Select Markets Resume Trading
Selected contracts resumed trading in Chicago following market closures
across America after the worst terrorist attack ever in the US destroyed the
World Trade Center Towers, hub to key financial markets.
Despite the brazen and wanton attack that killed thousands, selected
markets sought to present a "business as normal" face as the
world’s financial center in New York struggled to locate survivors or
uncover deceased compatriots.
One of the hard hit firms at the WTC with an estimated loss of 700
individuals, Cantor Fitzgerald, also had one of the largest bond operations
in the financial and architectural icon, accounting for about 25% of US
bonds traded. Cantor reportedly resumed trading operations at their auxiliary
facility in New Jersey, but spreads between bond quotes were said to be as
much as five to 10 times greater than normal.
December T-bonds
(
USZ1 |
Quote |
Chart |
News |
PowerRating) plunged in the initial minutes of
Chicago trading. Notice how T-bond futures exceeded the 78.6% retracement of
the now-infamous September 11, 2001 rally and flight-to-safety move but
exceeded that level by the amount of the gap down. In essence, the 78.6%
Fibonacci level –adding the gap down level of four ticks — held. Consider
adding (or subtracting) the amount of a gap to any Fib levels.
Today’s December fed
funds futures contract
(
FFZ1 |
Quote |
Chart |
News |
PowerRating), the most accurate predictor of
likely Fed action, priced in more than a 100% chance of a .75%
rate cut by Christmas. This would leave the short-term monetary tool of the
Fed at 2.75%.
In a move to enhance confidence in the world financial system and the
liquidity of the dollar, the Federal Reserve "sold" $50 billion to
the European Central Bank to help ensure that European institutions had
access to dollars to complete dollar-denominated transactions. The "interbank"
system upon which major banks and institutions trade currencies was cut
after the attacks.
Still, confidence in the dollar faltered. Although September dollar index futures
(
DXU1 |
Quote |
Chart |
News |
PowerRating)
were not traded because its futures contracts are transacted at the site of
the disaster, currency contracts at the Chicago Mercantile Exchange were
open.
A report out of the United Kingdom that retail sales rose last month
seemed to be the antithesis of the perceived mood consumers are likely to
have following Tuesday’s tragic event. UK retail sales rose .5%, a sign that
consumer confidence remains steady. The perception is that consumer
confidence in the US may drop in coming months, while the UK economy may
remain more resilient. Conversely, a report out today (compiled prior to the
attack) showed consumer confidence in the US fell to its lowest level in
eight years.
An up tick in the
British pound
(
BPU1 |
Quote |
Chart |
News |
PowerRating) to nearly its highest close of the year, up
.0350 to 1.4702, seemed to be a both a safe haven play and a bet that the
British economy, Europe’s second largest, will outperform those of the US,
Japan, and Europe. British pounds are on the Momentum-5
List.
Even though the Bank of Japan has come out and said "We’re running
out of options" to deal with the declining economic situation in that
country, Japanese yen futures
(
JYU1 |
Quote |
Chart |
News |
PowerRating) rallied, making good on a daily Pullback From Highs
setup. Part of the worry here, the flight out of dollars, is undoubtedly
fear about the financial ramifications of the assault and its uncertain
impact on stocks and bonds. It is also noteworthy and one of the most
bullish things a market can when a market rallies on bad news.
In the grains, initial indications are that the soybean harvest is coming
in under estimates.
November soybeans
(
SX1 |
Quote |
Chart |
News |
PowerRating) logged their best up-day in a month
to close 12 cents higher at 482.
For some excellent ideas on how to
approach the markets when they re-open, take a look at the strategies
of Kevin
Haggerty and Tony
Saliba in the lessons section.