Trading Blog: TnT Group

Good morning all. I hit on this a litle bit in my webcast. I wanted to go a little more in depth about it though. When I left for vacation over the holidays I left a gold and S&P market that seemed to be somewhat correlated. To say it was a great correlation would be an absolute lie. However it seemed like gold was being traded solely as part of the commodity basket and was rising with oil, copper, rubber, etc which was also followed slowly but surely by equities and the free money that was being pumped into them.

Now after my first day back from vacation and stepping back into these markets it seemed as if there was a definite change of scenery. Overnight gold was getting hit harder than Brett Favre’s head on the frozen field in Minnesota while equities, continuing there impressive day from yesterday, gradually rose higher (as I type S&P 500 Minis are up 4.25 trading 1269.50 while gold is down 14.7 trading 1408.2). This was not a small divergence from what had been happening before I left. This was a farely large change of thought. Are people or the markets now thinking, more than we have in a while, that the economy may be on track?

Below is a daily chart showing the somewhat correlated gold and S&P markets and the slight divergence over the last few days.

The overnight session really made me think that way. We had a ton of risk on trading happening. Minis up 4.25, euro trading up 30 some pips, yen getting hit farely hard down 87 pips, debt (both US and European) down a good amount, and gold getting clobbered. Oil had a tough time doing anything overnight. I understand it. Do they want to rally it because of equities rallying and a slight sell off in the dollar or is it confused because gold is getting pounded. It eventually rallied slightly, as it should if the markets are showing signs of adding risk and the outlook being somewhat positive.

Below is a 5 minute  chart of last night session and the distinctive inverse relationship of gold and Minis.

I am not coming out and saying that our economy is back on track and let the jobs rain down from the heavens. I still whole heartedly believe we are nowhere near where we need to be. My point is to keep an eye out for this inverse type relationship as it will tell a story as to risk on or risk off trade. It is hard to deny how these markets moved last night and is something to pay close attention to moving forward into this new year.

Dollar shelacking once again against the Yen and Euro.  Even with dollar weakness, equities had a hard time holding bid through the morning and eventually came off with the bonds around 10am.  We thought the PPI would have been bad for the long end of the market and what do ya know, the curves end up getting hammered while 30 years make new highs.  Curves continue to stay weak going into the 30 year auction.  *Update*  My boy Ranger Rick Santelli rated the Bond auction a D- and covered the shorts at 13210.  You couldn’t get on the initial sell off, basically sell the low and watch some dork come in bid for 1500, once the order got picked off it got clubbed like a baby seal.

Same story we’ve been preaching for weeks in the commodities.  Dollar down, buy all commodities with both hands, Gold especially.  Wish I could talk more about the Grains but it’s all old news, lock limit bid a few days back.  Took a shot selling some beans at 1193 after the dollar started basing above 76.80.

Copper, well, it’s the copper market.  A little weaker on the day after making new contract highs on it’s stairway to heaven.  Oh yea, unless you’ve been living it up in a mine shaft for the last 2 months, you’d know the Chilean copper guys surfaced yesterday sportin Oakleys with collars popped.  It’s all good.

Have a good one.

What a fun week….fun if you enjoy watching the dollar get pummeled and buying equities.

QE is still the talk, throw in a bullish German IFO number and we could see this dollar hold below April lows now, possibly even push the yearly lows. Even though I’ve been toying with long dollars with tight stops all week, I don’t think I can take longer term shots on longs until 78.40 level.  The stock markets continue to like this weak dollar and things have been steady in terms of the “psychological trade” we’ve been seeing.  Dollar down, equities up.  It might make sense to some people, but is it really the right thing to do???  And when will dollar weakness become a concern???

Brian Tehako and Jim Bianco had an interesting Bloomberg interview on Friday afternoon and they brought up that very point.  Might be worth a look if you have the same questions we’re asking.

Some other note worthy stuff that’s been going has been in the Metals.  BUY BUY BUY!  We saw some  strong demand in the Copper market earlier in the week based on low supply numbers and the weakening dollar.  Silver is also hitting 5 year highs.  I will continue to be bullish metals until something big changes, but doubt that will happen anytime soon.

Have a good weekend.

Where to start….It started off to be a mixed information day and somewhat confusing.  Even looking at the individual Equity market net changes, you can see some confusion.

Canadian unemployment came out as better than expected in terms of jobs created but the rate rose to 8.1% from 8.  The Canadian Dollar and Yen stayed fairly weak much of the day against the other pairs.  US Dollar is flat.

One thing that stuck out around 10:30 was a 4000 lot S&P seller that came in at 1103.00.  Copper got smashed 4 cents following this and equities went on liquidation mode.  Nasdaq was trading 1887 and bottomed out at 1877.50, S&P was good for about 4 handles.  Lock it up.

Everything is unched on the week across the board and seems like things are waiting on the next clean indicator for direction.

Have a good weekend.

Andy Turner with you today.

GDP came out above estimates and equities caught a  quick bid after the release.

Equities came under pressure on the open and then things got a little hairy.  University of Michigan was revised a bit lower and Bernanke comments at 9 o’clock combined with some questionable trades in Intel saw equity indexes come under heavy pressure.  But Intel responded by trading higher and was subsequently halted, leading equity indexes to have major reversals and make new highs.

Debt got crushed on Bernanke’s comments to do whatever it takes to keep the economy moving.  Copper is strong again today as is oil.  Minis get above the 1061 area and we could trade higher but the economy is weak.  ISM and employment numbers next week.  The estimates are already pretty low.  This market loves to rally when we “beat” these bad numbers but its not going last forever.

Spyder here,

Mark is on vacation for the next few weeks so I will be chiming in for the days he usually writes on the markets.

Overnight seemed to look pretty tame and stayed the same early into the morning. Things seemed to really pick up around 7:00 however. To me it felt as if it was a pretty volatile session.  Jobless Claims came out +473K which was better than the expected +490K  with Continuing Claims coming at at 4456K after an expected 4495K. Now these numbers came out better than expected which the markets took positively, rallying equities to new highs. However, one of the traders that came on CNBC made a very valid point; these economists are beginning to realize the negativity within our economy and are lowering their expectations on these numbers. So a number, such as this Jobless Claims, which beat expectations, it may solely be because of the lowered expectations in the surveys that are given. Markets may have taken that to heart as equities came off the rest of the morning. S&P Minis as I am typing down 2 dollars on the day.

Taking a look at the commodity markets we had a big move up in copper even with the weakness in equities.  Oil, which once again seems to have a mind of its own most of the time, kept with that MO again today. Seemed weak when the equities were on the highs. When equities came off and went negative oil seemed to be strong. Ultimately you can make money in that market but its all about timing and if you are in it too soon you are as good as dead.

I think looking at the bigger picture you still need to be short equities. One of the risk currencies, the New Zealand Kiwi, has stayed below a daily trend and broken the 6996 level in which it needed to stay above to keep the trend higher.

With that being lower, as shown below, and the Euro/Yen Cross at the level it is at, as Brian has talked about, I think that longer term play is just to be short equities. Not to mention the unstopaBONDS where they are at!

Good luck trading!