Posturing From the Position of Power

Posted by Capital Trading Group on Jun 7, 2018 11:04:49 AM

         Last Friday the U.S. Labor Debt. reported the economy added 223k jobs in May, which was higher than the forecast amount of 190k. The unemployment rate fell to 3.8% the lowest since 1969, even hourly earnings rose to annual rate of 2.7%. The WSJ reported that Trump tweeted “looking forward” to the jobs report about an hour before the release, but can POTUS be held to the embargo rule??? We doubt it, but the tweet caused an early jump in yields as traders anticipated a better than expected number based upon the Presidents tweet.

          Also, out last week the FED reported on upcoming changes with Volcker 2.0. The WSJ reports that the prohibition on prop trading by banks would continue, but less stringent and more simplified enforcement for the rule would give bank managers more flexibility toward trader behavior.

          Just tossing this tidbit out and despite the recent pull back in Crude, we went to the gas station yesterday and Unleaded Gas, the premium version was $4.30! How’s that for summer driving budgets? Is there a difference in 87 or 93 octanes? Probably, but I bet most will forgo the more expensive Premium and buy the 87 version! Somehow, we tend to feel that the price of oil is manipulated, but that’s just us!

          The WSJ also had a great article on the price of Lumber today. One thing of note there, Lumber hit a high on May 17 at $639 and as of yesterday closed at $589, down nearly 8%. Is this significant? Can we correlate the price of Lumber in leading the way to another down leg in housing? It peaked in early 2005 as well, so this should be interesting? A break of this 8% threshold may see some CTA trend followers hop on board.

 

We also continue to see political posturing due to the heightened trade tensions, especially with China. Today China proposed a deal that included a $70 billion deal to purchase farm, manufacturing and energy products. The Trump administration wants to see upwards of $375 billion in trade deficit reduction and what it seems like to us, is that Trump is a master negotiator and will most likely get his way. After all, negotiations are about posturing from the position of power and considering China is fully reliant on exports and considering their growing leverage, we tend to think the U.S. holds the power. We also came across this chart from Bloomberg, which clearly demonstrates growing Chinese corp. debt and interest costs!

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Italy and More...

Posted by Capital Trading Group on May 30, 2018 1:30:12 PM

Nothing more wets the contrarian investors’ appetite then when these 3 little letters start making their rounds around the financial sphere. What three letters you ask? “CDS”, Some of you novices might not be old enough to remember the damage that these things did a decade ago, but I love a good rehypothecated insurance product, don’t you? What risk is there any more, markets just rise and rise and its cherry Kool-Aid stained T-Shirts for everyone right? Yea more like blood stained in disguise, masked under trillions of global central banks interest rate fixing, bond buying, #QE4EVR regimes. Anyhow lets just take a look at Italian 5Y CDS shall we:

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Interpreting Fed Speak & FOMC Projections, Crypto Craze and Repeal of Net Neutrality

Posted by Capital Trading Group on Dec 21, 2017 8:53:24 AM

Last week saw the final Fed meeting of 2017 and the final meeting with Janet Yellen as chair.  The FED raised rates another 25bp to put the top end of the Fed Funds range up to 1.5%. This move was widely expected and priced into the markets.  Here are the headlines:

  • FED SEES FASTER 2018 GROWTH
  • LABOR MARKET STAYING STRONG
  • MONTHLY BAL. SHEET RUNOFF TO RISE TO $20B IN JAN.
  • Median dot plot for 2020 rose to just over 3% for Fed Funds level
    (What policy makers think is coming in the future)

 

Yellen doesn’t feel that the equity markets are flashing any warning signs and doesn’t feel that the markets exhibit levels one would deem “frothy.”  Even though she didn’t use specific fundamentals or none at least that we can understand, it seems as if the FED simply views the upward move in the markets as “Job well done! Job well done alright, it only takes roughly $2 Trillion a year of increased global debt to keep this linear pig going, but who cares about debt, right? 

 

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Artificial Intelligence is Supplanting Humans

Posted by Capital Trading Group on Dec 13, 2017 11:59:16 AM

     What a week for Blockchain, that’s all we can say.  For all the hoopla circulating around the introduction of Bitcoin futures and all the endless blather of uncertainty, we feel that the CBOE futures came and went without a whimper.  The CBOE site was down for a bit, but overall the trading of Bitcoin futures, had zero effect on the overall Bitcoin price.  As we have stated for quite some time, Bitcoin should never be confused with any derivative, nor should any of our readers be confused about what we refer to as Bitcoin. 

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Bitcoin / Blockchain Mania

Posted by Capital Trading Group on Dec 1, 2017 2:39:37 PM

Wow what a ride in Bitcoin, Ethereum etc in the last day.  This really shouldn’t be a surprise considering the amount of new wallets created on Thanksgiving.  As we figured the Thanksgiving discussions convinced more than a few people to dive into the Hot Crypto Waters!  Bitcoin reached new heights trading up to nearly $11,300.  Then it proceeded to drop to nearly $9000 before settling in near $10k again.  If you think about it, pretty fundamental the move based upon the lack of supply and all the new accounts created in the last week as Coinbase has more users than Schwab now! Here is the chart:

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