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Macro

Lots Of Influential Data Out On The Asia-Pac Session But Still No Advances On the NZ Election


Morning Briefing October 19th 2017


A quiet calendar on Thursday begins with UK Retail Sales at 0830GMT. The metric has picked up recently following a subdued start to the year with improved demand attributed to a delayed bout of demand due to weakness in Q1 and Q2.

However, weakness is expected to creep in again in September with continued Brexit uncertainty still impacting consumer confidence combined with a real wage decline as inflation rises.

A lengthy quiet spell on the economic calendar ends with the first US release of the day in the form of Weekly Jobless Claims at 1230GMT. The level of initial jobless claims is expected to decline by 3,000 to 240,000 in the October 14 employment survey week after a 15,000 decrease in the previous week. Claims were at a level of 260,000 in the September 16 employment survey week.

The levels of initial and continuing filings remain elevated, particularly in the hurricane-impacted regions, but the overall level has nearly returned to pre-hurricane levels. The four-week moving average would fall by 5,000 in the coming week as that 260,000 level in the September 16 week drops out of the calculation, assuming the MNI forecast is correct and there are no revisions.

Also at 1230GMT Philadelphia Fed Manufacturing Index is released. The index is forecast to fall back to a still-solid reading of 21.0 in October following a gain in September to 23.8.

At 1330GMT Kansas City Federal Reserve Bank President Esther George is scheduled to speak on "The U.S. Economy: Rural and Urban Growth" in Atlus, Oklahoma, with audience Q&A.

The US Bloomberg Consumer Comfort Index is released at 1345GMT, followed swiftly by the US Leading Indicator at 1400GMT. The index of leading indicators is forecast to rise by 0.1% in September.

Positive contributions are expected from the ISM new orders index and consumer expected, offset by negative contributions from the surge in initial claims due to the hurricanes and slightly shorter factory workweek.

At 1430GMT US Natural Gas Stocks figures are scheduled to be published.

At rounding off the day at 2030GMT the Fed Weekly Money Supply data will hit the wires..

Global Economic Trading Calendar


Markets


SNAPSHOT: Below gives key levels of markets in the second half of the Asia-Pac session: - Nikkei 225 up 121.19 points at 21484.62  - ASX 200 up 4.723 points at 5895.2  - Shanghai Comp. down 12.058 points at 3369.214  - JGB 10-Yr future up 1 ticks at 150.37, yield down 0.3bp at 0.07%  - Aussie 3-Yr future down 5 ticks at 97.85, yield up 5bp at 2.12%  - Aussie 10-Yr future down 5 ticks at 97.205, yield up 4.5bp at 2.769%  - US 10-Yr future down 0.5 ticks at 125.04, yield down 0.54bp at 2.3411%  

US TSY/RECAP: Tsys ended Wed lower after choppy morning trade then quieter range with varied curve trades, front end sales, 10Y futures sales, then some front end dip buying. Thursday is Fed Chair Yellen's meeting with Pres Trump; time not known; may be published 11pm ET Wed on White House meeting schedule. - Tsys began weaker then NY Fed Dudley said there is "no reason" US expansion has to end of old age and said Fed to hike 3x in 2017. Heavy TYZ 10Y futures selling: 50K+ sold from 125-02.5 to 125-01.5. Stops hit on downturn, longs exit. Fast/real$ sellers in 5-30s, insur. portf sales in 10Y, 30Y; flattener unwinds too. Earlier mild FX-tied sales in Tsys as $ rose. Moderate high-grade corporate bond issuance. T-Notes last at 125-04 in Asia, 10-Year Yield last at 2.347.

US EURODLR FUTURES: Another quiet Asia-Pac session for Eurodollar, unchanged or very slightly up except for the blue back being slightly down, volumes are thin as the market awaits Fed Chair announcements, current Fed Chair Janet Yellen
will be the last to interview with Pres. Donald Trump ET Thursday.

