Feb 13, 2018 - Commodity Weekly: Suffering commodity space offered nice trade opportunities

A great week for traders is behind, the volatility finally arrived to the commodity markets and more sectors had nice moves during this period. The biggest movers were in the Energy sector were oil and distillates joined the falling natural gas as the updated 2018/19 predictions of increasing US production surprised the markets. The Agri sector had on the other hand nice upside moves caused by weather worries.

Oil

The EIA last week surprised markets with increased estimates of oil production for 2018 and also 2019 by 320 and 330k bpd respectively. According to the updated estimates the US reached 10M bpd oil production already in the first week of February. This was more than 300k bpd more than a week before. The news triggered intensive selling but from the COT data covering positioning until end of Tuesday trading the reduction of speculative longs wasn’t significant. However the second half of the week probably brought some additional long covering. Technically the H&S pattern on daily WTI crude chart worked perfectly brining 5 dollars per barrel profit for short sellers. WTI closed the week below the psychological $60 level and now markets are eying the weekly inventories and the IEA monthly report (to be released on Tuesday) for more direction.

Corn

The grain sector got support from the drought in Argentina, significant for soybeans and corn while the wheat prices surged on the news of insufficient rains across the Great Plains made winter wheat struggling. Only 14% of Kansas wheat was in good or excellent conditions. For corn the USDA estimates lower production, higher consumption and lower stocks which is a perfect mix of bullish factors, however for the rally to be confirmed some key levels have yet to be broken. Last week the biggest obstacles were technical selling and farmers increased hedging activity. The levels to watch ahead are 365 and 370 for the closest corn contract.

Sugar

The two main Brazilian sugar producers announced last week that they are going to focus on ethanol production as much as possible given the fact that sugar is traded at 30% discount to ethanol. This kind of news usually should give boost to prices however the follow up was completely missing and the raw sugar prices were stuck in a tight range. The huge sugar production from India and the increasing European refined sugar supplies are still weighing on the market of the sweetener. However the huge speculative short positioning limits the space to open additional shorts and the market is currently ahead of the decision which direction to go: back into the broken trend-line or droping toward new lows.

Good Luck and remember to watch your risk and be consistent

Mr. Tech Man

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016-2018. 

Contact: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com

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Feb 9, 2018 - Market Update

European equities seem to be in a quite and cautious mood today after yesterday's red day. US futures are up a what gives additional comfort to the market is also the calm in FX. Bonds are getting slightly sold but yields are not moving very high.

It is an interesting situation when stocks got sold off heavily over the last two weeks but bonds and FX were not significantly impacted. In other words, there was no direct rotation out of stocks to bonds, what may be seen as a profit taking in stocks only as bonds barely moved.

Bond yields remain elevated but not spiking or moving rapidly higher. JPY is a proxy of safe heaven flows is offered today but seeing a bit of unrest in EM space. Let's see what will come up with US open and where we close tonight.

At he moment, despite lots of cautious about another wave of algos and systematic investors selling to adjust to their portfolios based on risk/volatility inputs we see currently S&P 500 around 2600/10 level and DAX around 12 100/200 as good points to re-enter the market to benefit from FOMO flows that may eventually start even today.

But bear in mind to manage your risk appropriately also in the light of upcoming weekend, especially if we do not see the US stocks moving higher on FOMO flows. If that happens, we can also get ready for another Monday risk off sentiment behaviour as there is still lots of moving sitting in selling volatility related products.

Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom

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Feb 6, 2018 - Market Update (No recession short-term, healthy correction done, no global contagion, so let's hunt for bargains; One Fed hike is priced off; Watch today for Trys yields, JPY crosses, VIX; New turning points for VIX at 22 & 30; XIV a problem for Credit Suisse; BNSF Railway (part of Berkshire) joining Blockchain in Transport Alliance; Hedging by book: long gold, JPY, 10- and 30-yr Trys; The panic is over, moving to the last leg up of 2009 bull run;German coalition talks well covered blockchain)

Short recap

Asia in red

Europe opening lower

US Congress to vote on government funding

German coalition talks well covered blockchain technology to make Germany a fintech hub

Draghi not ok with EUR volatility due to potential inflation miss

Kuroda – no near-term hikes

Question – what now?

