Brian's Monday recap: China weakness, fewer euro bears, S&P upgrade

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China’s CPI data suggests the sluggish economy may be weaker than anticipated. The rise of inflation was 2.1 percent, but was 0.3 percent lower than the previous month’s read. Moreover producers prices fell sharply by 2.9 percent. The inflation view shows that China has a new syndrome that of deceleration on the economic front. Rather than the Chinese syndrome that refers to a nuclear disaster and meltdown, we shall call this the China sinkdrome. As a side note yet of extreme importance to oil traders, China’s demand for the black goo was off by 6 percent year-on-year. Another sign of the slipping economy is that base metal demand has slowed by an average of 30 percent. This incorporates tin, aluminum and copper. This has helped raise the dollar and lower oil prices as a result - posted by Stanton Analytics.

The single currency continues to be fairly contained all things considered. EUR Vol continues to drip lower while ranges become more and more vanilla. The conviction in the EUR short trade is fading and while people still find it useful as a funding trade, given all the positions unwinds in EM, I think the positioning has been drastically reduced and investors will be skeptical to immediately get back in. Technically 1.3175 will act as a short term pivot with 1.3104 (100 dma) the next level to watch. To the topside 1.330 - posted by  Chance S.

Kathy (http://structuraltrading.com) (08:55) ES stalling inside a bearish Shark zone, a hold below 1641 has 1622.5 tgt , a hold above 1641 keeps price in sideways range unless can b/o globex hi 1648.25, premkt chart http://screencast.com/t/XnrBx0e3  current chart: http://screencast.com/t/j3f5e2UYlZ6

Kathy (10:38) NQ currently testing heavy confluence PRZ at 2999 region, a hold below 2998.5 has bullish 5-0 tgt at 2956.5 w/ scaling pts 2992, 2985 & 2967.5, premkt chart: http://screencast.com/t/rzQElzKXMiny  current chart: http://screencast.com/t/hrNzyWiVu Failure to b/d 2998.5 has bullish retracement tgts 3009.75 & 3022.5.

Kathy (10:57) CL is forming BC leg of new intraday emerging pattern, having 96.39 as max for this leg, a hold below 95.92 implies the C pt is in, premkt chart http://screencast.com/t/QYNCvk37Gx8I  current chart: http://screencast.com/t/PaXCzKeJ

During the Globex session 380k ESM and 1.6k SPM traded on Globex, trading range was 1647.50 – 1646.50. Friday’s regular trading hours (RTH’s), pit session trading range was 1643.70 – 1626.00 before settling at 1638.60, up 15.9 handles. With the S&P trading 1641.50 area,  Standard & Poor's raises their outlook for the U.S. - upgraded from negative to to stable, extending the pre-market strength following Friday's BLS jobs data and the 200 point gain in the [DJIA]. The SPM traded a high of 1647.90 on the news.

The SPM gapped 8.5 handles higher, opening range was 1646.50 - 1647.50, traded 1648.30 double top at 8:32 before pulling back 10 handles to small series of lows at 1638.30, just under previous settle by 9:07-9:14. For more on the 10-handle rule, visit and stay awhile: http://www.mrtopstep.com - click on the education tab, then click on Trading Rules 101. Also, while you are there click on the webinars link and view a webinar of your choice.

BULLARD SAYS LOW INFLATION MAY WARRANT PROLONGING QE, IMPROVING LABOR MARKET COULD WARRANT SLOWING QE. After closing the gap, holding the previous settlement area, the SPM retested the opening range in light volume by 10:15 and was rejected. On the ensuing move the 1641.50 area held, which was the same area that was trading when the S&P upgrade hit the newswires. Throughout the midday/afternoon trade the SPM traded sideways in the 1640 - 1644 area. The 1642 area was trading when the 2:45 cash imbalance showed a very small $61M to the sell side. 1641.60 traded on the cash close before settling at 1642.10, up 3.5 handles on the 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.
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