Brian's Thursday recap: MBS talk, Eurozone weighs

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US MBS: One money manager who invests in MBS says he still likes the belly of the 30Y MBS curve and 15Y MBS but he is a seller on strength in the lower coupons because the sector has been too volatile. He attributes the volatility to the fact the market is trying to figure out what the Fed will end of doing in regards to QE3 ahead. "Another strong NFP will complicate the outlook even more," he added. As it stands now, some think the Fed will not start tapering any Tsy or MBS purchases for a long time while others think the recent better jobs data, if it continues, could cause the Fed to consider announcing something as soon as June or July this year. There is also a difference of opinion as to whether any potential tapering would come from the Treasury sector or the MBS sector. To turn the tide one way or another, it looks like the MBS market needs to see some fresh buying, preferably from the banking sector which many had thought would be the main buyer of MBS this year. That has yet to happen. REITs have been another stabilizing force but they have been in the market on a steady basis lately. The next jobs report is April 5 and the next Fed meeting is April - posted by Osafumi.

Collective Intelligence! From a client (pit 10YR option trader) traders continue to take low risk option plays (bullish) looking for a safe-haven bid to come into the mrkts into the weekend, latest play: bought 5000 32C for 1 tick - posted by Jack Broz.

In the pre-market U.S. equity futures were trading below fair value, with weak Eurozone PMIs, disappointing earnings of late, including [FDX] [ORCL] yesterday and the ongoing Cyprus - Eurozone uncertainties weighing on sentiment. It was a fairly busy day on the economic calendar: weekly initial jobless claims, Mar flash PMI, Feb existing home sales, Feb leading indicators and Mar Philadelphia Fed index. On the corporate earnings side, [LULU] and [ROST] released their earnings pre-open; following a growing number of disappointments of late. [NKE] and [MU] report after the close today.

Fitch warning of euro bank downgrades which adds to recent chatter expecting more rumours of a UK downgrade in the next 48hrs, Fitch due to review UK rating following the budget. Also, Continuing Resolutions stop out averted. The Senate moved ahead Wednesday toward a vote on a huge, bipartisan spending bill aimed at keeping the government running through September and ruling out the chance of a government shutdown later this month. AP

Here's the link for Henry's, Stanton Analytics interview with professional trading magazine: Also, another MrTopStep contributor, Carley Garner, was featured on Mad Money. She posted Wed.: Jim Cramer used our Treasury analysis on Mad Money last night:

Don’t miss this guy > @princetontrader aka Mike V posted his Pivots Webcast At (08:49CT) Mike posted his vol windows ES: 1550.00 x 1539.50 and NQ: 2787.25 x 2765.50. The 1545.75 is a big one for me, also TR bull bear 45.50, all falls in 3x pivot zone 47.00 to 44.75, win the zone win the day...

Kathy has had some very good calls too! Charts posted by Kathy Garber @tbg4321. Harmonic rotations ES CL NQ

RealTradersWebinar is hosting a MEGA WEBINAR this Saturday (March 23) -- Click here for more information and reserve your spot today:

During the Globex session 298k ESM and 900 SPM traded on Globex, trading range was 1550.50 – 1545.60. Wednesday’s regular trading hours (RTH’s), pit session trading range was 1555.50 – 1548.30 before settling at 1549.10 up 6.9 handles. Still waiting on Cyprus ... China PMI checks in strong, the European PMI’s were weak while the U.S. checked in at 54.9 vs exp of 55.1. Corporate earnings starting to weigh a bit on sentiment as a number of recent releases have disappointed. Also, this morning the broader market opening imbalance showed a moderate overall $87.18M x $483.95M.

Today’s SPM regular trading hours gapped 5.5 handles lower to 1543.20 – 1544.00 marking the low before quietly grinding to a new high as 1547.50 traded at 8:59 in light volume in front of 9:00CT data - leading indicators, Philly Fed and home sales. Following the data, the SPM broke through the opening range and on to a new low of 1541.80 by 9:20 on the back and fill. That 1542 area has recently seen some turning points and today the bulls defended that level as the SPM printed 1548.90 by 10:45 on a modest pickup in volume before the sideways to lower trade set in.

At 12:00 the SPM was trading in the 1546 area before losing the bid and retested the opening range. [SDS] and [TWM] block trades were posted hence the Russell and S&P selloff, TWM was more of the leader. At (13:02CT): the VIX, fear gauge printed a new daily high above 14, up 8% on the day as the SPM was trading a new daily low of 1536.90. However, the bonds were only up 11 ticks at their highs while the [DJIA] was down almost 130 points. So, not much reallocating. The SPM did slowly and quietly grind back up to retest and was rejected from the opening range by 2:15. The SPM was trading 1541 area when the 2:45 closing imbalance showed the broader market with a very small $110mil to sell. The [DJT] closed down 100 points and the DJIA closed down 90 points. On the 3:00 cash close the SPM traded 1539.20 area before settling at 1539.10, down 10 handles on the 3:15 futures close. Second bad close in a row.

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

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