Brian's Thursday Recap: Higher Inflation, Monetary Expansion and Economic Slowdown

Collective Intelligence!
One day’s good news morphs into the next day’s disappointment. The read on China’s inflation and factory prices led to an early sour mood. It puts the PBOC into an uncomfortable position. Factory prices fell for the 14th consecutive month. The global economic slowdown is affecting the Dragon’s output. Higher inflation gives the central bank little room to move aggressively. The government is looking into infrastructure investment and lowering tax rates to stimulate the economy. Inflation for April rose to 2.4 percent from 2.1 percent.

The ECB’ Weidman noted it was the right time for monetary expansion. Nevertheless, he went on to say that low rates are not a permanent solution. On the Syrian front, Russia is to imminently supply Syria with advanced arms. This is from the Israeli government sources. The sale involves surface-to-air missiles. If they receive such arms, which can hit planes or missiles would make international intervention in Syria far more complicated. If the sale goes through it will underscore the chasm in the U.S.-Russian relations - posted by Stanton Analytics.

From a floor 10 yr bond option client: overnight paper buys 13,000 tym 134.00 calls for 4 tics and 20,000 134.5 calls for 2 tics. all bullish. Also, jmatthew555 (09:30) The steepening yield curve trade via options is alive and well. Paper continues to sell puts in EDZ4-EDM5 and buy puts in EDM6. Paper selling the EDZ4 92/95p spread vs buying the E2Z3 9862.5/9900p 3.5 on 60,000.

The US is poised to join Australia and Qatar as a top exporter of liquefied natural gas the next several years, says Citi as it notes "Canada is not likely to be far behind." The investment bank thinks the US could export 5-8B cubic feet/day by 2020, based on the number of terminals awaiting government approval. That could turn the US into a net exporter by then. "The economic and strategic implication of gas exports could be broad and deep."



Chatter - Talk suggests that Hilsenrath will publish an article around 15:00 EST, claiming that the Fed will taper QE sooner rather than later.

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

Harmonics from Kathy at
Kathy (08:42CT) ES 1631 is important resist test ... so either a new ABCD (sigh) or emerging Bat.
Kathy (08:53) 6E approaching bullish Bat PRZ, this pattern helps a bearish Bfly retrace 78.6%, these small patterns are just helping price test range extremes, premkt chart: current chart: 6E key resist test is 1.3110, a hold there implies stall or bearish continuation.
Kathy (10:00) DX held above line in sand 81.990, currently transforming the premkt Bat into a Gartley & forming BC leg w/ 82.610 being the extreme for this scenario ... so DX in between opposing emerging Gartley's premkt chart current chart:

Today’s S&P 500 trade started with 225 k ESM and 700 SPM traded on Globex, trading range was 1624.50 – 1631.20. Wednesday’s regular trading hours (RTH’s), pit session trading range was 1629.50 – 1618.70 before settling at 1628.70 up 8.1 handles. Jobless claims checked in 3down 4k to 323k, lowest level in over 5 years. At (08:29CT) John Monaco posted the NYSE opening imbalance was 70% Sell SIDE ON THE OPEN. Note: Ben Bernanke speaks tomorrow at 8:30CT.

The regular trading hours opening range was fractionally lower, 1628.50 – 1628.00 traded a high of 1629.80 before stepping lower, printing a series of new intraday lows down to 1623.90. The S&P bounced to a high of 1626.50. A low of 1624.70 was seen before stepping higher, a series of higher highs topping out at 1632.30 in the pit by 1:05CT. Morgan Stanley bought up to 700 SPMs up to the 1632 area on the rally while the locals in the pit provided the liquidity and pressed the short side on the way back down to a new intraday low of 1620.00. Counter Trend Friday? iceChat (13:24) If you think Friday is going to be down you way want to look at the week 2 May 1620 put 1.15@1.25 last quote. After trading 1620 the SPM bounced, but fell short of the open range and traded sideways to lower. 1622.50 area was trading when the closing imbalance showed a small $260M to the sell side. The SPM future traded 1623.5 area on the cash close before settling at 1624.60, down 4.1 handles.

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

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