What's with the futures trading this morning?

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ao's picture
ao
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What's with the futures trading this morning?

The Dow is up 390 pts. in futures trading this morning!  What's with that?  Silver's flat, gold's dropping .... hmmm.

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Re: What's with the futures trading this morning?

It's all about the ~$1T EU Bailout program.

ET

 

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Re: What's with the futures trading this morning?

Yes, remember what happened when Ben started QE in 2009?! It helped create a pretty major top in the US dollar.

The interesting thing is that the Euro is near support and will need to break through that if QE is to affect it the same way that QE affected the USD. Fundamentally, the ECB is fighting a cultural battle here. I'm not an expert, but at least on the surface, it seems there are dramatic differences between, say, Greece vs. Germany, Spain vs. Switzerland, etc. etc. ad infinitum. I believe these cultural differences could well be the catalyst for creating further anger over the economic injustices associated with bailouts. We will have to see. Perhaps the USD will have just a little more calm before the storm now.

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Re: What's with the futures trading this morning?

Is anyone else having difficulty openning the Bloomberg site this AM?

Doug

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Re: What's with the futures trading this morning?

I feel like I fell down the rabbit hole again.  "Futures surge on the news of the bailout."  CNN Money headline this AM.  

To me that sounds like  "Ice futures surge on news of the Titanic".  What am I not getting here?

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Re: What's with the futures trading this morning?

WOW!

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Re: What's with the futures trading this morning?
land2341 wrote:

To me that sounds like  "Ice futures surge on news of the Titanic".  What am I not getting here?

Laughing  Pretty good analogy there, land.

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Re: What's with the futures trading this morning?

Wow indeed.

If you like volatility, step up to this 'E Ticket' ride.

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Re: What's with the futures trading this morning?

Hey JAG we called this on Friday haha!

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Re: What's with the futures trading this morning?

Man, this news is gonna make even me think twice about my cash position!  I think we will see some major volatility across Europe (volatility as in riots) - - as several countries were ram rodded into this deal.  They passed this over the weekend - just wait until the citizens of the wealthy countries get a wiff and have a day or two to digest it.

We are up big...but this aint even close to over. 

But, for some reason, if this bailout appears to hold....even me...the gold hater of gold haters, will have to buy a little.  I may even buy some real estate or stocks!  ANYTHING but fiat.  Wow....what a difference a weekend can make!

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Re: What's with the futures trading this morning?

I don't know very much about trading on the exchange.... What sectors are rising ? Is it Financials only or are they all rising together ?

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Re: What's with the futures trading this morning?

I don't know very much about trading on the exchange.... What sectors are rising ? Is it Financials only or are they all rising together ?

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Re: What's with the futures trading this morning?

Google Finance

 

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Re: What's with the futures trading this morning?
bearmarkettrader wrote:

Hey JAG we called this on Friday haha!

Too bad I didn't put any cash where my mouth was. What about you?

Dogs,

Your trading system should be loving this volatility, though overnight moves can be hard to capitalize on. Is your system nimble enough to handle these whipsaws? Details please.

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Re: What's with the futures trading this morning?

Google Finance

 

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Re: What's with the futures trading this morning?

Google Finance

 

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Re: What's with the futures trading this morning?

Rickets,

The dollar hasn't moved that much, considering the moves in the risk assets. The Fed currency swap last night should be killing the dollar, but as of this time, there hasn't been any significant net movement in the dollar. Cash may still be the best investment right now. 

This is better than anything Hollywood could produce.

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Re: What's with the futures trading this morning?

Hey BMT,

I'd love to hear more about why you are so convinced this is a bear trap. I certainly agree that the bailout news is yet another liquidity wave that will TEMPORARILY push equities higher. I'm actually shocked that they have seen less action than I expected so far.

But I think the gig is basically up. The world has figured out that the system is broke. Yes, a trillion bucks of liquidity has to go somwhere. But as soon as the citizens of the involved countries make it clear they won't tolerate any more bailouts (which is what I expect), I think we're headed for a major crash.

I did cover my shorts ENTIRELY this morning (my time, meaning Sunday 6pm NYC), but I'm already starting to average back into the shorts. I'm viewing this liquidity-driven rally as an opportunity to reset the short entry point. My initial guess was we'd see at least 1180 on the S&P again before resuming a long and probably steep decline. I am pretty sold on the idea that 1223 was the top and if we see 1200 again I think it'll be a brief experience.

BMT, it sounds like you think the fantasy rally is going to continue and we'll break even the 1223 high. Is that what you think? If so, how'bout elaborating on why you think that...

