Daily Market Color 03/28/2013

Daily Market Color

03/28/2013

Economic Reports &Headlines

Cyprus, the Eurozone member with a 24 billion dollar economy, reopened their banks today for the first time since March 16^th. Cypriots will only be allowed to withdraw 300 Euros per day. They are forbidden from traveling outside of Cyprus with more than 1,000 Euros. Anything in excess of the limit will be confiscated. Cashing checks are banned and commercial transactions above 5,000 Euros will be reviewed. Transactions above 200,000 Euros will face a more stringent review.   

According to the Central Bank of Cyprus, depositors from other Eurozone countries withdrew 18% of their deposits in February.

Heading across the Mediterranean into the north side of the European region, Germany retail sales grew on a monthly basis by 40bps. Economists were forecasting a 80bps monthly drop. Despite the rosy monthly figures, February retail sales showed a surprise to the down side on a year over year basis, (-2.2%), Vs 2.1%.

Unemployment in Germany remained unchanged with the jobless rate stuck at 6.9%.

On the Asian Pacific front, February retails sales in Japan fell more than expected, 2.3% Vs 1.3%. The drop was led by a 10.3% decline in auto sales.  

On the domestic front, fourth quarter GDP quarterly growth rate was lower than expected, 40bps Vs 60bps. Nevertheless, this was better than the reading from last month which gave a reading of 10bp.

Jobless claims for the week of 3/23 increased 16k on a weekly basis. This is the largest increase so far for 2013.

Chicago PMI for March expanded at a slower rate than expected, 52.4 Vs 56.1.

SP 500 hit a record high today during intraday trading.

Future Reports

Tomorrow US markets are closed for Good Friday; however, they are still reports on the economic calendar that should have an effect on futures when they reopen on Sunday.

On the domestic front, Personal Income and Outlays will be released at 8:30am. Personal income and consumer spending are expected to increase by 90bps and 60bps, respectively.

At 9:55am tomorrow morning, the University of Michigan will release its consumer sentiment survey. Consensus is calling for the index to come in at 72.5.

Japan will release five economic reports that should surely have an effect on Nikkei and Yen futures at the opening of Sunday’s trading session.   

Trades

The reopening of Cyprus banks dominated headlines in the markets today. According to reports from Reuters and Bloomberg, there seem to be calm among Cyprus citizens and no indication of an impending bank run. However, what I do find alarming is the submission of resignation from Cyprus Popular Bank’s board. The entire board resigned. What I also find alarming is the 18% withdrawal of deposits from Cyprus banks in February; I could only imagine what the figure will be for March. Nevertheless, US stocks are rallying and the SP 500 finally hit a new high during today’s intraday session. Jobless claims rose last week and GDP growth was revised higher from last month’s estimates. The Euro is making up for yesterday’s losses in light of the banks reopening in Cyprus being uneventful. The pound rallied a bit today. All in all, nothing changed fundamentally today. Next week has a high probability of being eventful due to the several market moving events.    

Daily Market Color 03/27/2013

Daily Market Color

03/27/2013

Economic Reports &Headlines

The final reading of Fourth quarter GDP in the world’s sixth largest economy, the United Kingdom, was in line with economists’ estimates on a quarter over quarter basis, growing by 30 basis points. The year over year growth was lower than expected, 20bps Vs 30bps. *bps = basis points.

The Bank of England (BoE) issued a Financial Policy Statement for its meeting on March 19^th. According to the BoE, UK banks had a capital shortfall of 25 billion pounds in 2012.

French fourth quarter GDP was in line with consensus, declining by 30bps on a quarterly basis and yearly basis.

The economic sentiment index in March was in line with consensus and lower than last month’s reading.

The National Association of Realtors, Pending Home Sales Index, contracted less than expected in February, 40bps Vs 70bps. The index measures the amount of existing housing contracts that were signed but not yet closed.

Future Reports

Tomorrow we got two major reports coming out of the largest economic engine in Europe, Germany. At 3:00am tomorrow they will release retail sales. Economists are expecting an 80bps drop and a 210bps rise in February’s retail sales on a monthly and yearly basis, respectively.

At 4:55am, March’s unemployment data for German will be released. Economists are expecting the jobless rate to remain unchanged from February’s reading of 6.9%  

On the other side of the Atlantic Ocean, the US will release fourth quarter GDP. Economists are forecasting a 60bps rise.

