Dave Lutz of JonesTrading has the top topics about which traders are talking today.
US Futures are holding yesterday’s gains (NDX closed at a 14Y high, S&P got back upside 50dma), as tailwinds from Europe continue. We saw a large unwind of protection yesterday into VIX expiry — and the possible antics of a large ETF rebalance in the market — yesterday they sold iShares Credit ETFs and bought iShares Sector ETFs (Mostly Industrials and Fins) — I’ll be watching for a move to the SPDR products — watch XLI (Industrials) and XLF (Fins) for explosive volume early. The DAX has gained 80bp, but has softened in the last few as German 10YY tests session lows .995% – Summer volumes remain, with most markets trading 35% recent averages in Europe. Over in Asia, Nikkei gained 80bp as they reacted to the softer Yen – China closes 8M high as Media stocks rallied on reform headlines — Aussie closed higher on the back of the miners. Watch those Miners, we continue to see GDXJ outperforming the metal — Building ETFs (XHB and ITB) will be active on HD#s and Housing Starts data, they have a ways to recent peaks — Airlines shrugged off Volcano headlines, and weak “chatter” of M&A in Japan causes sharp covering.
The US 10YY getting some legs to the downside as Germany’s 10 breaks 1% again. Does not look Stress related, as DAX futures remain near peaks. Leverage continues to comes into FX, with the Aussie $US rallying despite dovish minutes from their Central Bank. Doves getting louder in Jackson Hole, as we got more weak global inflation prints – Drop in UK Inflation hits the Pound, and Kiwi getting whacked on low inflation and weakening economic forecast. The DXY is about to make new 2014 peaks, a headwind for commodities — yet Industrial metals are in the green, and even Gold is holding a bid. The Oil complex is seeing a bounce right now into inventory data, while Corn and Wheat continue to be pressed to the downside. Housing numbers got Bonds hit yesterday — we get Starts and Permits today at 8:30 along with US CPI, we have a super-small POMO at 11, then API data tonight at 4:30. We have Expiry of VIX contracts today, WTI tomorrow
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