Thanks,

Erik

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Re: What's with the futures trading this morning?
JAG wrote:
bearmarkettrader wrote:

Hey JAG we called this on Friday haha!

Too bad I didn't put any cash where my mouth was. What about you?

Dogs,

Your trading system should be loving this volatility, though overnight moves can be hard to capitalize on. Is your system nimble enough to handle these whipsaws? Details please.

Short answer is yes - but you need to be able to access live charts.  You could have a lot of fun trading the OEX on a 21 minute chart today.

You hit on the key piece - the market is up on overseas news and it is dangerous to trade the news.  You've heard the expression "Buy on the rumor, sell on the news."  (Which for the record is NOT a trading strategy in our system)  The impact of the news already worked itself through the markets and there weren't any entry points to the upside.  If you happened to be positioned in calls, or got into a position on Friday you were simply lucky.  There were some good trade opportunities to the downside as the market opened, gapped up and lifted to it's peak and then started fluttering.  The OEX peaked at 529 around 9:45 and then pulled back to 524 around 10:45 before stabilizing.  10% in an hour is nothing to sneeze at, but you need to be careful exposing your principal to a monetary nuclear reaction.

All gaps are eventually closed and today's gap up will eventually be closed too.  That's where I think the entry points for trades to the downside are going to be.

Generally speaking, days like today are best experienced from the spectator perspective.  So I'm just watching this roller coaster ride for now - there is far too much emotion and no real fundamentals.  Even equities that should be down today on fundamentals will be up since a rising tide lifts all boats.

The last couple of hours of today should prove interesting.....and I am quite content to have closed my 3M Puts on Friday morning.

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Re: What's with the futures trading this morning?

Erik,

I know you didn't ask me, but I wanted to clarify that I don't think this is a bear trap, the smart money indicators are bearish for the first time in almost a year. Getting into your shorts again is the right move in my humble opinion. The reason I thought there was a strong rally in the markets coming was the big move in silver last week.

My 2 cents FWIW.

 

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Re: What's with the futures trading this morning?
JAG wrote:

Getting into your shorts again is the right move in my humble opinion.

That really, really sounds awkward.

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Re: What's with the futures trading this morning?

JAG - ya, not going all in here - want to watch for a bit (few days) to see what happens.  But, Europe vowed never to do any QE - and here we are.  Many citizens in wealthy European countires will hate this more than Americans and our printing in recent quarters.  I think this is a great lab for us to watch.  Will the riots in Europe prevent the leaders from QE, or will the leaders ram rod the QE? 

I think this is somewhat similar to the states and watching California specificaly as the canary in the coalmine so to speak.  If leaders can push the EU bailout and California thru these times with IOUs, then hyperinflation strategies are in.  Until today, I was more confident that the people would wise up and prevent unlimited QE....but now I am not confident. 

Still need more time to watch what Europe does later this week....

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Re: What's with the futures trading this morning?

Eric,

The EUR financials are going ballistic up 10 and 20%. Look at the steep rally in CAC over 7%. Lots and lots of liquidity being pumped in.

My theory for a continued rally is that markets MUST go higher otherwise pensions and retirements go unfunded. There are too many interests at stake with the equity and bond markets at this point in time.

People say that the bailouts are banker bailouts and to some extent this is true but it is deeper than that. The majority of stock and bond holders of these financials are retirement funds, thus, future retirees. Obviously the super wealthy own a larger amount of these stocks/bonds but many middle class people also have a piece of these companies. Upper management is a different story but yes they get their bailouts too.

I just dont see how the governments can allow so many pensions to be so underfunded. By providing the liquidity it keeps RF's from being so underfunded. In the end, devaluation is going to be the method to battle the bursting bubble worldwide. The last 2 yrs have proved this time and time again. Consider what the US has done, 800 bill bank bailout, 750b stimulus, 1.75 trill in monetization, a grand total of 3.3 trillion. 3.3 trill for a country with 300 million and 14 trill in GDP. The EU package is the first grand scale bailout. There will be more to come.

Conclusion: the path of least resistance is the digital printing press, as absurd as it is this is what will happen.

PS: I only had 4hrs of sleep so excuse my horrible writing

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Re: What's with the futures trading this morning?

Seems to me it'll take massive riots (or some sort of citizen action) to force the cancellation of the 1 trillion bailout.  With the election reversal Merkel's party suffered (also resulting in a hung gov in Germany -- or at least forcing a change in the ruling coalition), Germany might not approve the bailout.  (Although as I understand it there's some confusion amongst observers as to whether or not the bailout has to be approved by anybody's gov.)  The fact that there's a hung gov in the UK also complicates things (although the UK's not in the EU).