The weekly jobless claims report will be released at 8:30am tomorrow. Analysts are expecting 340k people to file for unemployment benefits.

The Institute for Supply Management will release its Chicago Purchasing Managers report at 9:45am for March. Consensus is at 56.1.

At 11:00am tomorrow, the Federal Reserve Bank of Kansas City will release its manufacturing index. Economists’ are expecting the index to contract by 3 for the month.

Tomorrow evening in Japan, the markets will get a read on Japanese manufacturing, inflation, consumer spending, employment and industrial production.   

Trades

Headlines that dominate the markets this morning are Cyprus bank-run prevention capital controls. Over in Italy there is a political gridlock. Over in the US, pending home sales were uneventful but slightly better than consensus. Overall the news-tape warrants no attention. US stocks are down and the British pound is down as well in light of an unrevised GDP report along with a BoE statement calling for UK banks to raise 25 billion pounds. Nothing changed fundamentally or technically, so my positions will remain unchanged as well.

Next week will be an interesting week. But before I outline my reasons for believing so, allow me to explain why tomorrow evening might be an eventful evening for the Nikkei and the Yen. A slew of reports will be released out of Japan tomorrow night and this may prompt speculators to adjust their positions ahead of Bank of Japan (BoJ) policy announcement. As I stated above in the “Future Reports” section, markets will get a read on Japanese manufacturing, consumer prices, consumer spending, employment and industrial production. This is a lot of data that will be released all within a 35 minute time span. These reports could influence the BoJ officials’ decision on monetary policy next week. I will look forward to placing a trade in the Yen next week.

Now next week will be eventful because we have the Bank of Japan, the Bank of England and the European Central Bank are making monetary policy announcements. Markets will get a read on manufacturing in Europe, the US, the UK and China. US Non-Farm Payrolls will be released next Friday as well.     

Daily Market Color 03/26/2013

Daily Market Color

03/26/2013

Economic Reports &Headlines

Today is a busy day for economic reports. At 5:30am over in the UK the CBI Distributive Trades survey was released. It’s a survey that serves as an indicator for short-term trends in the UK’s wholesale and retail sector. The reading for March was 0% Vs February’s 8% reading.

SP Case/Shiller 20 city home price index was in line with expectations on a month over month basis, growing 1.0%. Home prices increased the most since June 2006, according to Bloomberg.com.    

New Home sales came in lower than expected, 411k Vs 425k. And it came in lower than last month as well, 411k Vs 437k. However this is still the best two month reading since 2008 according to Bloomberg.com

February’s Durable Goods Orders came in higher than expected, 5.7% Vs 3.5%. The gain was primarily fueled by the volatile transportation sector. Durable orders actually declined 50 basis points when you discount transportation from this month’s reading. Communications equipment and fabricate metals led the decline in the ex-transportation durable orders reading by declining 7.6% and 4.4%, respectively  

The Conference Board released consumer confidence data for March and it came in lower than expected, 59.7 Vs 68.0.  

The Richmond Fed Manufacturing Index came in lower than forecasted, 3 Vs 5.5. Despite missing estimates, the report still indicated growth but at a slower pace than last month.

Brazil, Russia, India, China and South Africa are in talks to unite and create a bank that will function similarly to the World Bank and the IMF. The World Bank and the IMF have been historically under the leadership of Americans and Europeans.

Future Reports

Tomorrow will be another busy day with many items listed on Wednesday economic calendar. Two countries will report GDP data. France and Great Britain, the countries with the world’s fifth and sixth largest economies, respectively, will release GDP data tomorrow morning.

Following the GDP data releases, we will get a guage of economic sentiment from the European Union at 6:00am.

On the domestic front, the National Association of Realtors will release February’s Pending Home Sales report. Economists are forecasting a month over month decline of 70 basis points.

Trades

Am I still long US stocks via SP 500 futures and I am still short Sterling. The rally in Sterling was short lived and it finally came to an end yesterday. Losses in the British Pound continued after a poor report on the wholesale and retail sector in the UK. US stocks rallied yesterday during the early hours of Monday morning as the troika and Cyprus reached a deal. However the gains were reversed due to a comment from the Finance Minister of the Netherlands. His statement of using bail-ins as a way to handle future banking crisis is disturbing. Imposing losses on uninsured depositors is a sure fire way to cause a bank run and undermine the European Central Bank from fulfilling its fundamental function of being a lender of resort.  I would like to say that Europe will fade out of the media in the short term. But it is unclear how much money has left depository institutions of peripheral Eurozone countries. And until this comes to light, I feel that Europe could pop right back into the headlines with even greater intensity and thus have a material effect on global risk assets.

