Where To Bank In Times Of Uncertainty
George Bush put the world on warning that “any
nation that continues to harbor or support terrorism will be regarded as a hostile regime.”
Bush predicted that the now-declared war on terrorism will be a
“lengthy campaign, unlike any other we have ever seen,” and
demanded the Taliban regime in Afghanistan to immediately hand over Osama
bin Laden, his lieutenants, and members of his Al Qaeda organization
— or else.
The threat of war, and its possible repercussions around
the world, spurred a massive flight to Swiss francs. The Swiss franc is
perceived as a safe-haven due to Switzerland’s reputation for political
neutrality, their reputation as trustworthy bankers, and their strong civil
defense. Today we saw a massive decoupling in the normally highly correlated
Swiss franc
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currencies usually move in tandem.
Tipping its hand by leading the Momentum-5
List, the Swiss franc bolted to a near contract high in reaction to spot
trading overnight. (The Swiss unit has been on the Momentum-5 List all
week). Going the other way, the
euro FX plunged in overnight trade. Both traded lower at the CME, but the
Swiss found support after filling the overnight gap and touching yesterday’s
close, then marched higher to recoup a Fibonacci 68.1% of the day-session’s
slide and close .0038 higher at .6329. Evidencing the massive decoupling, the
ECZ1 closed down .0125 at .9190.
The big down-tick in the euro FX bolstered dollar index futures
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index, and the ECZ1’s move was disproportionately dollar index
positive.
Meanwhile, the world’s second-largest economy also bunkered down and continued repatriating its national money in a flight away from overseas undertainty. The Japanese yen
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Bank of Japan had to intervene for a third time this week to stem the rise
of the yen, as investors bailed out of euros and dollars. The
large-scale interventions have had only a limited impact in dampening the
demand for yen. Basis December closed down .0055 at .8616.
Closing out the week with their fifth-worst weekly loss ever, stock index
futures gapped down on the open. As we’ve seen in gaps on either side of the
market in opening minutes, locals once again were fading the extremes, this
time buying the low. That provided an opportunity to get long
December Nasdaq 100 futures
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S&P futures
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into the session. In the S&Ps, the market made a double bottom on the
five-minute bars at 939.00. The ensuing rally, from down 45.00 to up 5.00 on
the session, was another example of extreme volatility. Equity futures
trailed off to negative finishes and new multi-year lows.
Ten-year notes
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and T-bonds
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buying.
Also in flight-to-safety moves, December gold
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silver
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saber-rattling, but sold off from their highest levels of the session.
Notice that silver, trading on a shortened time schedule, closed in a Slim
Jim and should be monitored for a move out of the consolidation. Since the
contract is on the Momentum-5
List, the move is likely to be higher.
NYMEX had hoped to resume its regular trading schedule, but difficulty
accessing the exchange, just blocks from the site of the disaster and the
only building running in the area, is making for long, difficult commutes
for traders and employees. Fifteen-year NYMEX floor trader veteran Lawrence
Altman was on Jon Najarian’s “Dr. J And The Traders” Webcast last night on
Webfn and like many, mentioned he has been spending two to three hours a day
commuting by ferry to and from the exchange.
Energy contracts continued declining on the view that a looming recession
and reduced flights from airlines will drive demand lower.