Post Expiration Markets
Post Expiration Trading
With option expiration now behind us and the promise of yet another ill-fated Greek rescue package on the way, it seems to us logical that you might get a rally across the board. We have been sitting in technically oversold land for weeks now but the bad news kept a lid on anyone really wanting to draw a line in the sand, let alone get very excited about being long.
So, here’s the list of items that we drew up over the weekend thinking about being long or short:
- Equities now almost universally at a 10% retracement
- US and European Interest rates near crisis lows?
- Commodities now in fourth or firth day of all out beat down
- Program trading operations using sell side baskets making markets jittery
- Political games of Chicken being played in US and Europe – oh yeah and China
- De-leveraging is not happening – more write offs to come
- If the VIX is still near multi- year lows does that mean portfolios are un-hedged
- How much of a boost does weak $ give US GDP second revision?
- Swiss Franc holding above 115 v. US $
- Are the Japanese permanently impaired
- Global wage deflation = lack of consumption or awesome corp margins?
- Q2 Earnings are coming – Celebrate or hide?
The following chart shows you why we have been concerned about and predictive of such a slow down in the US and global economy. As the wave of earnings revisions begins to form, we are witnessing a single and similar pattern to last quarter.
However, this quarter not only will GDP reflect the slow down, corporate profits will too.
You’ve been warned – Again.
What we’re watching:
- Time to sell long duration bonds
- Time to sell credit risk?
- Small Caps lead out are they now leading down?
- More momentum for a China hard landing
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