Dec 30, 2013. The start of a new cycle.

–Red eurodollar pack was the strongest part of the curve Friday, closing +3.  There was a new buyer of about 25k EDM5 Friday, enough to create an impact in an otherwise quiet market. Ten year yield closed just above 3%, essentially at the high of the year.  Many markets and spreads are at extremes for the year.  For example, 2/10 treasury spread hit a new high of 261.  Red/gold eurodollar pack spread is holding over 300 (closed just under 305).  The highest one year eurodollar calendar spread (currently EDZ15/Z16) closed at new high of 124. $/yen is at the high for the year at 105, and gold is closing near the year’s low around $1200.  Even the euro hit a new high for the year on Friday as stops were elected in a push toward 139. (Many gappy moves recently…bonds, copper, euro…). Stocks of course, are at new highs.
–Clearly the markets cannot maintain these trends in the face of the completion of the solar polarity flip. Right?  Intuitively obvious, especially when considering the enclosed chart of solar cycles (looks like Nasdaq!).

File:Solar Cycle Prediction.gif

–Any dang fool can see that the model is peaking right about now.  However, market reversals may lose some of their relevance if caused by solar flares that knock out the power grids and cause societal chaos.  Zap.  No more computerized models that trade in milliseconds.  Just back to the good old days of trading floors with paper cards and fat pencils (with erasers, another important aspect of the technology in the early days).
–All the best in 2014. -MNZ

Posted on December 30, 2013 at 5:11 am by alexmanzara · Permalink
In: Eurodollar Options

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