Monday, August 31, 2009

Getting back in the swing

I just finally rebuilt all my charts on bloomberg (took ages). Fordham finally built a very nice trading room. Unfortunately and it will be used for classes and our arch nemasis will be using it as well.

Just glanced over some charts, inter and intra markets are all diverging and painting a very interesting story. Ill have to sit down and read the charts carefully before explaining in fundamental terms of whats going on.

Big directional change in term so of in corporation. We should be able to finish much quicker now that the plan has changed. ill give it 2-4 weeks time before we are fully incorporated.


Friday, August 21, 2009

Daily S&P500 Market Commentary - August 21, 2009

Im signing my lease tomorrow and moving some stuff into my new apartment. Unfortunately I've been quite detached from the markets as of recent. It looks like a few days ago the equities led a rather significant correction as seen by the S&P500 correction 2.5% + . It seems that has been the correction I was looking for, though as unexpected it seems the trend on the S&P500 seems to show weakening in the short term, though overall in the monthly time frames it seems the S*P500 is still bullish.

Last week on ---> (click here) "August 14, 2009" I said I expect equities to experience a significant correction or trade sideways. The correction indeed did happen, though I feel that the sideways scenario is less likely to happen. I expect the S&P500 to test 975 resistance by the end of the week (if 1010 magically holds once again). If 1010 resistance holds and we get a break in 975-977 support we will possibly see prices at 950.

My indicators tell me that price momentum and risk reward are short term (into next week) in favor of the bears.

Hopefully some more thoughts tomorrow...

Friday, August 14, 2009

Daily S&P500 Market Commentary - August 14, 2009

I'm seeing signs of a weakening trend on the S&P500 before the open today. The S&P500 is going to trade sideways into next week or we will be seeing a significant correction. As up to this point the only "significant" correction we saw was from August 10 to 11 when markets the S&P500 corrected only around 1.5% + . (essentially I have been wrong on any "major" corrections - as the prices continues to extend; though on a decelerated path)

Amazingly the 1010 resistance I thought I had barely missed last on August 5th actually became real resistance on August 7. Prices failed at 1010 exactly and corrected to 997 by August 6th. And I also correctly predicted that prices would end up higher on that Friday.

Though my call on 1010 resistance true, it was short lived, but it worked out since I had exited my forex positions two days earlier in anticipation of price swings. In addition I was able to correctly identify the short term trend (within a 3 days) correctly on the S&P500.

The end of today will give a good hint of how markets will open up on Monday next week.


Wednesday, August 12, 2009

Some comment on bond market performance

Just want to follow your stuff yesterday with some comments on bond market performance in recent time. Like you, I am awaiting statements from FED's policy meeting today. I definitely agree with you that what Bernake say is strongly driving the market. As it may provide players official comment how the American economy is, and even for the global market. However, in term of fixed income aspect, i think that this meeting will be like others before; FED will keep its interest benchmark policy unchanged. Earlier this year, speculators thought that it would lift prime interest within this year, which drove significantly market as 10year Treasury yield has moved largely with a variance band of 80bps and has reached nearby 4%, the highest level since December 2008. It was one of key reasons boosted fixed income players’ performance.

A principle that many bond investors always keep in mind is that when the economy is weaker, it is bullish for bond market. In attempting to recover the economy, central bank will decrease it benchmark rate. Consequently, it will down bond yields and therefore bond price will rally. ( bond yield and price move inversely). Another factor that fixed income market becomes more profitable in compare to stock or commodity in the context of the weaker economy is credit spread or risk premium. The more volatile the market is, the higher the risk premium. Except Treasury debt as considered as free risk, others will have certain risk levels depend on their own characteristic. Bond yield (include both government and corporate bonds) comprises free risk rate and risk premium. Therefore, along with a pool of good news on business performances of companies released last time, the economy is showing signs of stability or even recovers from the recession. It means that business environment is getting better, which helps to narrow risk premium for debt instruments. As a result, bond yield decreases and its price obviously rise. Such factors fundamentally drove the bond market in recent time.

I wish to give you guys a more datable view on bonds in emerging markets, those are considered pretty active so far.


Sunday, August 9, 2009

Scattered Market Observations - August, 10, 2009

The Situation:

Some quick brief notes before markets open. I will be busy all day apartment hunting so won't be attached to a Bloomberg. Hopefully when I get settled I will find one at the graduate center at Lincoln Center, or I will have to use the on in the Bronx.

Either way, we have seen corrections in currency markets the day before the unemployment report on the pound with the continued use of Quantitative easing. And the Euro reacted strongly dropping 200 pips or so within the first 20 minutes of the US jobs reports being announced. Other major pairs were on pulled back on a limited scale. The big day is on tuesday! unfortunately I will still be house hunting... (the life of a student... terrible timing in such historical events)

Ive been talking to Sauros and Pat about Central Banking market driven theories. The mechanism that which is feeding the equity rally is not quite clear. Though it is clear the relationship of Monetary Policy, risk aversion and economic reports are what are fundamentally driving currency price behavior in this low interest rate environment. This in turn is moving dollar denominated commodities especially oil. Though the biggest " ? " is what the heck is driving equities.

We combed over a number of scenarios and its not quite clear; whatever the case maybe, one can play a correlative strategy despite not having a clear view on fundamentals.

Some people suggest that inflation is what is driving the equity rally since march. I dispute this claim as bond performance was the best performing asset class these past few months. It is only recently that we are seeing improved capital flows to equities that are on par or performing better than bonds; depending on region.

So if bonds are doing very well it can't be clearly a inflation driven environment...


