Decreased Volatility on S&Ps Leads to Short Opportunity
| PREVIOUS POSITIONS | ||||
|---|---|---|---|---|
| Market |
Long/Short |
Enter | size=2 color=000000>Exit | size=2 color=000000>P/L (per contract) |
| Sep. 99 T- bonds | Long | 113-19 | 114-02 | $468.75 |
| Sep. 99 S&Ps | Short | 1331 | 1342 | -$2750 |
| Sep. 99 Swiss franc | Long | .6710 | .6705 | -$62.50 |
CURRENT POSITIONS (AS OF 8/25/99) |
|||||
|---|---|---|---|---|---|
| Market | Date | Long/Short | Enter | Stop | size=2 color=000000>Target |
| Sep. 99 T-bonds | – | Flat | – | – | – |
| Sep. 99 S&Ps | – | Flat | – | – | – |
| Sep. 99 Swiss franc | 8/25/99 | Short | 1380 | 1400 | 1364 |
Note: All price levels are approximate.
T-bond futures
The September futures [USU9>USU9] rallied over a point today on the market’s belief that the Fed is done raising rates for the rest of the year. Not even the Durable Goods report, which was much stronger than expected, was not able to keep the bonds down.
We will look to do some possible buying in the next couple of days as the bulls have taken over the market for now. However, we do see bonds in a trading range environment with an upward bias.
S&P 500 futures
The September contract [SPU9>SPU9] was up today on the post-relief Fed rally. Although we agree the Fed will not raise hike rates until next year, a hike is a hike and we believe the stock market will trade in a range-bound manner now that we have bounced significantly off the lows.
Volatility has dropped off on the VIX (CBOE volatility index) from a high of 32 to a current reading of 20.67. We think there is a high probability of a pullback, and thus we established a short position at the 1380 area with stops in at the 1400 level. We will try to cover at the 1364 area tomorrow.
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| Figure 1. September S&P futures (SPU9), 15-minute bar. Source: Quote.com.
|
Currency futures
The September Swiss franc [SFU9>SFU9] and Euro [ECU9>ECU9] were weaker today as capital flowed back into the U.S. stock and bond markets. There were also comments made by European Central Bank officials about how the U.S. rate increase will not influence their monetary policy at the moment. This may be true for the short run, but we certainly don’t buy that argument long term. We will look for a buying opportunity in the next day or two as the market is getting oversold on long fund liquidation and political statements. Stay tuned.
Next update: Friday, August 27, 1999.
(Check “Today’s Schedule” every day on our home page to find out about additional updates.)