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Brian's Wednesday recap: 'Fairest' bond auction, ethanol and corn, crude watching

Brian Shepard

Collective Intelligence!

From my POV, it may look like a lot of back & forth, but I'm seeing a lot of stop-running on both sides, right around areas of short-term auction failures. There are so many little pockets of these areas in the ES right now that it's ripe for game-playing. IMO it'll only stop if bigger orders start coming in. One thing I've noticed is that the market will bang around what I call "smaller auctions" - really just support/resistance on small time frames (<15m). To me, that's indicative of day traders, scalpers, market makers, etc. playing games, trying to run each other for a few ticks. It can also be bigger traders accumulating a position, and once the order flow in one direction is dried up, they'll push the market. But no matter what, the market is always trading to these failed auction areas. Everytime, without fail. I'm working on why that is - from a real-world, trading perspective, not a technical one. I like to know why stuff is showing up on my charts, rather than just blindly trading patterns - posted by Peter_Davis (10:06). william_blount (10:16) Peter, because they are SPOTS... Sam_E (10:17) fibs Peter - its ALL a fib game and tie them in to my good friend mr Blounts clock and you are golden.

Nikkei intraday range of 600 points, imagine if the DJIA did that, plenty of fund managers who piled into Japan must be feeling a little queasy. I think they will try ride it out and it is the hot money flowing in and out, speculation as opposed to investment - posted Jimmy Ticks.

Greed and fear run the markets and the meter has been leaning toward concern ever since a few of the Fed governors remarked the tapering could start in June. It seems the majority of traders are leaning to the September meeting and possibly later. We look forward to next week's FOMC meeting ...

June VIX is same level as a day before NFPR hopefully make double top. The market after opening slightly firmer grinded lower throughout the early morning with equities better bid and setups ahead of the $21Bln 10 year auction. The lower prices could not be sustained, with the yen strengthening and equities reversing all their gains and heading into the red. All told, after last minute setups, the market was little changed from yesterday's closes leading into 1PM, 10s trading about 2.20% and a great sense of uncertainty to how the auction would fare." They said despite "recent volatility, today's $21Bln 10-yr auction was one of the fairest in recent memory (especially in 10s) as the issue stopped at 2.209%, a 0.2bp tail. Stats again mixed with another very large allotment to indirects, 51.7%, the largest percentage in two years, a very small 11.7% to directs and another weak bid to cover of only 2.53, the lowest since last August" posted by John.

How long does corn basis stay firm? Last week’s ethanol output was the highest of the crop year and we expect that another strong output week will be reported Wed AM. Going forward, though, ethanol production margins have just recently declined rather sharply on a $.15 / gln drop in nearby ethanol prices. Ethanol import margins have also improved and Brazil production is seasonally ramping up…which begs the question of how much longer the ethanol industry will provide the historically high bids to the cash corn market.

Stanton Analytics and MrTopStep Webinar with "Spreads and Their Relation to the Flat Price" THIS SATURDAY 11am CST - http://bit.ly/10HwSM7

Our models are calling for a buy down here in the 1611/12 area, but 1608 is possible so any longs should be willing to ride it a little lower if it happens - posted by Carley Garner at (13:35). I can't wait to see what tomorrow brings!

Kathy (http://structuraltrading.com)  (11:00) ES testing sm bullish Bfly PRZ 1616.5, invalidated blue Bfly shown on premkt chart: http://screencast.com/t/GggQtHyrpW , current chart: http://screencast.com/t/GRDDm0n5

Kathy (14:21) ES testing bullish Crab PRZ at 1610.25 >> Kathy (13:52)  A hold below 1615.5 has 1610.25 harmonic tgt, profile shows if cannot get to other side of 1612.75 CHVN (meaning below it) then atnicipate attempt to fill in the value areas of 1618.75 & 1626.25, http://screencast.com/t/1stSxpgUnP

Roger_Volz (08:12) CL pressing daily ledge 96.26-39; neckline 96.51

Kathy (08:22) CL approaching important resistance test & completion of Bearish Bfly at 96.36

Stanton_Analytics (08:25) Crude: July is likely to move higher on the strength of the arb. The upside target is neckline resistance at 9680 to 96.90. The key pivot is 97.20. The minor support is 95.90 the pivot, 95.60. Buy first sell later.

Kathy (08:42) Ideal min retrace tgt for CL's bearish Bfly is 95.47 region, failure to b/d 95.86 implies stall or test of 96.36 PRZ.

***Prices rose Wednesday after the IEA said the amount of oil processed by refineries will rise by 2.2 million barrels a day between the second and third quarter of 2013 to average 77 million barrels a day, making it difficult for global supplies to keep up with production. The Paris-based energy watchdog said oil supplies could "struggle to keep up with refining demand" until prices rise and "rebalance the market."

One of NY’s finest researchers has joined Twitter. MrTopStep gives a big thumbs up to https://twitter.com/RVchartchatter

During the Globex session 300k ESM and 1.1k SPM traded on Globex, trading range was 1637.90 – 1626.60. Tuesday’s regular trading hours (RTH’s), pit session trading range was 1639.00 – 1621.70 before settling at 1627.10, down 15 handles. As the carry trade continues to unwind, money/risk has streamed out of the emerging markets, destabilizing currencies, weighing on stocks and creating headaches for policy makers already worried about faltering growth. In the eurozone, April industrial output checked in up 0.4 pct m/m... Germany's Vosskuhle (Judge Presiding Over ECB/ESM Hearing): ECB's Conditionality On OMTs Could Be Good Middle Ground.” Also, bullish sentiment among newsletter writers fell to its lowest level since December this week (43.8%).

Tomorrow, Thursday, is switch day = SEPTEMBER will be the front month.

The SPM gapped 9 handles higher to 1637.00-1636.00 as UBS sold 500 SPMs and the index traded the intraday high of 1638.00, yesterday’s high, before deteriorating throughout the day as the bears slowly took control... An early low of 1626.20 at 9:11 and at (09:23) [NYSE] new high/low 28/144 adding to the internal weakness. The SPM made a lower high of 1631.50 at 9:30. Not much was happening in the mid-morning as the SPM was trading within yesterday's range.  By 10:17 the NQ took out yesterday's low and the SPM went on to elect the SPM sell stops under 1621.70, yesterday’s low, at 10:45. The 50% retracement from the 1597 low to the most recent 1649 high came in at 1620 to 1621. By (12:55) NYSE 36/365 high low...used to use -400 for oversold 52wk low signal so we know others were watching too. The SPM was eroding in an orderly fashion, no panic, and traded a series of lower lows, printing 1613.50 by 11:41. Roger_Volz (13:55) ES 55 day SMA 1604.25 coming into radar...turned the 12/26 upside reversal at 1398 with one test to date...that is bottom of technically neutral top of negative for me.

An early look at the [NYSE] closing imbalance by John_Monaco (14:07) 75% sell side for the close. The 1612.5 area was trading when the 2:45 cash imbalance showed a small $100M to the sell side. Sam_E (14:50) I cannot emphasize how BIG NQ 2921 was to the bulls if they are right it was their gift. We will check back tomorrow Sam. 1611.90 area traded on the cash close before trading new intraday lows of 1609.50 during the closing range. The SPM settled at 1609.90, down 17.2 handles on the day. Heads up... don't forget the PIT BULL’s rule about looking for a Thursday / Friday low the week before the expiration.

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




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