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We meant non-existent. There were absolutely no scheduled economic reports scheduled for today. The only piece if "fresh" information traders had to guide their actions was a circulated article from a German magazine that suggests the European Central Bank is considering a plan to cap relative yields on the debt of distressed Euro Zone members. Simply put, the borrowing costs for nations such as Greece and Spain, would be tied to some sort of "German rate plus determined risk premium". However, the next central bank meeting isn't until September 6th, so we likely won't get clarity until them.
Although we have nearly three weeks until the next FOMC meeting, there is already plenty of speculation. We are hearing widespread expectations for policy makers will extend their pledge for historically low interest rates into 2015, rather than the original 2014. Even further, it seems nearly half of analysts are looking for further credit easing of some kind by the Fed (possibly as early as the upcoming meeting).
We are slightly disheartened by the lack of a timely reversal in Treasuries, but that doesn't mean we have changed our mind. We continue to look for some sort of "rally out of the hole". If you don't want to be long, we suggest you avoid being a naked short...if things turn around, the squeeze will be swift and unforgiving.
Position
Trading Recommendations
Just as the idea of an ECB intervention of rates worked against Treasuries, it worked in favor of equities. Similar to last week's COT data, this week's CFTC report on net long and short speculative positions offered only minimal help. Both large and small speculators are comfortably neutral in regard to the large S&P futures contract. However, the e-mini stats reveal that small speculators are getting rather comfortable on the long side. This should warrant some caution for the bulls simply because there might not be many buyers left.
For instance, it is possible to buy the 2770 put and sell the 2700 put for a combined premium of $400. This provides a trader with risk limited to $400 plus transaction costs, and a max profit potential of $1,000 if the futures price is below 2700 at expiration.
Contact us if you have questions, comments or concerns about implementing such a trade.
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These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.