What Are Traders Chatting About? The Japan-Induced 'Scalded-Dog' Formation...

JonesTrading’s Dave Lutz has a roundup of what traders are chatting about right now:

Good Morning! US Futures are in the “Scalded Dog” formation, running well over 1%. The late afternoon rally on the GPIF news squeezed higher in the overnight, as a double-dose of good news shot Tokyo nearly 5% higher to 7Y peaks (and Nikkei futures are up ANOTHER 2% this AM) – The BOJ said it would expand its annual asset purchases to Y80T from the prior Y60-70T. Most of the incremental buying would be targeted at JGBs but the pace of stock and property fund purchases would triple, while the GPIF confirmed moving domestic stocks to 25% (vs. 12%), domestic bonds 35% (vs. 60%), foreign stocks 25% (vs. 12%), and foreign bonds 15% (vs. 11%). In Europe, the DAX is up 2%, led by a nice rebound in the Financials, but volumes remain light. Over in Asia, the Ruble is collapsing again, despite headlines Ukraine, Russia Reach Deal on Gas Dispute — but the MICEX is still rallying, up 1.5%. Shanghai added 1.2%, but India leaps another 2% to new all-time highs. Aussie added 1% despite some of the carnage going on in the Miners. There is no global sector I could find in the red overnight — China fins among the worst performers, but still added 40bp.

The US 10YY is slightly higher, despite a persistent bid in Bunds — after that deflationary CPI print yesterday freaked out the Germans, and their retail sales for December just posted its biggest monthly fall since May 2007. The real story though is that Greenback, as it leaps near Y112, and looks to take out 2014 peaks against Euro. Stronger dollar is a huge headwind for commodities this AM — but it’s encouraging to see a bid under Industrial commods like Copper and Lumber, albeit small. Gold is not happy today off 2%, hit with deflation, a stronger dollar, and momentum/technical selling. Mixed picture in Energy — with the Oils off roughly 1% and nearing last week’s lows, while the Ukraine gas deal, coupled with cold weather, has that massive short base in Natty bidding it up almost 3%. Scheduled Catalysts today include PCE at 8:30, at 9:45 we get Chicago Purchasing Manager (Released 9:42 for paying subs), at 1 watch Natty/Oil on the Baker Hughes Rig Count, and 3:30 brings that “Commitment of Traders” data — Late tonight we get Chinese PMI.

We have a Russell and S&P month End rebalance today on the close — more details will be in WTAW — I’ll be watching today: REITS as Japanese property REITS leapt over 11% overnight / Watch for a sharp rebound in the SOX after MCHP’s guidance is much better than feared / Capitulatory selling in the Miners, as GDX/GDXJ are making all-time lows this AM / Oil ETFs with the commodity looking to go out October under more pressure — heavy short interest there, if Oil pops today, u will see those 3 ETFs squeeze / Natty — Due North, been saying it all week / Finally — look for people setting up in front of the “Good Harbour” rebalance that may occur Monday – Since the wild session on Oct 15th, The S&P has climbed 10%+ from a intra-day low, while the 10YY is 45bp higher. In what can only be a amazing coincidence, that’s when Good Harbour went to “25% large cap and 75% treasuries”

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