STOCKS: The Nikkei 225 came into the lunch break in positive territory, up 140.8pts at 21503.85 heading for its most gains in 3 decades led by the real estate, materials and information technology sectors. This represents a 12-Day rally as we are still hearing current Japan President Abe is still set to win a majority in the coming election. - Aussie stocks also up on strong than expected Labour data, the ASX200 is up 5.02pts at 5895.10. - China data has though failed to improve the Hang Seng or any other Chinese stock indices despite a display of GDP data showing steady growth. - On the overnight Wall Street indices again shot up to record highs, the Dow Jones closed up 160.16 points - European stocks all closed up too, offsetting the miners dip seen affecting European stocks yesterday, even the IBEX35 closed up despite the Thursday deadline for Carles Puigdemont's the Catalonian President, to formally announce independence or not after presenting a vague decision last week.

OIL: Crude oil again relatively flat in Asia, last at $52.03 per barrel taking a small dip of $0.15 when Japanese Imports came in lower. - On the overnight crude oil dropped around $0.64 when inventories data came in showing a drop of 5.73mln barrels to 456.5 barrels.- Barclays said : "Hurricanes also took their toll on oil production, which was down over 1mb/d to 8.4mb/d. Despite this, the market remains fixated on events in Iraq. Reports suggest that production disruptions are building, with inventories at the Ceyhan port being drawn down quickly. Prices were also supported by continued chatter about OPEC leaning towards extending production cuts by nine months.

GOLD: Corporate earnings beat estimates, stocks rise, dollar rises and in turn, precious gold falls. Gold extends 4 days of losses on the session at $1278.65 down $2.43- More confidence in the likelihood of a Fed rate hike raised U.S Tsy yields, also contributing to gold declines.

FOREX: The dollar was broadly unchanged during the Asia-Pacific session, with the focus on the second day of speeches from the 19th Communist Party Congress. Dollar-yen trekked sideways within a Y112.88 to Y113.09 range, close-by option strikes again playing their pair in containing the range. Aussie rose from $0.7841 to $0.7872, another solid local jobs report seen underpinning. Aussie then faded late in the piece in sympathy with a softer Kiwi, last at $0.7848. Euro-dollar rose to $1.1817 as stopped were triggered above $1.1810, but then consolidated around $1.1800 as interest waned. Cable followed a similar pattern to Euro, stops were taken out above $1.3220 to see $1.3228 print, but then fell back to $1.3202 before demand again emerged. Cable was last at $1.3214. Focus is now beginning to shift to the European open and the release of UK Retail Sales for September.

Technical Analysis



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15004




Technical Analysis

Cocoa (CC) Consolidating Just Below Jun, Aug Highs


Cocoa (CC) edged higher yesterday, and appears poised in the next day or so to resume the upchannel (on the 4hr/daily chart).  CC bulls are not completely out of the woods though, as the daily MACD has just negatively crossed.  Bears will likely remain cautious today as the daily RSI and Stochastics are attempting to bottom.  Notably, last week's pullback was roughly 100 points, while the latest 3 day drop of 90 points was relatively less severe.  Weekly and 4hr RSI, Stochastics and MACD are rallying, bottomish or consolidating recent gains.  I am long from yesterday at 2081, after taking profit on Monday's position, and am targeting the red zone (on the daily chart) for Friday.  The amber/yellow zone is where I might place a stop if I was a swing trader (although in my personal account with which I seldom hold overnight I set my stops tighter).

 

Cocoa (ICE CC Dec17) Weekly/Daily/4hr

 

Click here for today's technical analysis on Ethereum, Soybean

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures and spot FX markets can be analyzed to enhance trading performance. Tradable Patterns’ daily newsletter provides technical analysis on a subset of three CME/ICE/Eurex futures (commodities, equity indices, and interest rates), spot FX and cryptocurrency markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


15003




Options

Prime Time for an Amazon Trade


How to play the internet retailer’s upcoming third-quarter earnings report.
 

The market always worries too much about Amazon.com’s stock—and that presents an opportunity for investors.

One of our favorite Amazon (ticker: AMZN) trades is selling put options on the stock, especially when the internet retailer is about to report earnings. Puts increase in price when stock prices decline. Many investors buy puts to hedge their stocks, and we like to meet that demand by selling them puts.