But, assuming the bailout goes forward, what would keep it from having the same effect in Europe as our series of bailouts had in the US (a prolonged and gradual melt up in the markets)?  Why wouldn't this action kick the can down the road a couple years (while admittedly making the final collapse even uglier)?

Viva -- Sager

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Re: What's with the futures trading this morning?

The DOW is UP almost 400 points?!?!?!  I never ate the cake that said eat me and yet here I am down the rabbit hole!

There is no end to the ability to pretend that everything is OK while they simply pass the buck and kick the issues down the road.  The wheels will never fall off this thing so long as no one is willing to admit that there are no stinking wheels.  Yell

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Nothing to see here...

LOL, this market is hilarious.

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Jim Rickards: "Goldman Can Short Faster Than Europe Can Print"

Jim Rickards: "Goldman Can Create Shorts Faster Than Europe Can Print Money"

"Look at what Soros did to the Bank of England in 1992 - he went after them, they had a finite amount of dollars, he was selling sterling and taking the dollars, and they were buying the sterling and selling the dollars to defend the peg. All he had to do was sell more than they had and he wins. But he needed real money to do that. Today you can break a country, you don't need money you just need synthetic euroshorts or CDS. A trillion dollar bailout: Goldman can create 10 trillion of euroshorts.

Follow the link for the video.

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Re: Nothing to see here...
JAG wrote:

LOL, this market is hilarious.

+1 JAG

This morning action looked eerily similar to the reverse of that curve.  Most of the 400 points came in an instant ant the market slowly drifted sideways.  The computer programs are the market now. not flesh and blood traders.

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Re: Nothing to see here...
docmims wrote:

This morning action looked eerily similar to the reverse of that curve.  Most of the 400 points came in an instant ant the market slowly drifted sideways.  The computer programs are the market now. not flesh and blood traders.

Good point.. I am sure they actually removed this anomaly from their databases... Otherwise the algorithms would probably still be doing tango there, or in any case, not doing what they are supposed to do ;) Oh man, that's going to be fun. Will we start to see job postings like "Technicians needed to delete outlying data from database of trading algorithms"? :) How ridiculous can this get!

Samuel

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Re: Nothing to see here...
guardia wrote:
docmims wrote:

This morning action looked eerily similar to the reverse of that curve.  Most of the 400 points came in an instant ant the market slowly drifted sideways.  The computer programs are the market now. not flesh and blood traders.

Good point.. I am sure they actually removed this anomaly from their databases... Otherwise the algorithms would probably still be doing tango there, or in any case, not doing what they are supposed to do ;) Oh man, that's going to be fun. Will we start to see job postings like "Technicians needed to delete outlying data from database of trading algorithms"? :) How ridiculous can this get!

Samuel

Look again.  Closely.  Last Thursday was a rapid slide down off of an erroneous apparent programmed sell order that triggered existing sell orders at lower levels in other equities.  As of this morning, the only trades that had been whistled out were the PG and MMM trades that had been nullified in accordance with NASDAQ Rule 11980 regarding obvious errors.  Haven't read an update on the proposal to go back and nullify all trades in equities that traded at a price that was 60% above or below the stock price at 14:40 on Thursday - the period that was being looked at was 14:40 - 14:50.  Thursday was a very normal response to a very abnormal trigger.

Yesterday wasn't even close to Thursday.  Monday's open was a gap. The market gapped up at the open because futures were +360.  In comparison, Thursday was a slide, and there is a big difference in the two.  Monday was a very normal response to a very normal trigger - (the futures being +360).

That said, the reason the futures were +360 is complete bullshit, but 1 trillion dollars does tend to cause a little liquidity - even if it manifests as debt.

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Re: Nothing to see here...
Dogs_In_A_Pile wrote:

Look again.  Closely.  Last Thursday was a rapid slide down off of an erroneous apparent programmed sell order that triggered existing sell orders at lower levels in other equities.  As of this morning, the only trades that had been whistled out were the PG and MMM trades that had been nullified in accordance with NASDAQ Rule 11980 regarding obvious errors.  Haven't read an update on the proposal to go back and nullify all trades in equities that traded at a price that was 60% above or below the stock price at 14:40 on Thursday - the period that was being looked at was 14:40 - 14:50.  Thursday was a very normal response to a very abnormal trigger.

I am sure they will eventually amend the definition of "obvious errors" :)

Samuel

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