Honestly, I am not sure either…

…as Janet is celebrating and Powell not being able to find the “Buy” button

Market is down and Trump focussing on long term fundamentals and not the short term sell off

It reminds me local CEE politicians who cheer and show up in the public only in good times

Let’s sum up a bit

S&P 500 was 12% above 200 DMA – markets do not stay very long 10% above 200 DMA

(for regular bull market it is between 5-10%)

Technicals showed way-overbought markets

Most of the market followed the same direction (robots, ETFs, investors selling volatility) for months/years

Selling volatility/insurance and now covering positions

But after market dropping more than 6% all start to hedge (thus more selling)

S&P 500 found support at 2538 (200 DMA) after touching low of 2530

DAX didn’t care about 200 DMA and found support around 2015 highs, 2017 support levels

And below 12 275 (76.4% Fibo) after printing 12 141 low

VIX skyrocketed above 33 (up 113% on a day) but corrected (25+ levels signal market fear)

XIV (short volatility ETF) plunged (speculation that Credit Suisse lost USD 500 mln)

Let’ wait for official comments

Hedging based on history

Long Gold – pretty unmoved (sitting right below resistance zone (1357-1375)

Long JPY – sitting right lows of 108.12/107.31 acting as support but not very affected

Long 10- and 30-yr Trys – enjoyed very decent rally yesterday

Why to hedge?

CBs believe in rising rates globally on inflation pressures and strong growth

But China is slowing down and coping with huge credit problems

US economy topped, EU to follow soon and as Japan population is old, the lag

Example from 2011 – losses prior week, losses on Monday, more at the open on Tuesday

And recovery taking more than half a year…

What to do next?

As there is no recession risk near term, the healthy correction & late stage bull market panic is done

Stock markets will hopefully find their calm soon

So we can focus on hunting as a part of final leg up of the bull market that started back in 2009

…but be aware of:

FX, EM unaffected (EM equities down only 5%) – a positive sign

One Fed hike is priced off; If volatility continues another one can get priced off

No global contagion – a positive sign  

Watch today for Trys yields, JPY crosses, VIX (can fly in both directions with turning points at 22 or 33)

JPY 1m ATM vols (jumped from 6% to 10%)

Equities

Broadcom bidding for Qualcomm (USD 121 bln)

Bayer to sell more assets (seeds/pesticides) to please EU as it buys Monsanto

Elliot Advisors don’t like BHP’s dual listing (among other things)

Energy stocks still worth of looking at (also multiplied by recent sell off)

Boeing keen on a new mid-market jet

Bristol-Myers still behind Merck with cancer drugs testing data

Apple and Cisco come together to work with insurance companies on cyber policy products

Banks moving away from models to stock picking on new research rules

BNSF Railway (part of Berkshire) joining Blockchain in Transport Alliance

Earnings

Allergan, GM, Gilead Sciences, Walt Disney

S&P 500 daily

DAX daily

Source: Saxo Bank

Bonds

10-yr Trys yield at 2.65% vs 2.86% yesterday

Yield at 3.00% a buying opportunity?

10-yr Bund yield at 0.73% vs 0.76% yesterday

Bitcoin

Bitcoin's Brutal Week Is Even Worse in South Korea  link

So-called kimchi premium disappears amid government clampdown

Bitcoin prices globally are sliding to their lows of the year

Data/events

ECB’s Weidmann (0900 GMT)

Fed’s Bullard (1350 GMT)

Feb 16 – Chinese New Year

Mar 4 – Elections in Italy

Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom

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Feb 6, 2018 - Commodity Weekly: After the support of weak dollar commodities seem to join selloff

After a supportive week of depreciating dollar commodities are getting hit by sell off in equities and overall negative sentiment in risk assets. While the dollar should have been helping commodities rise, it wasn’t entirely the case even last week and the air was filled with tension especially after the FOMC meeting on Wednesday where the Fed noted inflation is on track. The most negative impact was on the Energy sector, Grains are holding relatively well and Sugar had also a few good days as investors were probably liquidating some of their shorts.

Oil

The more aggressive central bank outlook scared investors all over the market place and made them scale back on the positions built in the last year. Oil traders joined the crowd in selling their positions although the selloff wasn’t that aggressive as in equities ahead of a series of monthly report. Tuesday we have EIA and next Monday Opec and Tuesday IEA Monthly oil reports will give us a hint how these institutions see the development of market fundamentals.

Corn

The sector of grains saw a good week after news about drought in South America (corn and soybeans) and Kansas, Oklahoma (winter wheat) made traders liquidate a huge part of their shorts. However the magnitude of short covering increased the likelihood of additional selling if negative news will not be confirmed.

Sugar

The huge short that was built up during the last year is the biggest obstacle ahead of the bears despite the negative fundamentals persist. The raw sugar #11 traded in New York could not break the 13 cents psychological support last week and this changed the sentiment into more bullish, or at least less bearish. The prices rallied recently up to 13.90 that was most probably caused by the liquidation of some of the shorts at least. We will know more before the week end.

Good Luck and remember to watch your risk and be consistent

Mr. Tech Man

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016-2018. 

Contact: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com

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Feb 2, 2018 - Market Update (NFPs day but a high bar for USD to rise, Trys rising but where is the USD?, Rising yields challenging stocks (dividend/higher financing), Strong EUR to weight on EU stocks soon, Italy in or out?, eBay dumping PayPal and going for Adyen, Insurers to sell cryptos theft protection)

Short recap

Asia lower

Europe opening mixed

Strong EUR to weigh on EU stocks soon

10-yr Trys yield above 2.75% putting pressure on stocks

As dividend yield is not as attractive as before and cost of financing for companies is getting higher

With recent rise in US yields, economic numbers and improving earnings season

Are we going to see one 50 bps hike among all three hikes expected in 2018?