Nevertheless, the overall economic picture in the US is rosy when in comparison to the economic plight of the Eurozone. New Home Sales were great despite it missing consensus. S&P Case/Shiller 20 City Home Price Index gave a great reading. Consumer confidence may have come in a bit gloomy; however, housing data overshadowed the downbeat confidence report. Durable goods orders were better than expected. The report definitely gave a unilateral reading that was overly reliant on the transportation sector, however; the report still surpassed expectations. As a result of all the data, US stocks are rallying and making up for yesterday’s losses.

I will continue to stay put in my positions since the fundamentals and the technicals did not change. I expect US economic reports to prolong its upward trajectory. I also expect conditions in Great Britain to further deteriorate.      

Daily Market Color 03/25/2013

Daily Market Color

03/25/2013

Economic Reports &Headlines

Cyprus was able to successfully reach a deal with the troika for a financial aid package.

Jeroen Dijsselbloem, head of the Eurogroup finance ministers stated that Cyprus bailout structure would be used as a model for future bailouts.

Dallas Fed manufacturing survey came in higher than consensus, 7.4 Vs 3.4.

Future Reports

Later on today New Zealand will release merchandise trade figures.

Tomorrow morning at 5:30am, the UK will release a survey on retail and wholesalers.

The US will release February’s Durable goods orders. New orders are expected to increase 3.5%

S&P/Case Shiller 20-city home price index will be released for January. Economists are forecasting a month over month increase of 1.0% in home prices.

February’s New US home sales will be released at 10:00am. Consensus is at 425k.

The Richmond Fed manufacturing survey and the consumer confidence index will be released at 10:00am tomorrow Moring as well.

Trades

Today would have been great for risk assets if the Dutch would of refrain from issuing reckless commentary. Dutch Finance minister, Jeroen Dijsselbloem, stated that Cyprus could be used as a model for future bailouts thus placing the brunt of the costs on Shareholders, bondholders and uninsured depositors. I expect the alarming rhetoric to be limited in its negative effects to risk assets. We have a slew of economic reports that could potentially shift Cyprus out of focus. I will remain short the pound and long US stocks.

Daily Market Color 03/22/2013

Daily Market Color

03/22/2013

Economic Reports &Headlines

Today there are hardly any reports on the economic calendar.

Three Greek banks expressed interest in purchasing local units of Cypriot banks according to Reuters.com. The solidarity fund leaders are planning to meet with Greek bidders today to select a buyer.

The Ifo institute published their German business sentiment survey for March. The survey its brokwn into three categories: economic sentiment, current conditions and business expectations. The survey was downbeat because it slightly missed consensus on all three fronts and it was lower than February’s reading, on three fronts.

Over in France, INSEE (The National Institute of Statistics and Economic Studies) published March’s business climate report which came somewhat lower than consensus, 90 Vs 91

Future Reports

Next week should prove to be eventful because all eyes are on Cyprus. The seemingly tiny peripheral Eurozone country, with an outsized financial system, will falter on Monday if it fails to raise the $7.8 billion needed to unlock financial aid from the Troika.

On Monday, in the US, the Dallas Fed manufacturing survey will be released at 10:30am.

Fed Chairman, Ben Bernanke, will be speaking with the Bank of England governor Mervyn King and IMF chief economist at the London School of Economics.

Trades

As we head into the weekend, there is an abundance of uncertainty surrounding Cyprus ability to raise $7.8 billion dollars by Monday. I believe they will be unable to raise the money, however, I’m not forecasting an immediate default on Monday. My SP futures are rallying and made up for yesterday’s losses. My Sterling short position is rallying against me and I am beginning to believe that the downtrend in the currency may be stalled momentarily. I will continue to monitor the trade on Monday. The next market moving report from the UK will be GDP next Wednesday. The lack of reports between today and Wednesday may further fuel the rally in the pound.       

Daily Market Color 03/21/2013

Daily Market Color

03/21/2013

Economic Reports &Headlines

Yesterday the Fed left key rates and their monthly asset purchases unchanged. GDP projections for 2013 were lowered by 20 basis points to 2.3% - 2.8%. The unemployment projection was lowered 20 basis points to 7.3% - 7.5% for 2013. Inflation projects were lowered by 30 basis points as well to 1.3% - 1.7%. Fed policy will be called into question once the jobless rate hits 6.5% or if inflation hits 2.5%.

