Daily Trading Stance

Theme Comment 

Friday, February 19, 2010

 

The Federal Reserve raised its discount rate (not fed fund rate) from 0.50% to 0.75% overnight, which caused large fluctuations in the market. EURUSD fell more than 100 pips and the SP500 future, which had risen 0.5% in the US session fell more than 1%. The Fed said that the rate hike does not signal a change in policy. St. Louis Fed President Bullard said in a speech (later) yesterday that “The idea that… there’s a high probability that we’ll raise rates later this year is overblown”. US consumer prices are released today and we in line with consensus in expecting an increase of 0.3% and 0.1% in the CPI and Core CPI, respectively. We remain negative on risk today despite the +0.5% increase in most major equity indices yesterday.

Economic Data Releases Country Time (GMT) EC 09:00 UK 09:30 US 13:30 FX EURUSD USDJPY EURJPY GBPUSD AUDUSD FX-Options EURUSD USDJPY AUDUSD Daily stance 0/0/+ 0 0/0/-

Name PMI Manufacturing (FEB) Retail Sales MoM (JAN) CPI / Core CPI MoM (JAN)

Saxo -0.2% 0.3% / 0.1%

Consensus 52.7 -0.5% 0.3% / 0.1%

Prior
52.4 0.3%

0.1% / 0.1%

Comment Sell rallies to 1.35, or break below 1.3435, for 1.3385 target. Stop abv 1.3550/1.3480 resp. Buy dips to 91.55 for a push thru 92.0, target 92.35. Stop below 91.07. Look to test suppt at 123.0 but may hold for 123.0-124.0 range. Look for further declines to 1.53. Res now 1.5415. Below 0.8875 targets 0.8830 and 0.88. Back abv 0.8935 defers. Comment Spot drops under 1.35 and vols were quickly higher at the opening in Asia. The market remains particularly nervous on the downside so the curve should hold at these levels. Yen vols turn better bid especially in the front end along with the dollar rally. The RRs are finding bids after coming off a fair bit. Vols turn bid after another dip under 8900. The fact that it traded as high as 9020 and then down to 8890 in the last 24 hours should keep gamma well bid.

Equities DAX FTSE S&P500 NASDAQ100 DJIA Commodities Gold Silver Oil (CLH0)

Daily stance 0/0/0/-

Comment Sell on rallies towards 5650 and target 5600. Stop above 5672. Sell on rallies towards 5300 and target 5261. Stop above 5317. Sell at the break of 1093 and target 1085. Stop above 1097.

Daily Stance 0/0 0

Comment Sell break below 1,097 for 1,090 target, stop abv 1,107. Consolidation 15.65 -15.85. 78.0 suppt seen holding for now for 78.0 – 78.70 range.

Earnings Releases Time (GMT) Country (G(GMT)(GMT US Bef-Mkt )

Name JC Penney

EPS exp. 0.819

EPS prior 0.140

Comment

Daily Trading Stance
US Breakeven 10 Year
3 2.5
120

Top 100 Global Stocks CDS Index
140

2
100

1.5

1
80

0.5
60

0

-0.5 09-okt 09-dec 09-feb 09-apr 09-jun
US Breakeven 10 Year

09-aug

09-okt

09-dec

09-feb

40 19-02-2009

19-04-2009

19-06-2009

19-08-2009

19-10-2009

19-12-2009

Saxo CDS Index

USD breakeven 10 Year – an expression for measuring inflation expectations.
EURUSD Opt. Vol.
35 30 25 20 15 10 5 0
02-08 04-08 06-08 08-08 10-08 12-08 02-09 04-09 06-09 08-09 10-09 12-09 02-10
7
6

Credit Default Swaps are expressions for the perceived default risk in a company. Now at 53.
AAA and BAA Corporate Bonds vs. 30yr US Treasuries

5

4

3

2

1

0 jul-08 okt-08 jan-09 apr-09 jul-09 okt-09 jan-10

EUR-USD OPT VOL 1W

EUR-USD OPT VOL 1M

EUR-USD OPT VOL 1Y

Moody BAA - US Generic Govt 30 Year Yield

Moody AAA - US Generic Govt 30 Year Yield

Volatility at different time horizons. Too low, now?
CEE-German Govt. Bond Spreads
8 7 6 5
20

Spreads are easing, but still showing tight corporate debt markets.
CBOE SPX VOLATILITY INDEX
35 30

25

4
15

3
10

2
5

1 0 apr-09 maj-09 jun-09 jul-09 aug-09 sep-09 okt-09 nov-09
Poland - German

0

dec-09

jan-10

aug-09

sep-09

okt-09

nov-09

dec-09

jan-10

feb-10

GDMA Hungarian - German

Czech Republic - German

CBOE SPX VOLATILITY INDX

The VIX Index is now at 21.

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