Hardening opposition

May 13, 2019

–The two sides are hardening in the US/China trade dispute, leading to a harsh reversal of Friday’s stock market rally.  Yuan has posted a significant new low at 6.874, having been around 6.71 through the early part of April.  While US stock indices have not taken out Friday’s early morning lows, US fixed income markets are making new highs with TYM having traded 124-10 as of this writing.  EDH21 is the highest ED contract on the strip, having settled at 97.88.  As of now, it trades 97.93, pushing closer to the 9800 strike which hasn’t been breached since late March.  Now it’s about how much pain each side can withstand.  I had watched Xi’s New Year address, and while I recall it as being generally upbeat and highlighting accomplishments, there were also somber warnings about working through upcoming challenges.  Trump points to new highs in the stock market. While China is the dominant concern, Turkey and Iran are possible flashpoints to keep in mind.

–Today, Clarida gives a speech relating to the Fed’s Policy Review.  Once again, we’ll hear about inflation targeting and allowing an overshoot to ‘catch-up’.  Last week Brainard floated the idea of yield targeting at the same venue and that’s sure to get a shout-out as well.  The rule of thumb that I am going with is that maximum pain for the Federal Reserve is right around a 20% decline off the high.  In SPX, that’s currently 2363 (High was 2954.  Friday’s close 2881).

–While oil is higher this morning copper is at a new recent low.  High open interest call strike in TYN is 124.5 with 90k open, which will probably act as a magnet on price.   

Posted on May 13, 2019 at 5:13 am by alexmanzara · Permalink
In: Eurodollar Options

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