New Zealand fourth quarter GDP blew past economists’ estimates, 1.5% Vs 0.9%. This was the strongest quarterly   

Overseas and on the domestic front, the economic calendar is filled with reports.  Five PMI reports were released beginning with China. The flash manufacturing PMI reading signaled an expansion for March. The expansion accelerated in comparison to February’s reading, 51.7 Vs 50.4. Any reading above 50 indicates an expansion while reading readings below 50 indicates contraction.

France’s flash PMI contracted more than forecasted for both manufacturing and services. Manufacturing: 43.9 Vs 44.2, Services: 41.9 Vs 44.0.

Germany’s flash PMI was mixed but still negative overall. Manufacturing contracted when economists forecasted a slight expansion, 48.9 Vs 50.8. Services expanded lower than expected, 51.6 Vs 54.9.

Eurozone flash PMI composite was lower than expected one the manufacturing and services front. Manufacturing: 46.6 Vs 48.2, Services 46.5 Vs 48.2

February retail sales in Great Britain were surprisingly higher than expected. On a month over month basis, retail sales exceeded expectations, 2.1% Vs 0.5%. On a year over year basis, sales beat expectations as well, 2.6% Vs 0.6%.

Crossing back over the Atlantic, on the domestic front economic reports were upbeat as well. Jobless claims beat consensus, 336k Vs 340k. The four week average is down to a new recovery low of 339,750.

Flash Manufacturing PMI for the US expanded modestly but came in slightly lower than expected, 54.9 Vs 55.0.

Existing home sales in the US for February came in at 4.98 million, slightly lower than consensus which was 5.01 million. This is a three year high according to USAToday.com.

The Philly Fed Survey surprised and expanded by 2.0 instead of contracting by the (-1.5) consensus for the report.

Cyprus ECB emergency liquidity will be cut off on Monday.

The Senate and Congress passed a budget to fund the US government until September 30^th, thus averting a government shut down on March 27^th.   

Future Reports

Tomorrow is a relatively light day for economic reports globally. They are only two reports on the calendar and they are both from the Eurozone.

France will release its business climate indicator and Germany will release its IFO survey.

Trades

So the deadline for default in Cyprus is on Monday, March 25^th. The Cypriots are trying to raise money through a solidarity fund that I expect to fall short of the capital needed to secure a bailout from the Troika. Monday should prove to be a horrible day for risk assets, however, I’m anticipating the effects of the ECB cutting off funding to Cyprus to only last momentarily. I also don’t believe that Monday will be the hard deadline for a default in Cyprus. If the ECB stops funding Cyprus, I expect Cyprus to extend bank and stock market closures until they can raise enough money through their solidarity fund.

I will remain long SP 500 futures and short British Pound futures. The fundamentals in the UK might appear to be more upbeat in light of the positive retail sales figures released this morning, however, the fundamental picture in the UK remains unchanged. The technical downtrend remains unchanged as well. In the US, the Fed is still providing an accommodative stance. The Feds GDP forecasts were lowered slightly, but it was lowered by a rate that wasn’t alarming. The jobless rate is expected to fall at an accelerated pace according to the Fed as well. Existing home sales were upbeat this morning, rising to a three year high. The Philly Fed Survey marginally expanded instead of contracted. Flash Manufacturing PMI expanded by a modest amount. US Congress and Senate passed a budget to avert a government shutdown. The overall picture in the US is upbeat. Cyprus is suppressing US equities from rallying. Once they are out of the news then risk assets should resume their uptrend. 

Daily Market Color 03/20/2013

Daily Market Color

03/20/2013

Economic Reports &Headlines

The Bank of England Monetary Policy Committee released minutes from their most recent meeting this morning at 5:30am. The vote to leave monetary policy unchanged came in at 6:3. A few voting members’ wanted to increase their asset purchases by 25 billion pounds.

February’s Labor Market Survey in the UK came in mixed. Economists were expecting 5,000 people to claim unemployment benefits, however only 1,500 people filed for benefits. The jobless rate remained unchanged at 7.8% although 7,000 were out of work. This is the first increase in unemployment since January 2012 according to Bloomberg.com.

UK’s annual budget statement cut GDP growth forecast in half for 2013, 60bps Vs 120bps.

