as the SPM (big S&P) traded in the pit to a low of 1536.50, testing the 50-day moving average, 1536. During the midday the equities caught a bid as some short covering elected buy stops and triggered buy programs. The afternoon volume remained light, so there was no panic or real conviction on the leg up. The SPM topped out at 1550.80 before fading back into the mid-1540s and grinding sideways to slightly higher. The 1547.50 area was trading when the closing imbalance showed a small $245M to the buy side. On the cash close the SPM future traded 1549.70 area before settling at 1547.60, up 13.6 handles on the futures close.

Brian Shepard is a 20-year exchange member of the CME Group.
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DISCLAIMER: The information and data in the above report were obtained from sources considered reliable. Opinions, market data, and recommendations are subject to change at any time. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any commodities or securities.

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