Marc Nemenoff
PRICE Futures Group
Financials: Dec. Bonds are currently 25 higher at 128’22, 10 Yr. Notes 15 higher at 125’03.5 and 5 Yr. Notes 8.5 higher at 118’16.7. This mornings ADP Private Sector Jobs Survey should an increase of 213,000 jobs vs. expectations of 209,000. Ordinarily this would be good news. However the geopolitical and geoeconomic situations have made this report somewhat insignificant. Demonstrations in Hong Kong for more democratic elections, Syria and ISIS, Ebola and a slowing of economies in Europe (France is now predicted to have negative growth through 2015) have pushed Bond and note prices higher (rates lower). I feel that this will lessen the prospects of a rate hike in the U.S. anytime in the next 6 months as it is evident that Europe will continue quantitative easing making our current rates (about 2.5% for 10 Yr. Notes) attractive by comparison. I also think that we have to be careful of excessive Dollar strength which would be predicated by higher rates here in the U.S. All that being said we remain long June 2017/short June 2015 Eurodollar futures and will cover this position if the spread trades below 198 premium the June 2015 contract.
Grains: Dec. Corn is currently a penny lower at 319’6, Nov. Beans 3’6 lower at 909’4 and Dec. Wheat 3’2 lower at 474’4. Trend remains down and volatility low. I feel we are near a bottom but have no recommendation at this time. Normally I would be looking for a strategy of selling puts or stradles but given the low volatility premiums are too thin to make the risk worth the reward.
Cattle: Oct. LC are currently 25 lower at 160.25 and Nov. FC 40 lower at 234.60. This market is too volatile for me to have a net position at this time. I will once again look to do the long Jan. FC/short Nov. FC spread at 6.30 O/B premium the Nov.
Silver: Dec. Silver is currently 11 cents higher at 17.17 and actually has shown some bottoming action in the 16.85 area. We remain long. Dec. Gold is 3.50 higher at 1215.00. We continue to look to the long side on breaks below 1208.00 for short term trades.
S&P's: Dec. S&P’s are currently 3.00 lower. My bias remains on the short side of the market on rallies above the 1976.00 level. Support remains in the mid 1950’s. Consider going short the Nov. 2000 call above 20.00. Keep in mind this has limited profit potential and unlimted risk as do all short option positions.
Currencies: As of this writing the Dec. Euro is currently 17 lower at 1.2618, the Swiss 20 lower at 1.0459, the Yen 6 higher at 0.9127 and the Pound 12 higher at 1.6203. For the moment we still like the long Yen/short Euro spread. Overall I feel the currencies are oversold at current levels.
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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