Cyprus lawmakers unanimously rejected the bailout. Cyprus is currently in very preliminary talks with Russia to receive a bailout by selling their banks to them and easing requesting more lenient terms on an existing loan. Cyprus banks might remain closed for the remainder of the week. ATMs in the country have been replenished with cash, so depositors could gain access to limited amounts of their deposits.    

According to Forbes.com, corporate cash piles of non-financial firms are currently at 1.45 trillion. 58% of the cash is held overseas. This is a record high.  

Future Reports

 At 2:00pm we will get an update on the Fed’s economic forecast along with a monetary policy announcement.

At 2:30pm, the Fed Chairman, Ben Bernanke will hold a press conference.

At 5:45pm, New Zealand will release fourth quarter GDP. Economists are expecting a 90bps increase.

Tomorrow morning at 5:00am we will get flash PMI (purchasing managers’ index) data from the European region.

Great Britain will release retail sales for February. Economists are forecasting a monthly and yearly increase of 50bps and 60bps, respectively.

Jobless claims in the US will be released at 8:30am tomorrow. The last two reports were upbeat and surpassed forecast. Economists are expecting 340k people to file for unemployment benefits.

 Flash manufacturing PMI in the US is expected to expand and come in at 55 for March. This number is slightly lower than last month’s reading.   

February’s existing homes sales for the US will be released at 10:00am. Consensus is calling for 5 million homes to be sold.

And finally will get a regional report from the Fed. The Philly Fed survey is expected to give us a negative reading tomorrow of 1.5.

Trades

I am still long SP 500 futures. The focus shifted away from Cyprus, at least for the moment, and is now being directed towards the Fed monetary policy announcement, economic forecast and subsequent press conference. Cyprus voted down the bailout and they are currently seeking alternative solutions to avert a default. According to a report from Reuters, Cyprus is in preliminary talks with Russia to be rescued. The ECB will still provide emergency liquidity to Cyprus; however, it is unclear how long the ECB will provide this liquidity. US stocks may trade sideways for the next two weeks as the Cyprus banking crisis continues to unfold. Eventually within the next two weeks, hopefully, Cyprus will either default or get rescued so the unknown could finally be known and immediately priced into risk assets. Economic reports from the US will continue to be the main focus in my opinion once Cyprus is out the headlines.

I placed a short bet on the British pound this morning. Chancellor Osborne cut UK’s GDP forecast in half for 2013 and he calling for the Bank of England to be more aggressive. The pound rallied into the level it was once at on March 1^st. March 1^st decline was sparked by a surprisingly disappointing manufacturing PMI report. The employment report from the UK today was mixed but overall poor in my opinion since unemployment increased for the first time since January 2012. With UK’s GDP being released next week and UK PMI reports being released in two weeks, I am forecasting continued depreciation in the pound.

The markets are heating up and presenting opportunities. I am just looking for the best opportunities by determining the drivers of a market along with forthcoming events.

Daily Market Color 03/19/2013

Daily Market Color

03/19/2013

Economic Reports &Headlines

Great Britain’s consumer prices were in line with estimates growing by 70bps and 280bps on a monthly and yearly basis, respectively.

Producer prices in Great Britain exceed expectations for the month of February, Output 80bps Vs 40bps, input 3.2% Vs 1.3%.

Housing starts came in slightly lower than expected, 917m Vs 919m. This was still a strong reading regardless of missing consensus. Housing permits came in stringer than expected, 946m Vs 925m. The Midwest led the gains, followed by the Northeast. Figures from the South and West regions declined.

Manufacturing sales in Canada for January fell 20bps on a monthly basis and 1.6% on a yearly basis.

Future Reports

Today we will get the bailout vote from Cyprus at 12:00pm. There is a possibility that is might be delayed.

Tomorrow we will get further insight into the Bank of England monetary policy agenda when they release their minutes at 5:30am.

We will also get job figures from the UK.

At 2:00pm tomorrow the FOMC will make its monetary policy announcement and they will also issue their forecast in the US economy. The announcement will be followed by 2:30pm press conference from Ben Bernanke.

At 4:45pm New York time in New Zealand, we will find out if the Drought is having any affect on NZ’s GDP.

Trades

I will remain long SP 500 futures. Cyprus is an event that should present a buying opportunity for must. I expect the vote to have a temporary effect on the markets. I also expect the FED to increase their forecast of the US economy. In addition to reassure the markets of their accommodative stance that should end no time soon.

