Direct from the Floor of the CME, Brian’s Market Recap

Brian Shepard

Three weeks from the presidential election, one more debate and a seemingly infinite amount of campaign commercials invading our home, offices and basically our personal bubble. President Obama showed up and made his presence well known, but neither candidate is showing enough leadership and their message is not clear or concise! No downgrade for Spain and up goes the Euro giving a nice cushion to bounce from allowing the bulls to push their horns a little higher. Speaking of bubbles, China’s economic data has been inline to firming lately and plenty of traders do not fully trust their data, but their economy is one of the biggest pixels in the global picture and the Asian markets could be busy tonight as their economic calendar is busy. Domestically, the corporate earnings season is off to a mixed, a best start and the equities are rotating from sector to sector. The Tech’s took another punch to the gut following IBM, INTC, LLC and MCHP earnings, but the housing sector continues to firm suggesting a firming consumer demand may be in the works. Tick tock....

Morning observations: So here's the number du jour: The SP futures opened the U.S. session higher yet again.  This month the S&P futures have opened higher of 11 of 13 days. What makes the stat more impressive is the cumulative gain of those opens is +3.2%. During the U.S. session?  We've lost more than -2.0% better read: The ROTATION continues as some of the previous dogs were being bought and the marquee names have faded during the rotation of the last two weeks or so. Plenty of headlines today and more are loaded in the chute... chatter is down playing the European Summit, not expecting any directional news.

UBS posted a large FXI trade. All in Jan13, the custy sold the 25/34 ps spread (30k x 20k) vs buying the 38 calls 20k times. Effectively buying 1.3mm shrs of FXI front running a busy China economic calendar, GDP, IP, Fixed Asset Invest, Retail sales, for later tonight - so could get interesting.

MrTS video:
MrTS Charts: "WHAT'S +70 HANDLES IN STOCKS ESZ 1456 / BONDS ZB IN 3DAYS? Follow-Up You're Welcome!"

Wednesday started with 320k ESZ and 2k SPZ traded on Globex, trading range 1454.00 – 1446.30 / Tuesday’s RTH’s, pit range was 1451.20 – 1441.00, settled at 1449.20 up 13.7 handles. Today’s RTH’s opened 1.5 handles higher at 1450.80 – 1451.00. During the opening minutes 23 of the 30 Dow stocks were higher, but the industrial average was down 45 points after IBM and Intel both fell more than 4% on earnings. After holding 1448.50 low, the spoos traded up to 1453.80 by 9:00CT, briefly slowing down through the Globex highs and traded a high of 1456.30 by 9:50 as the sideways trade set in with the DJIA trading modestly lower. Without IBM's decline, the DJIA would have been 60+ points in the green. Small caps, banks, financials, DJT’s and the housing industry were outperforming following some strong housing data. Treasuries were sharply lower as traders put money to work. mts2 (09:25:31): LLTC - up on the day after lowering guidance > this is similar action to what we saw in MCHP yesterday - bad news is being bought = priced in - Positive read thru for Tech footing. Well, if that in fact does come to fruition, obviously that would lend some new leadership. Following the lunch hour, the DJT’s were giving up some of the early gains and AAPL was modestly lower as crude was resting near unch’d to a bit lower. A brief retest of the spoos opening range held at 12:48 before stepping back up to 1456.50 by 1:45 AAPL was back to testing unch as the DJT’s were up 30 points. The closing imbalance showed 22 of the Dow 30 to sell and the broader market with a small $265M to the sell side. The cash close traded 1456.40 area before settling at 1457.10 up another 7.9 handles on the day after the DJIA claw it way back to close up 5 points.