Hello All,
It turns out the rumor of China buying Italian bonds was nothing more than just a rumor. No new developments out of Europe, and positive corporate earnings allowed stocks to post another day of gains. Nothing more than consolidation until we find out what Europe's fate is, and we await a skewed reaction to option ex on Friday. The choppy action in the Eurocurrency is evidence of the rapid change in sentiment, as the larger pattern still remains bearish. With Gold ticking back up after holding support around $1800, another wedge pattern is evident where we can get a larger break to the upside if there is no resolve with Europe. Treasury yields are not necessarily correcting in a dramatic fashion which leads me to believe that there is still room for further deterioration as investors flock to safety in light of the SNB's currency intervention. The Fed stated today that it would buy about $16 billion over the next month as part of its reinvestment of maturing assets, as the central bank may decide to swap short term treasuries with long term securities to cut borrowing costs. We also note that PIMCO has increased its treasury holdings to its highest level since Dec. 2010 after going flat, which in hindsight backfired given the run this year. On the energy front, API data reported a draw of 5 million barrels of crude as gasoline inventories rose 2.7 million barrels, pretty much a wash. We await tomorrows more reliable DOE data to give us a better signal to get in. I re-iterate the importance of being a trader rather than an investor in many of these markets as the day to day news continues to fluctuate ahead of our FOMC announcement next week.
No trades in light of my upcoming trip, feel free to give me a call if you need any specific advise intraday.
*There is a substantial risk of loss trading futures and options. Past performance is not necessarily indicative of future results.
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