Currently we have Cyprus preventing US stocks from going higher. We also have mixed market expectations regarding FED policy that’s also preventing the market from moving higher. Market participants are worried that the FED would begin to scale back the amount of easing at this meeting, or least provide commentary with intentions to do so within the near future. I believe that we will need several 200k plus job reports before the FED starts scaling back. Manufacturing and housing are upbeat at the moment, however, GDP, employment and inflation is warrant further monetary easing. 

Daily Market Color 03/18/2013

Daily Market Color

03/18/2013

Economic Reports &Headlines

The headline that is dragging global markets lower this morning is Cyprus bailout. Over the weekend international lenders and the European Central Bank included a provision in Cyprus bailout terms that will force them to tax bank deposits in order to receive $10bn worth of aid. Cyprus government is expected to vote on the bailout on Tuesday at noon.

The National Association of Home Builders released February’s home builder’s confidence index. The reading was below consensus, 44 Vs 47. Any reading below 50 indicates that more survey participants felt conditions were bad.

Future Reports

Tomorrow we will get PPI and CPI reading from Great Britain.

On the domestic front, housing starts in February are expected to come in at 919k. The report will be released at 8:30am New York time.  

In Canada we will get manufacturing sales at 8:30am New York time as well.

Trades

SP 500 futures are down this morning. I am currently at a lost due to the Cyprus bailout which is still an event that’s unfolding. Cyprus is set to vote on taxing bank deposits on Tuesday at 12:00pm. Government officials in Cyprus will keep banks closed on Tuesday and Wednesday. I expect Cyprus bailout, whether it is granted or not, to have a temporary negative effect on global markets. If Cyprus defaults, I expect the same reaction that markets received when Greece defaulted. If the bailout is passed, I expect the deposit tax will have a limited affect on global markets. The FED meeting and quarterly press conference should divert attention away from Europe.   

Daily Market Color 03/15/2013

Daily Market Color

03/15/2013

Economic Reports &Headlines

Consumer prices in the European region were in line with consensus for February. Consumer prices rose 40 bps and 180bps on a monthly and yearly basis, respectively. The yearly figure was the lowest since August 2010.

Over in the US, consumer prices for February increased higher than expected on a monthly basis, 70bps Vs 50bps. Prices increased 2.0% on a year ago basis. Last year prices rose 1.6%.

The Empire manufacturing Survey came in lower than expected, 9.24 Vs 10. The figure also came in lower than last month’s figures which was 10.04. However, any reading above zero signifies an expansion. Unfilled orders, shipments and employment contributed to the slight slowdown in growth.

February’s industrial production figures came in stronger than expected on all three fronts of the report which includes, production, capacity utilization and manufacturing. Production: 70bps Vs 50bps, Cap U: 79.6% Vs 79.4%, Manufacturing: 80bps Vs 30bps.

Consumer sentiment dropped unexpectedly in March, 71.8 Vs 77.5. The expectations portion of the report was the primary factor in the disappointing report. This is the lowest reading since December 2011.

  

Future Reports

This Monday’s economic calendar is going to be relatively light. The European region will release merchandise trade figures.

During Monday evening, the Reserve Bank of Australia will release the minutes from their most recent meeting two weeks ago.

On the domestic front, we will get the housing market index during the morning.

Trades

My position in SP 500 futures remains unchanged; however, I began to think heavily about my trading strategy last night. Before I went to bed I was watching a Jack Schwager interview where he was promoting his most recent book. During the interview, Jack spoke about the change in the markets and how they fluctuate. He stated that trend following and momentum trading are trading strategies that requires more sophistication to benefit now. It’s not as easy to catch a trend like you use to in the 80’s. According to him, they are too many false breakouts, which I find to be true. Jack went on to say that traders have to find their own way of trading that fits their personality. I find that to be very true.

As a result of the video I reflected on my way of trading. It’s pretty straight forward. First I look for drivers in a market. Once I identify the drivers in a market, I look for the catalyst that would either change the intermediate trend or amplify the existing trend. For example, the S&P 500 is being driven by economic reports. The catalyst that will either propel the trend or change it will be the debt ceiling deadline in my opinion. Prior to the debt ceiling deadline, it was the fiscal cliff. Prior to the fiscal cliff it was the presidential elections.

Now everything I listed above is fundamental. I realized that I need to incorporate the technical side back into my style of trading. I want to have the confidence to add to a position. I want to have the confidence to close a position. So I plan to use technicals as an indicator to confirm market moves. 

