Aug 3. Liquidity fest

Aug 3.  The dollar index fell below 81 yesterday, dropping about 3/4 of a percent.  Since April DXY has almost made a round trip…from 80 in mid-April to 88 in early June, now straight back down to 81.  Coincidentally the high in SPX was nearly 1220 in late April, then sold off with dollar strength to 1050 in early June, subsequently making a lower move to 1020-30, and has since been rallying, right along with weakening dollar.
–A depreciating currency has the effect of making things denominated in that currency more expensive, be they stocks or commodities.  And fixed income markets remain bid due to underlying weak economic fundamentals and the upcoming FOMC which may reveal additional liquidity measures
–There was size buying once again in in Green midcurve call butterflies.  E2Z 9825/9850/9875 c fly 5.5 paid for 5k, and E2Z 9837/9862/9875 c fly 6.0 paid for 25k by CSFB. 
–Crude oil also made a new high, breaking out of a 2 month range to the upside, gaining over $2.50.  Liquidity is finding its way into the markets.  
–Today’s news includes Personal Income and Spending (both expected +0.1%) and Factory Orders expected -0.5%.

Posted on August 2, 2010 at 7:18 pm by alexmanzara · Permalink
In: Eurodollar Options

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