Dec 27. Staggering rallies!

–Just your run-of-the-mill 5% gain in SPX to end the year.  All stock index futures made new lows in the morning, posted outside days and closed at the highs, normally a sign of a bottom.  However, these key reversal days were notoriously fickle when they occurred at new highs.  So take everything with a grain of that new pink Himalayan salt.  

–This morning stocks have unsurprisingly given back some of the rally with a decline of 1.4%.  Extraordinary volatility.  Quite a change in 2018 from 2017, when, according to an article on MarketWatch “…there were just eight sessions with a 1% move.”

–Near eurodollar and FF calendar spreads didn’t reflect much change in sentiment.  In Fed Funds, Jan/Jan settled 3.5 (up just 1.5) and April’19/April’20 still closed negative, at minus 2.5 also +1.5 on the day.  However, the longer snapshot of the curve was steeper.  Red/gold pack spread popped to a new high of 20.5, rising nearly 3 bps.  The interest rate market is accepting the idea that hikes aren’t happening…so the curve is steepening.  If Fed officials begin to confirm that view, then the flattening might be over for good.  Red/green pack spread yesterday closed at a new high as well, at minus one-quarter bp.  This spread has been inverted since August. 

–New Home Sales and 7 year treasury auction today.  The last day of the year is Monday, which, unlike Christmas eve, will provide a regular, full day session of volatility and year-end price marking. Trim positions accordingly.

Posted on December 27, 2018 at 5:15 am by alexmanzara · Permalink
In: Eurodollar Options

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