I thought of a possible explanation. All of 2008 we are seeing risk aversion increasing and lots of people holding money on the sidelines. We also are getting a huge pent up money supply from the member banks who got all the fed injections and bail out monies. The increase of bonds can be explained by one type of player in the markets. These players are the ones who are still some what risk averse but are looking for relatively safe assets that will give a higher safe return than more volatile securities such as commodities or arguably equities. So this leaves the possibility of inflation fears, but however some players are simply more risk averse focused.

The second type of player can be the ones who are buying into the inflation story (similar notions as played out by the ECB), and including the others are all the huge corporations who are favored clients of the big banks that can still get corporate loans. This is confirmed as many huge banks saw increases in the loaning/credit markets in the first and second quarter. In this sense all the money the Fed has been injecting has to go somewhere. This money is possibly going to the big multi national corporate banks. Consumer loaning is still down, consumption is down, retail is down, and personal savings is up. (these players are driving the equities rally; be it artificial or sentiment driven).

So in a sense this is all a one sided earnings driven story. Pat also pointed out a very good point, if member banks are not significantly loaning to their multi-national corporate clients, the recent arguably "good" earnings are due to purely cost cutting and don't reflect true growth. This may be the case since we saw many companies with surprise earnings, but with lagging sales and revenues.

So its hard to believe that there is literally no domestic demand, as demand would have to be a huge part of what is driving these equities. We discussed that one possible solution of the demand problem was being met from abroad. Essentially huge players in emerging markets are what is making up for what local demand is lacking in (possibly capital flows form abroad). Big players like china has seen ballooning and questionably bubbly equity markets and huge expansions in loans (though to an extent still justifiable when looking at loan to deposit ratios).

So that would be completing the story of what is going on...



So what does this all mean. Central banking is key! Tuesday when the FOMC meets will be a great indication of where markets will be heading.

Short term we see the S&P500 going higher, but will it sustain this levels? not likely. I put a possible price target of 1100 on the S&P500, though Pat is calling 1050 before a possible trend change. We are all in consensus though that the markets ill need a significant correction to reach those levels. Already oil and currencies have corrected significantly, while the S&P500 has only see around 1% corrections which does not warrant further sustainable levels.

Oil we are still short term bull.

For currencies the Pound and EURO has corrected signficantly and arguably now is the right time to be buying in the markets if one is a bull. Though I opt to be conservative and wait for Tuesdays news to get a better view of trend developments. Overall though I expect continued dollar weakness (if this is the case implications for the EURO zone can be grave if they truly stop QE policies).


I apologize for the scattered thoughts; we making huge strides in incorporation which is taking most of our time these days. hopefully things will clear up once we make that hurdle.


Thursday, August 6, 2009

Daily Comment for August 5, 2009

Here is the quotes of the day:

I was engaged in my daily morning lengthy routine of news escapades when I received this email from my buddy (click here) ---> "SAUROS".

"The S&P went to 1009.05 at the highest, soooooo far from the 1010 you called ... :P"

He was obviously talking about this (click here) ==> "July 31, 2009 Post"

Please note his sarcasm in the above sentence. Though it was unfortunate to find out later in his next email.

"Actually I saw the 1009.05 on the rolling S&P (it means the S&P computed with its futures while it was closed). The "official" one shows 1007.12 at the highest... pffffff"

D*mn! .003% off! I should have realized that prices never really reach real resistance and support levels.



Ok well enough with the joking. The big question at hand is where will the S&P500 go from here and in what time frame. Definitely into Friday all technical indicators are telling me further price increase. However, intuitively it feels so wrong being a bull with such extended prices.

However as last week showed I made a completely wrong call on a big retracement of 3-4% as prices only corrected about 1%.

I will maintain discipline inline with technical readings and say prices will end up higher by the close of Friday. ( will double check my charts tomorrow for a price target).

If the bears take over tomorrow I would only expect a 1 - 1.5% continued retracement.

A lot of this depends on expectation and unemployment numbers. Its a good possibly that these numbers are priced in already, though with recent positive economic news this may not be the case anymore.

If the technicals are correct I would expect numbers to be inline or better than expected.


What the heck happened with the pound!? It was perhaps the only major pair that continued to climb despite the dollar gaining against other major pairs such as the EUR, CAD, and AUD. I think my choice to exit my trades was the right moves as yesterdays gains were minimal and wouldn't have mattered with today's retracement (I haven't had time to watch the pairs like a madman, as I explained in my last post).

To be honest I think currencies are leading the game, Im waiting for a larger retracement in currencies before I consider and new trades.

But Currently the pairs are showing more upward momentum.



With the expected dollar weakness to continue I expect oil to climb further up. And the technicals confirm this scenario. Pat has a price target of 75 by the end of this week. We will see soon enough.

If technicals are correct I don't expect tomorrows supply numbers to affect prices too much.


If you are trading this environment I would suggest reducing your positions or finding appropriate intermarket hedges or make use of some options. The risk is getting greater and need to minimize possible adverse affects especially if you have been long.

Monday, August 3, 2009

Forex Update: August 3, 2009

Just looking reviewing some charts as I have been busy. I must say I the Pound just shot way up and is over extended giving me some lovely profits. In general the 3 major pairs that I am trading all shot up. The Eur completely recovered and is making gains, while the AUD also shot up to a lesser extent.

Here are the Charts:




Here are the results:

As you can see I traded within approximately a two week time frame. My trading thesis was based off overall fundamental macro trend. However only confirmed and directed by short term technical analysis.


I closed out my positions so I can focus on my work and incorporation. In addition, due to possible trend changes or significant corrections coming at the end of this week or the end of next week. Hopefully the Group Forecast can be posted soon since we had our weekly meeting yesterday. In addition, hopefully Group ANLZ will be trading together soon.

If there are any questions about this trade please post a comment or forward your concerns to

-Alexander LĂȘ
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