chek't trips
Morning Market Report-beware the Quad witches
This is a Quad-witching day and that means that four very large markets: stock index futures, stock index options, stock options, and single stock futures expire simultaneously.
While stock options contracts and index options expire on the third Friday of every month, all four asset classes expire simultaneously on the third Friday of March, June, September, and December. Whoever loaded up on long oil products: equity's, ETF's option (calls) and GLOBEX crude oil futures on the site of chuck and nancy celebrating upon leaving the WH yesterday are going to have some decisions to make. *Of note, anon asked if we can follow the money regarding who tried to make a profit in front of these events of the last 2 weeks. The answer is not until some paperwork is filed attached to qtrly reports. You certainly can see bulk positioning for any placed bets but narrowing down who did what and when is not something we see until the necessary forms and back-ups to what each firm or institution has done becomes available. Think back to 911 when many bets were placed on airline stocks and option puts on that side and long calls for the commodity. For years there were questions on who actually did this. Many years later it was uncovered that most of that was placed through Deutsche Bank and we even had a set of 'show' inquiry's that actually came to this conclusion. It was not taken any further as they were given a pass as it was determined that they, DB, could 'never be 'terrorists. If it were this easy to see who does what and when then we would be able to see some transparency in this system.
For an example see crowdstrike, the institutional positions are not available for this yet either. This is something that needs to change going forward-the ability to see who does what and when should not be a mystery, nor should we have to wait weeks or months to see this. As it stands now, we do and its just another tool that the system has to keep retail at a dis-advantage.
Gold had a nice little run up over $1400 last night however in the grand scheme of things it is not a huge deal-it does attract attention though. It keeps it 'on the radar' while the spike has now dropped back below the psychological barrier of a large round number it is still attempting to breakout of a cup and handle pattern.
It may need to have a go back down at $1350 or so to shake out any week longs and do a little consolidation-this is not a bad thing.
Watch oil today…they may not do much with it yet as we are on a weekend and typically things habben on sunday afternoon/evenings when the world-wide markets begin to stir from it's weekend off.
Options Traders Whipsawed as Yuan Leaps Most in Four Months
https://www.bloomberg.com//news/articles/2019-06-21/options-traders-whipsawed-as-yuan-takes-biggest-leap-in-months?
Global Stock Rally Softens On Quad-Witching Friday As Iran Tensions Spike, Gold Hits 6 Year High
The global stock rally that took all US assets, including stocks, investment grade and junk bonds, to all time highs while sending gold and Treasuries soaring on Thursday, fizzled as world stocks fell on Friday amid worries about a U.S. military strike against Iran, while the ongoing US-China trade conflict took the edge off the central bank-induced rally from earlier in the week.
calm your tits and look back to two, even three weeks ago: where it was and where it is now. In the past if you got that type of movement in an entire year that would still be good.
The scramble for anything that wasn't nailed down, pushed Gold futures above $1,400 an ounce for the first time since September 2013 on Friday and Treasuries were steady.
had that pop on the ten-year mentioned in last nights asian summary-thin markets are easy to do this in.
Friday is also quad-witching option expiration, when "strange", and often unexplained things happen in the market as volumes soar and traders are caught flat footed. As a reminder, there is a major option "pin" around around 2,950 in the S&P, so it is quite likely that any major moves away will be difficult to achieve, but if the S&P starts moving, it may accelerate rapidly in either direction.
the pin refers to making sure that the big payouts are not hit in any size-quite a game that is always played here.
moar breathing room but still printing negative yielding debt-costs you to actually hold these.
https://www.zerohedge.com/news/2019-06-21/global-stock-rally-fizzles-quad-witching-friday-iran-tensions-spike-gold-hits-6
https://www.kitco.com/charts/livegold.html
https://www.dailyfx.com/crude-oil
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
https://www.bloomberg.com/markets/stocks/futures
Global Negative Yielding Debt Soars By $700 Billion In One Day To Record $13 Trillion
one day
The "deflationary ice age" predicted by SocGen's Albert Edwards some 25 years ago is upon us.
