Brian's Friday Recap: Prop up the economy, and keep going for the gold

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SIR MAY I HAVE ANOTHER. The G-7 are meeting this weekend in England to discuss what the central banks can do to prop up the global economy. There is not expected to be any earth shattering news coming from the meeting. Nevertheless there may be a framework that can be instituted so as to even out the effects. George Osborne, the British Finance Minister, would like a more active involvement and less austerity. The differences amount to growing an economy and keeping it mired in the bog of heavy taxes and recessionary growth. This is also the principal reason for the recent run-up in crude oil prices. Some money managers are looking to oil as a better hedge against inflation than gold. Since there is not a good ETF that mimics the futures price they are forced to move into the pit for the hedge.

OPEC left their forecast for demand growth unchanged at 800 k b/d. They struck a cautionary note regarding Europe as one would expect, but they also showed concern about China’s economy. Supplying oil to the giant gives them an inside edge as to the demand and economic growth associated with it. A message of sorrow.

Alan Ableson passed away at the age of 87. We mention him because while working in a luncheonette at 16, I read his column every week in Barron’s while assembling the NY Times. He taught me much over the years. He will be missed. He was a giant among financial writers - posted by Stanton Analytics.

Crude: The upside pivot to confirming a low for the day is a break of 94.90 on a 5 min basis. The downside pivot is 94.00. Crude: Is in liquidation mode following the OPEC outlook on the second half of 2013. Brent is breaking its downside pivot of 102.00. WTI is likely to see 93.25 with a break of 93.80 - posted by Stanton Analytics (09:09). Crude: When in liquidation mode the usual price decline ranges from 2.50 to 3.00. We have both pattern matches and retracement zones at the 93.40 to 93.25 area. That should mark a v.s.t. low. If this is correct, there will be a late day rally off this level - posted by Stanton Analytics (09:20). HENRY, Stanton Analytics is the man and goes about it with great aplomb without tooting his horn -- ONE OFTHE BEST PROS I have encountered on the NET - posted by William Blount (10:05). However, we can and will TOOT-TOOT!

Bernanke doesn't talk Fed policy outside of testimonies or FOMC usually...why would the Fed stop something that has been clearly successful for the stock market (and Bernanke's pension which is largely in stocks) - with barely any effect on headline CPI (although the real inflation figure may be different) - posted by Jimmy Ticks (08:01CT). William enjoyed Ben’s SPEECH #1 of his farewell tour and how he saved the world--he is simply inoculating his place in history as Alan Greenspan did before him and all the while looking to January while humming the following tune: Lynyrd Skynyrd-Gimme Three Steps... If Yellen comes in she's a straight swap - Jimmy Ticks.

Followup: For anyone that took the gold short from the 1465-1468 area (posted here earlier this week) today is a good day to move stops to B/E or B/E plus a few bucks..We will try to ride this for a retest of the April lows@$1325ish...posted by Matt Z (08:47). Nice trade Matt. $10 of heat turned into $35 profit. Do we dare see $850 someday?

Maybe I should check with www.mrtopstep.com ;). Chatter late yesterday that did not materialize today... Talk suggests that Hilsenrath will publish an article around 15:00 EST, claiming that the Fed will taper QE sooner rather than later. I have always believed that volume = validity - posted by Tony LaPorta.

Harmonics from Kathy at http://structuraltrading.com
Kathy (08:48CT) AAPL premkt chart: http://screencast.com/t/3ORg9ASDYpy
Kathy (08:50) NQ link http://screencast.com/t/YKhwg42QZctj
Kathy (09:42) ES updated chart: a hold below 1622.5 offers short oppty to magnet 1613.5 w/ scaling pts 1620 & 1617, failure to hold below 16225 keeps price in sideways range w/ important resist test 1631 http://screencast.com/t/72htp5H5
Kathy (09:51) CL, when b/d 94.33 tgt was 93.78, failure to bounce there has tgt 92.58, premkt chart: http://screencast.com/t/HglJ1ba9current chart: http://screencast.com/t/72htp5H5

Today’s S&P 500 trade started with 245k ESM and 800 SPM traded on Globex, trading range was 1630.00-1624.80. Thursday’s regular trading hours (RTH’s), pit session trading range was 1632.30-1620.00 before settling at 1624.60 down 4.1 handles. As we awaited Ben Bernanke’s 8:30CT prepared text and Q&A session the Fed governor Plosser offered: Fed policy is risky for the future; QE had modest benefit for unemployment; Exit will be harder than expected. At (08:17CT) John Monaco posted the NYSE opening imbalance was evenly split, 50-50% ON THE OPEN.

The regular trading hours opening range was marginally higher, 1625.50-1625.00 traded and traded in a narrow range. Jack Broz (08:46:43): risky w/bernanke talking but we're gonna sell bonds 145.26/25 targeting 145.16. The S&P experience what has become an oddity in 2013, a down day yesterday. Today, the S&P had an intraday trading range of 8 handles, 1628.80 - 1620.30 and spent much of the time midrange.The transports, [DJT] and the Russell 2,000, [RUT] firmed up as well while the Dow, [DJIA] was marginally lower. Crude and the treasuries were taking it on the chin, spiking sharply lower. Jimmy Ticks (10:24:31): interesting that oil and commodities are down but stocks firm.... implies no liquidation of positions or margin calls. Actually, today was an inside trading day for the S&P, traded within the previous days range which generally is not too exciting for traders and combine that with a spring Friday in the city - accordingly, traders left early.

Midday the US treasuries: More bargain-hunting buying comes in here from US fast money, 10-year note yields are at 1.89%. Earlier Tsys uptick occurred off session lows as black boxes sold S&P Eminis / vs. bought Tsy 10Y futures, reversing earlier NY trade. US Stocks market indexes narrowly mixed: DJIA and S&P 500 off fractionally, while Nasdaq up fractionally; European stock indexes closed up fractionally though Italy's FTSE-MIB closed up 1.13%. Trading desks feared that black boxes would do more model-driven selling, but so far things seemed to have calmed down - posted by osafum. Jmatthew555 (11:19) Seeing signs of exhaustion on the selloff in TSY's. Last 50 minute bar saw extremely high volume on very high level of net sellers vs buyers. The SPM quietly traded sideways to higher through the afternoon and was trading 1628 area when the closing imbalance showed a huge $1.1Bil to the buy side. New intraday highs of 1629.30 followed by 1630 area on the cash close. One more push took the SPM up to 1630.30, yes that is exactly 10 handles off the daily low before settling at 1629.60, up 5 handles. Note: Have a great weekend and Happy Mothers Day!!!

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. {jathumbnailoff}

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