Morning Rage 04.03.2012

The EU and ECB released a report that suggests the Portuguese economy will face a larger economic contraction than thought, resulting in a debt-to-GDP ratio of 115% in 2013. In 2010, it was 93%. Ireland may also have trouble getting its house in order as the Irish Fiscal Panel noted that 2012 growth has weakened and the country would need extra budget cuts to get to its target. Reports from the FT overnight suggest that Italy’s budget continues to cause consternation for which the Eurogroup recommends additional austerity – not politically tenable for PM Monti at the moment. 

Not good news for Europe – but the market is taking it in stride. DJIA futures are down just 0.2%, while S&P futures are lower by 0.15%. NASDAQ futures are higher as a result of another 1.4% gain in Apple (AAPL) premarket trading – no doubt on news that Ashton Kucher will play Steve Jobs in a biopic. Crude futures, which saw large gains yesterday, pulled back – down 0.6% and back below $105 p/barrel.

The US$ is holding in ranges, close to 1.33 figure in EUR/USD, the 82 handle in USD/JPY, and 1.60 in GBP/USD. 

Meadows on the Markets 04.02.2012

Looking into tomorrow, S&P futures will look to 1,400, 1,408, and 1,411 as points of support. Markets look to be heading higher going into the earnings season, which kicks off with Alcoa next week.

Oil futures reversed recent weakness, popping 2% to $105 p/barrel. USD/JPY extended overnight weakness, dropping to the 82 figure – nearly 2 figures below the March high. EUR/USD is stuck in a channel, trading between 1.30 and 1.35 for much of this year. A rally above 1.35 could lead prices to extend to the 1.40 level.

By Mark Meadows

Trade of the Day (JCP) 4.2.2012

Break-even: I break-even on this trade if JCP closes at $33.70 by May 18, 2012.

Unprofitable: This trade is unprofitable if JCP closes under $33.70 by May 18, 2012.  The most I can the amount either spread can be worth $1.00 minus the amount I sold it for $.30 for a total of $.70.

Reason I Like This Trade: I wanted to take advantage of the fact that a customer bought 10,000 JCP May 38 Calls for $.91.  I thought this was the prefect time to get LONG, but I always want to define my risk vs reward and would prefer not to buy premium in this environment, so I sold a Put Spread.  

UPDATE 4.4.2012: Even with the huge sell-off in equities, I am sticking with this trade.  It is currently worth $0.32 for a small losing position.

UPDATE 4.9.2012:  With JCP selling off hard, this Spread is currently worth $.45.  I think the stock can rally higher, and I guess this was another Call Buyer to get Short the stock.  I will leave this spread on until earnings    

UPDATE 4.16.2012:  This Put Spread is currently worth $.49 and with the market uncertain, I might look to take this trade off right before earnings, but not until it.

UPDATE 4.23.2012  This Put Spread is worth $.60 and since it LONG premium I would take it off here.  


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Halftime Report for 04.02.2012

Oil, which fell sharply last week to test support above $100, is rallying 1.6% to near the $105 p/barrel mark. Even natural gas futures are seeing a bid today as the front-month contract gains 1%.

Despite some usual signs of risk, currency markets are offering a muted reaction. EUR/USD is down 20 pips on the day to 1.3320, while USD/JPY has dropped 70 pips to 82.17.

In unusual options activity, there is interest in Carmax (KMX) April $34 calls, seeing large trading volume over the open interest. KMX is trading up 0.75%, while the April $34 calls are higher by 18%.

Morning Rage 4.02.2012

 In overseas news, the FT is reporting that Europe’s largest banks will return funds from the ECB’s LTRO. According to the news, Italy’s UniCredit, France’s BNP Paribas and Société Générale, and La Caixa in Spain will begin repayment in December 2012 – the earliest possible date. EUR/USD is slightly lower, but holding above the 1.33-mark. USD/JPY continued its recent move lower, falling half a handle to 82.45.
Among commodities, crude futures are down $0.50 to the mid-$102’s. Seemingly in a perpetual decline, natural gas futures are down another 2%. Gold futures are lower by $5, trading at $1,667.50, now down over 12% from highs in September 2011. 
Today, at 10 a.m. ET, ISM will release the March figures for its manufacturing index, while the Commerce Department will release February construction spending. Markets are expecting ISM Manufacturing to gain to a reading of 53.

Meadows on the Markets 3.30.2012

Crude hit an intraday high shortly after noon – hitting a high of $104.15 before dropping $1 to close trading at $103.12. Natural gas fell another 1.3% in trading to a fresh 10-year low of $2.1220.

Some seasonalities to keep in mind for April:

– First day of trading in April is up 14 of the past 17 years
– April is historically the best month for the DJIA, averaging 2% gain since 1950
– 30yr TSY bonds make seasonal lows towards the end of April
– EUR has weakened in April for three of the past four years

By Mark Meadows 

Halftime Report 3.30.2012

Crude futures are holding below resistance at $103.80, but in positive territory for the session. Natural gas futures, which hit a 10-year low yesterday, are relatively flat on the session.

Here are some breakdowns at the moment of rough estimates for quarterly performance:

DJIA: +8.1%
S&P 500: +12.1%
NASDAQ: +19.0%
Crude: 4.7%
Natural Gas: -28.2%

Relative to the US$, here is a breakdown of currency performance. As you can see, JPY was the only major currency to cede ground against US$ over the quarter:

NZD: +5.6%
CHF: +3.9%
EUR: +3.0%
GBP: +2.9%
CAD: +2.2%
AUD: +1.7%
JPY: -6.9%

With end of quarter trade this afternoon, we could see a barrage of orders coming through towards the end of the day, adding to intraday volatility and perhaps presenting some interesting trading opportunities.