The one-two punch of a dovish Draghi and Powell unleashing the "deflationary spirits" has resulted not only in the S&P hitting a new all time high, but in an unprecedneted flight to safety as investors freak out that a recession may be imminent (judging by the forceful jawboning by central bankers hinting of imminent easing), pushing gold above $1,400 - its highest price since 2013 - and global yields to new all time lows.
As a result, the total notional amount of global debt trading with negative yields soared by $700 billion in just one day, and a whopping $1.2 trillion this week, the biggest weekly increase in at least three years.
We won't paraphrase everything else we said in the context of this very troubling observation (see our latest post from yesterday discussing the surge in (-) yielding debt), we'll just repeat the big picture summary: such a collapse in yields is not bullish, or indicative of a new golden age for the global economy. Quite the contrary - it signifies that debt investors are more confident than ever that the global growth rate is collapsing and only central bank intervention may possibly delay (not prevent) the world sliding into recession. Worse, rates are set to only drop, because as Rabobank's Michael Every wrote yesterday "if the Fed do cut ahead then yields fall, more so at the shorter end; but if they don’t cut then yields still fall, but more so at the longer end (now around 2.02%)."
His conclusion: "Either way US (and global) yields are going to fall – which tells its own sad story."
https://www.zerohedge.com/news/2019-06-21/gloal-negative-yielding-debt-soars-700-billion-one-day-record-13-trillion?
where have you been buddy?-knew this weeks ago.
Existing-home sales rebound in May
Still competitive: homes stayed on the market an average of 26 days and prices were up nearly 5% compared to a year ago.
not the case in california though.
The numbers: Existing-home sales were at a 5.34 million seasonally adjusted annual pace in May, the National Association of Realtors said Friday.
Sales of previously-owned homes were 2.5% higher than in April, but 1.1% lower than the selling pace a year ago. The MarketWatch consensus forecast was for a 5.28 million annual rate.
What happened: The median selling price in May was $277,700, a 4.8% annual increase and the 87th-straight month of annual price increases.
The Northeast, where sales have been socked by high prices and the loss of the ability to deduct property taxes from federal returns, saw a 4.7% jump in sales in May. In the Midwest, sales were up 3.4%. In both the South and the West, sales ticked up 1.8%.
Big picture: The housing market may have reached a natural peak, but conditions are still tight after years of pent-up demand. At the current pace of sales, it would take 4.3 months to exhaust available supply, still well below the 6-month threshold that’s traditionally been considered a marker of a balanced market, even though inventory increased during the month. Properties stayed on the market for an average of 26 days in May, up a bit from 24 days in April but still a sign of a strong seller’s market.
What they’re saying: “The bigger picture here, we think, is that the market for existing homes is finding its feet after last year’s disaster in regions hit by the capping of state and local tax deductions,” said Pantheon Macros’ Ian Shepherdson on Thursday.
Changes to the state and local tax deductions initially harmed high-tax states like New York, Illinois and California, Shepherdson said, because borrowers “were unsure how much their homebuying power had been reduced, and sellers had no idea how aggressively to respond to the sudden disappearance of demand. Now that the tax changes are old news, though, the market appears to be finding a new equilibrium in the affected regions, albeit with lower prices and transactions volumes.”
Market reaction: The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +1.73% is hovering near a two-year low. That’s great for would-be home buyers, but it’s also a warning signal about the future of the economy. If growth stalls, riskier assets like stocks SPX, -0.15% are less attractive to investors. When bond prices rise, yields fall, and vice versa.
https://www.marketwatch.com/story/existing-home-sales-rebound-in-may-2019-06-21
Kashkari Hoping To Replace Powell? Says He Pushed For 50bps Rate Cut
While we already knew that St Louis Fed president and FOMC voting member James Bullard dissented with Wednesday's decision to keep rates unchanged, pushing for a 25bps cut instead, moments ago former Goldman and PIMCO employee, and current Minneapolis Fed president, Neel Kashkari - who is a non-voting FOMC member in 2019 but is voting again next year - said that he advocated for a 50bps cut this week.
