December Lows Attract Buyers

  • October 25, 1999
  • Manuel Ochoa








PREVIOUS POSITIONS
Market

Long/Short

Enter
 size=2 color=000000>Exit size=2 color=000000>P/L (per contract)
Dec. 99 T-bonds Long 111-25 111 -$781.25
Dec. 99 S&Ps Short 1298 1275 $3500
Dec. 99 Swiss franc Long .6795 .6690 -$1312.50






CURRENT POSITIONS (AS OF 10/25/99)
Market Date Long/Short Enter Stop size=2 color=000000>Target
Dec. 99 T-bonds – Flat – – –
Sep. 99 S&Ps – Flat – – –
Dec. 99 Swiss franc – Flat – – –



Note: All price levels are approximate.

T-bond futures

The report of interest this week is the Employment Cost Index (ECI) on Thursday
The December futures [USZ9>USZ9] made new lows today–only to attract buyers and trigger short-covering.

The market opened lower on pressure from the European bond market after European Central Bank officials made comments suggesting they might raise rates in the future. This is not surprising, because the European and U.S. economies are closely aligned. The report of interest this week is the Employment Cost Index, since wages are the biggest components of companies’ costs. Stay tuned.

Stock index futures

Volatility (as measured by the VIX) has come down again, signifying complacency in the market
The December S&Ps [SPZ9>SPZ9] backed off a little today after last week’s strong rally. The market is in a trading range environment again and volatility (as measured by the VIX) has come down again, signifying complacency in the market. Thursday (when the ECI report comes out) should be interesting. We don’t see any opportunities at the moment, but we will monitor prices closely until then.

Currency futures

It was surprising the market did not rally more–a possible sign this market wants to go lower

The December Swiss franc [SFZ9>SFZ9] and Euro [ECZ9>ECZ9] rallied modestly today on the comments from European Bank officials (see bond analysis, above) last night and a weaker U.S. stock market.

We were surprised the market did not rally more, and we see this as a sign this market wants to go lower. We were stopped out of our position last night on Globex. We will be looking to sell this market on a rally.

Next update: Wednesday, October 27, 1999.

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