Daily Market Color 03/14/2013

Daily Market Color

03/14/2013

Economic Reports &Headlines

Last night Australia released a very upbeat jobs report that blew past consensus, 71.5k Vs 10k. February’s job gain was mainly fueled by part time employment. Roughly 54,000 out of the 71,500 jobs added in February came from part time employment.

At 4:30am (New York time), in Switzerland, the Swiss National Bank (SNB) released their monetary policy assessment. SNB left monetary policy unchanged and gave no indication of removing their 1.20 Euro/Franc exchange cap anytime soon.

Jobless claims in the US fell unexpectedly, 332k Vs 350k. There were no factors to skew the report. According to Econoday.com, this was the lowest jobless claims reading since the recovery. The four week average is currently at a five year low now.    

Producer prices in the US rose slightly higher than expected, 70 bps Vs 60 bps.

  

Future Reports

Tomorrow morning we will get producers and import price data from Switzerland

We also get a read on inflation from the European region and the US as well.

On the domestic front we will get industrial production data for February. Economists are expecting production to increase 50bps on a monthly basis.

At 8:30am New York time, the Federal Reserve Bank of New York  we release its empire state manufacturing survey.

At 9:55am New York time, the University of Michigan will release its consumer sentiment survey.  

Trades

I’m still long SP 500 futures. The trade is going well thanks to an upbeat jobless claims report this morning and the upbeat retail sales report yesterday. SP futures have climbed a little bit so far this week and I feel that the rally is being subdued by the FED. Once the FED makes their monetary policy announcement next week, then we should see some lager moves in US equity futures. I’m expecting the FED to leave policy unchanged. I also expect the FED to release commentary that will show their willingness to prolong an accommodative stance on the US economy. Stocks should rally next week on the FED announcement.  

Daily Market Color 03/13/2013

Daily Market Color

03/13/2013

Economic Reports &Headlines

Today’s economic calendar is fairly heavy. Let’s start off in the US. At 8:30am this morning, the markets got a feel for consumer consumption with February’s retail sales report. US sales topped estimates, 1.1% Vs 0.5%. The strong report could be attributed to motor vehicle and gasoline sales.

Business inventories inched up higher than expected, 1% Vs .05%. the rise in business inventories could also be attributed to retail autos and parts, which increased by 1.9%.

Both import and export prices came in higher than expected. Import prices jumped 1.1% because of oil, while export prices rose 0.8% because of agricultural products. There is currently a drought in the Midwest that’s causing agricultural prices to spike.

Industrial production in the European region declined larger than economists had predicted on a monthly basis. (-0.4%) Vs (-0.1%). Year over year data was less severe than consensus, (-1.3%) Vs (-2.0%)

  

Future Reports

Later on this afternoon at 4:00pm, the Reserve Bank of New Zealand will issue their monetary policy announcement. Economists expect monetary policy to be left unchanged.

During the evening at 8:30pm, we will get the jobs report from Australia. Market participants are expecting Australia’s jobless rate to come in at 5.5%.

Tomorrow over in Switzerland at 4:30am New York time, the Swiss National Bank will release its monetary policy assessment. Economists expect policy to be left unchanged.

Over on the domestic front, jobless claims will be released at 8:30am, economists are expecting claims to come in at 350k this week.

US producer price index will be released simultaneously with jobless claim, economists expect producer prices to rise 60 basis points on a monthly basis.

Trades

I will remain long SP 500 futures. I am looking for a currency to open a position in. The Yen, the Cable, the Loonie and the New Zealand dollar are all prospects. The Yen should prove to be a good trade after the Bank of Japan meets during the first week of April. If the newly elected BoJ governor decides to accelerate monetary easing, I expect that acceleration to be priced in immediately after April’s meeting. As economic data from Japan is released, I expect more volatility to ensue in the Yen because market participants will expect the bank to ease further if targets aren’t met. If consumer prices are not gradually increasing, this should prompt speculation that the BoJ will take more aggressive measures, thus further decreasing the value of the Yen.

The Cable is also in a similar situation, but the catalyst in the UK is economic growth. The UK is on the verge of a triple dip recession according to financial pundits. The reports that should continue to push the pound lower will be PMI reports. If the service sectors start to decline and contract, then the pound should definitely go lower on the news. Upsetting GDP data from the UK and more additional monetary easing policies could push the pound lower as well.

The Canadian economy is facing stagnant economic growth, however, the Loonie could continue to fall further if economic reports continue to miss consensus.