We like Amazon’s hefty put premiums and aren’t worried about having to buy the stock at a lower price, which is the key risk of selling puts.

Right now, though, we want to switch strategies ahead of the internet retailer’s Oct. 26 earnings report, taking a cue from Jim Strugger, MKM Partners’ derivatives strategist. He contends Amazon could be on the verge of entering a new, higher trading range after third-quarter earnings are released.

Over the past 52 weeks, Amazon’s stock has ranged from $710.10 to $1,083.31.

While selling puts is a viable strategy, put sellers leave a load of money in the market if the associated stock rises. After all, they pocket only the put premium. Call options, which give investors the right to buy stock at a certain price within a certain time, enable investors to profit from any rise in the stock’s price.

Strugger’s solution is to sell Amazon’s October calls and buy its January calls. The strategy—dubbed a calendar call spread—takes advantage of the stock’s inflated implied volatility levels ahead of earnings, while also positioning for an advance. The trade is intended to catch the drop in Amazon’s October options premium that should occur after earnings are released, while hedging and riding the stock higher with the more distant expiration.

With the stock around $1,006, Strugger recommended his clients sell Amazon’s October $1,050 calls that expire Oct. 27 and buy the January $1,090 calls. The spread cost about $12.

The strategy expresses a view that Amazon’s October $1,050 call will experience a sharp drop in volatility, enabling the call to be covered at a lower price. Meanwhile, the $1,090 call, which has lower volatility, covers the risk of the short call, and should increase in value if Amazon’s stock trades higher.

Amazon’s stock has moved less than 3% in response to earnings over the past four quarters, even though the implied volatility—the options market’s expectations of the move—was about 4.5%. The anticipation is that the short $1,050 call position can be covered at a profit, while the $1,090 call position would be allowed to mature in the market.

The trade will be a bit obtuse for some investors. If you count yourself among that group, just watch how Strugger’s trade evolves. There is no need to rush into the market to do anything, ever. If that applies to you, watch this trade. Studying strategies in real time is a great teacher.

Steven M. Sears is a Senior Editor and Columnist with Barron's. He is the author of "The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails." Mr. Sears previously reported for Dow Jones Newswires and The Wall Street Journal. He has reported upon most major modern financial events, including the Asian Contagion, the bursting of the Internet Bubble, the Credit Crisis, and Europe's sovereign debt crisis. He also was part of exchange executive teams that modernized the U.S. options market, and introduced electronic trading. Interact with him on Twitter @sm_sears.

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This article is from Barron's and is being posted with Barron’s permission. The views expressed in this article are solely those of the author and/or Barron's and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


15002




Securities Lending

SLB Update: Highest Borrow Fees


These were the 15 securities with highest borrow fees on 10/13/17.
 

 

The analysis in this article is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


15001




Technical Analysis

Cocoa (CC) Trying to Bounce Off Daily Chart Upchannel Support


Cocoa (CC) bounced almost 1% yesterday, refusing to drop to upchannel support (on the 4hr/daily chart) on the 3 day slide.  CC bulls are not out of the woods yet, as the daily MACD appears to be trying to negatively cross.  The seemingly bearish MACD signal may be a false one though as the daily RSI and Stochastics have already begun attempting to bottom.  Notably, last week's pullback was roughly 100 points, while the latest 3 day drop of 90 points was relatively less severe.  Weekly and 4hr RSI, Stochastics and MACD are rallying, bottomish or consolidating recent gains.  I am long from Monday at 2083, targeting the red zone (on the daily chart) for Friday.  The amber/yellow zone is where I might place a stop if I was a swing trader (although in my personal account with which I seldom hold overnight I set my stops tighter).

 

Cocoa (ICE CC Dec17) Weekly/Daily/4hr

 

Click here for today's technical analysis on Ethereum, Bitcoin

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures and spot FX markets can be analyzed to enhance trading performance. Tradable Patterns’ daily newsletter provides technical analysis on a subset of three CME/ICE/Eurex futures (commodities, equity indices, and interest rates), spot FX and cryptocurrency markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 


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