Yes, for those asking, this is the same former banker who three weeks ago, on May 31 that we were "not quite there yet" when discussing the need for a rate cut. Since then the Mexican trade war scare was resolved and financial conditions eased… and now, as Bloomberg uses, "he thinks we need 50?"
In an essay posted both on the Minneapolis Fed website and on Medium, titled "A Strategy to Re-anchor Inflation Expectations", Kashkari writes that "In the Federal Open Market Committee meeting that concluded on Wednesday of this week, I advocated for a 50-basis-point rate cut to 1.75 percent to 2.00 percent and a commitment not to raise rates again until core inflation reaches our 2 percent target on a sustained basis."
Why? "I believe an aggressive policy action such as this is required to re-anchor inflation expectations at our target" and adds that "Given that it has taken years for the markets to learn our current reaction function, I don’t believe a rate cut or two in isolation will do much to boost inflation expectations. That is why I argued we should also commit to not raising rates from the new lower level until we see core inflation sustainably reach our target"
Of course, he is wrong: the market learned the Fed's "reaction function" long ago: it is to do precisely what the market demands.
He elaborates:
Since I became president of the Federal Reserve Bank of Minneapolis in January 2016, I have advocated against interest rate increases because I did not see sufficient evidence that inflationary pressures were building, and I believed there was still slack in the labor market. These views led me to formally dissent against rate increases in March, June, and December 2017. More recently, I supported the Committee’s decision in January 2019 to pause further rate increases.
In the past few months, the job market has slowed, wage growth has flattened, inflation has continued to come in below our 2 percent target, inflation expectations have fallen, and the yield curve has inverted.
Minneapolis Fed economists estimate that long-run inflation expectations are currently around 1.7 percent. While that may seem like a small miss from our 2 percent target, it means we will have less ammunition to respond to a future downturn because real interest rates, net of inflation, drive economic activity.
He also accuses the FOMC Committee of being "consistently too optimistic in forecasting inflation returning to 2 percent. Core inflation is the best predictor we have of future headline inflation. My proposed strategy keeps rates on hold for as long as necessary until we actually hit our target. I believe such a strong, credible commitment will boost inflation expectations, while not allowing them to drift too high. If economic conditions weaken or if inflation fails to return to target, this strategy does not preclude further rate reductions. This strategy will also support further job growth, stronger wage growth, and continued economic expansion."
Clearly Kashkari, whose dovish bias is hardly a surprise as together with Bullard, he has been the committee's biggest dove for years, has been spared the indignity of purchasing food, medical services, tuition or paying for college on his own personal card, and instead has had the benefit of the Fed's charge card, where all inflation seems to disappear. Unfortunately for the common person this is hardly the case, as we explained two weeks ago in "Lower Income Americans Are Begging The Fed For Less Inflation", and prior to that in "How The Fed's New Monetary Policy Will Crush America's Poorest" in which we showed that:
… the lowest income cohort generally experiences higher inflation than the highest income group, because they spend more income share on rent, food at home, and other inflationary items. This can be shown by comparing the inflation rate of the bottom 20% and the top 20% income distribution, reweighted by their spending shares. As shown below, inflation runs above for lower income households given their spending composition.
https://www.zerohedge.com/news/2019-06-21/kashkari-hoping-replace-powell-says-he-pushed-50bps-rate-cut?
this one was a W appointee and had virtually NO experience prior to being named to the TARP 'police' (see SIGTARP)-do not trust him at all-he also thought he was going to be governor of california too.
or they go off-line for 'maintenance' at peak driving times. all the time in the west
you assume they actually follow the rules. not bad advice but they will do it no matter.
Its the same as telling your broker that your long shares cannot be used for shorting…still done.