Brian's Monday Recap: Bond Investors Dreading, While Deficit Shrinks

Collective Intelligence!
Following the minutes from the last FOMC meeting, the Fed Governors echoed they were ready to make adjustments to increase or decrease their QE asset purchases as needed in the future. The next thing we heard was Thursday’s chatter of an article to be published regarding the Fed laying out a strategy to taper back Fed policy.
Voila! The weekend story follows in the Wall Street Journal, which said that the U.S. Federal Reserve is considering winding down stimulus: “Fed Maps Exit From Stimulus” by Jon Hilsenrath - arguably the Fed’s favorite mouthpiece to the public. The early weakness in the global equities appeared to be gauging trader sentiment. All in good time ... Bond investors dreading an unwinding of the U.S. Federal Reserve’s stimulus plan have found a temporary ally, the European Central Bank - as Germany begins to flex.
We are coming into the week bearish the ES and bullish Treasuries (short ES calls and short ZB puts). We are recommending that our clients sell the July ZB 140 puts for 25 to 28 ticks. This strike has tripled in value in a few days...if we bounce or consolidate, they stand to lose value quickly - posted by Carley Garner (08:59).

There is a litter of fibbo internals strewn from 1637 cash to 1642 cash in the event we take out the high from last week -- that remains to be seen -- very near term; however, if we drop and hold any of the 3 spots given in the commentary to finish off iv then the bears will get burned again 1609, 1613 or 1617.50. Right now, it is a simple battle between extending the nano iii by killing last week’s high b4 doing iv or it is iv in motion SLOWLY - posted by William Blount at (09:58).

Jimmy Ticks posted a cool fact: Not a single negative return for 2013 in the top 20 highest short interest listed stocks over 200mln in market cap for 2013. Average gain in those stocks is 54% in the 344 listed stocks that have a short-interest over 5%, only 4 have had a negative return for 2013. Srosen58: If a stock has underperformed the market by 15-20% why would anyone be short it? Is that short interest now or short interest at start of year? Obviously, that makes a HUGE difference. Jimmy replied that was short interest now - and yes it does make a difference. The changes in short interest over the last 6 months have balanced each other out - I will give a rough breakdown NKA (increase), USNA (decrease), QCOR (increase), RH (significant increase), SODA (decrease), UNXL (significant increase), RSH (increase), TSLA (huge increase 400%), GME (decrease), BRRY (huge decrease), RPRX (huge increase), CAS (increase), BKS (decrease), DDD (huge increase), DECK (significant decrease). If you want more specifics I could put something together two of the largest increases in short-interest (UNXL and TSLA) have had the largest price movements. Based on my view there is some, but not much, basis for an increase in short interest aiding stock outperformance relative to other high short-interest names. However, it would probably not be enough to pass a data mining hypothesis test.

The Deficit Is Shrinking Fast!

Maybe I should check with ;). I have always believed that volume = validity - posted by Tony LaPorta.

Harmonics from Kathy at Kathy (09:31) CL in emerging Bullish Bat pattern, a hold below 94.8 has 93.7 completion target. CL premkt chart: Current chart Kathy (09:32) ES completed a very small bearish Gartley, retraced 78.6% (nice retracement) & has emerged into a bearish Butterfly with a completion target 1633, so a hold above 1628.5 has 1633 tgt w/ scaling pt 1630.5 ES premkt chart: Current chart:

Today’s S&P 500 trade started with 240k ESM and 1.2k SPM traded on Globex, trading range was 1627.60-1621.60. Friday’s regular trading hours (RTH’s), pit session trading range was 1630.30-1620.30 before settling at 1629.60, up 5 handles. Retail sales checked in at 0.1% against an estimate of -0.3% - 12.8% topping March by 0.2% and added to the recent upswing in the U.S. economic data. Goldman Sachs [GS] raises US Q2 GDP tracking estimate from 1.8% to 2.1% on strong retail sales.

The regular trading hours opening range was 1627.20-1626.70 and the opening 15 minutes was light trade and a tight range with a small bullish bias following surprise firmness in the retail sales data. Business inventories came in at 0.0% vs 0.3% consensus. Biotechs were still leading the Nasdaq ramp as the treasuries nudged off their lows in the early trade. Although it was slow the equities continued its sideways to upward ascent as the SPM printed a new contract high of 1632.80 - taking out last Thursday's high of 1632.30. The Dow [DJIA] and the Russell 2000 [RUT] were a bit of a drag as the S&P and Nasdaq were trading modestly higher. The SPM quietly traded sideways to higher through the afternoon and was trading 1630 area when the closing imbalance showed a small $120M to the buy side before settling at 1630.80, up 1.2 handles.

Brian Shepard is a 20-year exchange member of the CME Group.

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