New Zealand is facing a drought that could harm economic growth according to an official from the country. Their GDP report next week could prove to be eventful if the drought has a material effect on the GDP report.

In conclusion, I feel it is best for me to keep my eyes on US stocks, the Yen and the Pound. All other currency trades warrant a short trade while US stocks and the Yen warrants a longer term bet. The pound might be a good directional bet too if services and GDP begin to contract.  

Daily Market Color 03/12/2013

Daily Market Color

03/12/2013

Economic Reports &Headlines

On the domestic front, they are no economic reports that merit attention. The National Federation of Independent Business released their monthly small business optimism report. This report has little to no effect on the markets. Nevertheless, the report came in marginally higher than expected, 90.8 Vs 90.1.

The international council of shopping centers issued their weekly same store sales report. Week over week same store sales increased 70 basis points.

Across the Atlantic in Great Britain, industrial production came in lower than expected, (-1.2%) Vs 0.1. The decline was led by a 13.4% drop in machinery and equipment.

In the headlines, Republican Paul Ryan unveiled his plan to balance the federal budget within 10 years.   

Future Reports

Tomorrow on the domestic front, US Bureau of the Census will release retail trade data for February. Consensus is calling for a month over month increase of 50 basis points.

At the same time as the retail data, we will also get import and export prices. Export prices & import prices are expected to increase 20 and 60 basis points respectively.

At 10:00am we will get business inventories, consensus is calling for 50 basis point increase in the value of business inventories.

Overseas in Europe, the European region will release industrial production at 6:00am New York time.

The reserve bank of New Zealand will make its monetary policy announcement tomorrow. Consensus is calling for inaction by the central bank.     

Over in Australia, we will get jobless rate data. Economists are expecting the jobless rate to come in at 5.5%

Trades

I will continue to remain long SP 500 futures. 

Daily Market Color 03/11/2013

Daily Market Color

03/11/2013

Economic Reports &Headlines

Today was a relatively light day for economic reports, both on a domestic and international level. Italian fourth quarter GDP fell 90 basis points, on a quarterly basis, as expected.

The Bank of Japan released their minutes for the meeting they had during February 13^th and 14^th. Commentary in the minutes indicated that Japanese central bankers were seeing slight improvements.

Future Reports

Tomorrow we will get industrial production data from Great Britain. Consensus is calling for an increase of 10 basis points, on a monthly basis for January’s industrial production.

We will get consumer price data from Italy and Germany tomorrow morning  

  

Trades

I am still currently long SP 500 futures. I expect US equities to continue its uptrend. Next week the FED will make its monetary policy announcement. I expect FED bankers to reassure the market that they will continue to lend support to the US economy. I also expect Ben Bernanke to downplay the upbeat jobs report during his press conference. His statements should continue to push US stocks higher. The only thing I expect to push US stocks down significantly will be US budget talks in May. Short term fluctuations could be brought on by economic reports missing consensus by wide margins. Besides that, I expect stocks to continue their run.

I am also paying close attention to the Yen and the British pound. I know I missed my chance to win big in the Yen during January. But I believe April’s meeting of Japanese central bankers could prove to be eventful. Market participants are expecting the BoJ to start their easy money policy this year instead of next year. I’m indifferent if expectations are met or not. I anticipate a huge move in the Yen that I will profit off of.

The British pound should continue to decline as well. I’m going to wait for PMI figures to be released in April to trade the pound. 

Daily Market Color 03/08/2013

Daily Market Color

03/08/2013

Economic Reports &Headlines

Non-farm payrolls came in above consensus by a wide margin, 236k Vs 171k. The jobless rate also came in at a surprise, 7.7% Vs 7.8%.

Heading overseas, Switzerland consumer prices for February were in line with consensus. Prices rose 30 basis points on a monthly basis, but declined 30 basis points on a yearly basis.

Future Reports

Later on this evening we will get consumer price data from china. Economists are predicting that inflation will increase 2.9%, year over year.

We will also get producer price index figures from China as well. Consensus is calling for a decline of 1.5% on a yearly basis.

  

Trades

This morning I went long SP futures on volatility from the non-farm payroll report. Initially, within the first minute of the report, SP futures rose sharply but began to decline shortly after. Since the report was very strong I decided to stay long, despite the fact that I am currently losing money on the trade. In addition to that, there is a small amount of economic reports due out next week. So I expect markets to continue to rally for the remainder of the month.