Equities

Apple likely to return half of USD 285 bln of cash to shareholders

Amazon.com enjoying a record USD 2 bln profit

Royal Dutch Shell attacking Exxon Mobil position of biggest cash generator

Daimler on the spending spree for electric and autonomous vehicles this year

eBay dumping a privilege partnership with PayPal

Adding a Dutch fintech Adyen to payment service

Insurers looking at protection against cryptos thefts

Saudi Arabia in strategic talks with China, Japan and SoKo before Aramco listing

Earnings

Chevron, Exxon Mobil reporting in the light of higher oil prices. Any surprises?

Merck

A bit of reflection…

Seems like 2-yr Trys yield is giving more than dividend yield of S&P 500 stocks on average or…

Market Euphoria May Turn to Despair If 10-Year Yield Jumps to 3%  link

Is the excess money from bond markets flowing to equities or does it mean something else?

Something like valuations are extremely high?

Number of Americans thinking about stock markets being higher in one year from now hitting multidecade records:

Well, two many too bullish…

Bonds

10-yr Trys yield at 2.79% vs 2.73% yesterday (20 bps from 3.00% mark)

30-yr Trys yield above 3.00%

Yield curve keeps flattening despite recent spike in short term yields

But 10-yrs touching 3% could help USD

Credit spreads in speculative bond space have been tightening over the past years

With lots of money flowing there, higher Trys yields may reverse flows

If US yields keep rising what in turn can send volatility waves across all markets

VIX is already trading above 10, the level that acted as a resistance for quite some time

10-yr Bund yield at 0.73% vs 0.70% yesterday

More and more EZ bond yields moving above zero level

Italy in or out?

Probability of Italy leaving EZ still elevated since Constitutional vote

ECB and Bank of Italy have a problem – holding over EUR 100 bln of debt

Once ECB stops tapering, IT bonds will suffer on the back of debt to GDP ratio being higher than pre crisis

Thus sending shock waves through periphery

Luckily, majority of the public supports more EU integration

Despite immigration and EU criticism

Parliament elections (Mar 4) to be a lose call

PIMCO: The Fed is quietly trying to engineer an inflation overshoot  link

There's been a distinct shift in currency markets that explains why the US dollar is getting hammered  link

Something strange is underway in currency markets at present…

EURUSD

Markets focussed on USD weakness and potential ECB taper, now holding pretty firm

Bids sitting below 1.2490

Stops seen above 1.2540-50, if broken we can visit highs of 1.2570 and 1.2602

To watch also 1.2597 (61.8% Fibo of 1.3992/1.0340 move)

EUR 1.1 bln options with strikes between 1.2495-1.2500 expiring today

Important 1.2516 (38.2% Fibo of 1.6038/1.0340 move)

Support 1.2398 (10 DMA), 1.2305 (23.6% Fibo) and descending trendline (highs 2008, 2011, 2014)

USDJPY

BoJ special operations helped the cross higher

Offers seen ahead of 109.75, 110.00 and stops above

Bids may be around option expiries (USD 2.3 bln strikes 109.00-35)

Support 109.45 (10 DMA), 109.06 (76.4% Fibo) and 108.12 & 107.31 lows

Resistance 110.14 (61.8% Fibo)

Crude Oil

Crude oil - US producing 10 mln barrels a day, putting enormous pressure on OPEC

But strict adherence to production cuts by OPEC and Russia support the prices

China overtaking US as a biggest crude importer

Latest correction seems not to do any harm to long speculative positions held by funds

GS upgraded Brent forecast that should hit 82.50 level by summer

Bitcoin

Well, few accounts holding huge amounts  link

 …and 13 exchanges trading 40% of the volume:

Data/events

ECB’sCoeure (1000 MGT)

ECB’s Villeroy (1400 GMT)

US NFPs

Bar high for any surprise to support USD

Payrolls 180k exp vs 148k prior

Unemployment rate 4.1% exp vs 4.1% prior

Average earnings (m/m) +0.3% exp vs +0.3% prior

Average earnings (y/y) +2.6% exp vs +2.5% prior

Strong labour market supporting consumptions

But earnings may disappoint despite minimum wage and bonus increases

If not, market will start to speculate about quicker rate hikes this year

Fed’s Kaplan (1830 GMT)

Fed’s Williams (2030 GMT)

Feb 3 – Powell taking office as Fed Chair (he is a lawyer and not economist)

Feb 16 – Chinese New Year

Mar 4 – Elections in Italy

Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk

  

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. Contact: landoftradingATgmailDOTcom

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