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Assets vs. sentiment; algos locked and loaded for jobs Friday; $XLF call buying; Sam E’s treasure map for shorts

Brian Shepard
mts marketrecap 330 300x207 Assets vs. sentiment; algos locked and loaded for jobs Friday; $XLF call buying; Sam Es treasure map for shorts

Collective Intelligence!

 The European Central Bank and the Bank of England rate decisions were of no consequence, although there was a hawkish tone to Draghi’s presser. The economic data did not matter too much either, although some saw tapering coming … it has all come down to tomorrow’s jobs report and the non-farm payrolls data. There was some notable information today. “Assets in equity mutual funds and ETFs have now eclipsed assets lingering in safe money markets by a ratio of 3.7-to-1, a three-decade record.” Ratio was 3.4 at the 2007 peak, and 3.1 at 2000 peak – SentimenTrader. Also, there is and has been plenty of chatter and eyes fixated on the 10-year yield back up to 2.87%, shy of the 3% levels – that concerns many equity traders. These levels were last seen prior to the September FOMC release where the FOMC surprised the market by not tapering after the Fed chairman, as well as the committee, telegraphed they would begin to taper while at the Jackson Hole symposium over a month earlier … that led to the “Shock and Awe” during the summer’s price action as traders positioned their books due to that Fed message … clarity?  NOT!

Hmmm, recent chatter making the rounds on Tuesday,  Investors Intelligence bulls move up about 2% and above 57% to the highest reading of the year, according to last week’s data … Now, conversely, according to the weekly survey from the American Association of Individual Investors (AAII), bullish sentiment declined from 47.3% down to 42.64%. Perhaps the most surprising aspect of individual investor sentiment over the last few weeks is the fact that even after an eight-week winning streak for the S&P 500, AAII’s measurement of bullish sentiment never increased above 50%. http://bit.ly/1iDxgsH

Today started with 235k ESZ and 600 SPZ traded on Globex, ESZ trading range was 1786.25 – 1794.25. Wednesday’s regular trading hours (RTH’s), pit session trading range was 1778.00 – 1799.30 before settling at 1791.80, up 0.4 handles. william_blount (07:27) parting shot -everyone should thank Will H and his european mates for defending the 1787.5 SPOT at limey time on a successful test. mr rogers neighborhood: “can you say 1794 SPOT PRICE OF THE WEEK.”  The Dax has been soft, to say the least, and led to plenty of volatility, including today’s chop fest. Also, the jobless claims checked in at 298k vs exp 325k and prior 316k – while GDP checked in at 3.6% vs exp 3.0% – however, none of that really mattered much … in front of tomorrow’s employment data – NFP exp 185k with whisper numbers of 220k.  Above 230k would lead to the – Taper … drum roll – but is not tightening!

The regular pit session trading gapped 3 handles lower to 1789.00 – 1788.50, traded up to 1791.70 and  pulled back to the 1783.80 area before grinding back up to be rejected at the opening range midday.  Kathy (09:12)  ES breached the 1789.5 lvl, still considering this a current line in sand. william_blount (09:19) BATTLE for the opening 1789. iceChat (09:25) DAX new lows. Kathy (09:51) ES attempting to b/d IBL 1785, currently testing 15m low 1786.25 as resistance, offering a short oppty if holds. Following the European close, maybe even before that … someone(s) was rude enough to turn out the lights without giving the rest of us a heads-up. Apparently “they” had previously placed their bets, whether it’s profit-taking, hedging existing market position(s) or adding new positions going into the jobs data.

iceChat (11:34)  [XLF] financial sector ETF sees another round of massive call volume. This morning a customer bought nearly 100,000 12/27 21 calls in several tranches from 41 to 43 cents to open a new position already 16 cents in-the-money. Recall on 11/26 a customer paid 13 cents for 200,000 Dec 22 calls when XLF was near 21.57, those are still open and trading near a nickel. Ranking data provided by VESEL Interactive shows NOMURA leading the recent participant list for XLF.

Sam_Easley (12:15) just fyi you are playing with fire initiating a new position the last hour before payroll day. the algos are pre programmed for this close and fibs or imbalances or nothing else will change this close. one of the rare times logic means nothing. its up to the machines right now. just saying.

At 2:00 the S&P index was trading 1783 area when (14:00) MrTopStep MiM Closing Imbalance was showing a modest 74%, $356M to the sell side. At (14:20) the MiM was showing a moderate to big 81%, $684M to sell while the index was clawing quietly higher to trade 1787.50 area before pulling back. At (14:40) while the MiM was showing 81%, $667M to the sell side. iceChat (14:49) $1.2B MOC to sell and a retest of the 1782.50 low held.  On the cash close the futures traded 1784.50      area before settling at 1784.00, down 7.8 handles on the day.

*** A little sumthin for the swingers out there … Sam_E posted yesterday that he thinks 1795, 1799.25, 1800.75, 1808.50 all shortable.

Coming events: http://www.investing.com/economic-calendar/

December seasonality strong: http://marketsci.wordpress.com/

December liquidity – a different view:  http://bit.ly/IAKvtn