http://social.stocktock.com/profiles/blog/show?id=2348194%3ABlogPost%3A11012&page=1#comment-2348194_Comment_11034

http://social.stocktock.com/profiles/blog/show?id=2348194%3ABlogPost%3A11012&page=1#comment-2348194_Comment_11034

http://social.stocktock.com/profiles/blog/show?id=2348194%3ABlogPost%3A11012&page=1#comment-2348194_Comment_11034

http://social.stocktock.com/profiles/blog/show?id=2348194%3ABlogPost%3A11012&page=1#comment-2348194_Comment_11034

Mid July low, then the 20/40 bull crossover roughly a month later, then the mid Sep 20/40 bear cross, and then October happened.

It looks exactly the same but this time the move appears to be more exaggerated.

HIGHLIGHTS

US November factory orders drop 4.6% – much worse than expected
US Service ISM in December 40.6 from 37.3 – better than expected
US NAR pending home sales drop 4% – weaker than expected
December 15-16 FOMC minutes: Some debate over range vs explicit level for Fed Funds rate

COMMENTS
Markets delivered another up day for equities – with technology leading – S&P500 ends up 0.8%, NASDAQ up 1.5%. Interesting point about equities is that the e-mini S&P500 contract has been up 8 days consecutively. Bonds saw another choppy day – with better TIPS auction leading to a small rally – but the majority of the day was about curve plays and profit taking and corporate debt issuance. Tomorrow 3Y $30 bn may be the driver as supply kinks the front-end. Commodities saw another up day and many pointed to the flip of gold to be critical part of making sense in a day where “risk-on” trades seemed to dominate. FX saw the USD reverse course like gold – even as the EUR remained weak against many crosses. So the debate rages over whether its USD gains or EUR weakness that matters. The USD lost from 1.33 to 1.3530 today – flipping with the weaker US data and accelerating with the FOMC minutes. It’s not a surprise as you mix the market moves that a reflation theme dominated – with commodities bid, TIPS seeing a good demand, and market in New York net convinced that the FOMC will do whatever it takes to reflate the economy. The overall look and feel for 2009 remains one of mixed signals – with correlations flipping – leading to new trading themes: 1) Value and volatility. Many have jumped on the EUR/GBP and EUR/NOK trades. The drop in overall volatility has led to a longer term PPP look for FX value. But with the VIX in 30s (38.5% today) – a level that many previously argued was a breaking trigger for overdone – maybe we are in for a new level of noise and illiquidity. EUR 1M volatility at 24% used to be viewed as unacceptably high – impossible to trade. But today many see the EUR as an opportunity – we have defined the range 1.33-1.3640 – with risk of a rebound overnight given the reflation theme. 2) Recession vs. Reflation. The overall data today was clear – manufacturing continues to be in a significant slump even as services showed some stability. FED reaction to economy remains one dominated by fear of a deeper slowdown making them happy to promise longer term low rates as a solution. The reflation theme revolves around the FOMC December 16th decision. 3) Bad headlines, good price action – faith in stimulus and FED? Much has been made of the list of negative headlines – just consider today’s from Lyondell US unit bankruptcy to Alcoa 15% job cuts to IBM warning of job cuts to horrible pending home sales drop and weak factory orders. The point is that the economic data is dreadful and the government promises staggering. Mix in the rest of the world and you get the point – the market wants to believe in the future. There is no real mixed signal here – just a straightforward hope that the present course and promised action will work.

CURRENCIES
Cross Low High
EUR/USD 1.3312 1.3535 Close: 1.3522
USD/JPY 93.67 94.65 Close: 94.03
EUR/JPY 125.18 127.15 Close: 127.15
GBP/USD 1.4503 1.4993 Close: 1.4939
EUR/GBP 0.9023 0.9221 Close: 0.9051
USD/CHF 1.1140 1.1280 Close: 1.1167
EUR/CHF 1.4975 1.5122 Close: 1.5100
AUD/USD 0.7100 0.7268 Close: 0.7251
USD/CAD 1.1761 1.1925 Close: 1.1797
NZD/USD 0.5858 0.5990 Close: 0.5985