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IB Traders' Insight

Global market commentary from IBG traders and market participants.

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2015-04-17 16:39:17

Posted by
Kevin Kastner
Washington Deputy Bureau Chief for Economic Data Operations
MNI News
Contributor

Macro

MNI US DataWatch

With all the mid-month price and sales data out in the April 13 week, the April 20 will be fairly quiet, with homes sales data on Wednesday and Thursday the only top tier releases of the week. Initial claims on Thursday and durable goods orders on Friday will round out the week.

Here is a closer look at the key data in the coming week:

EXISTING HOME SALES FOR MARCH, WEDNESDAY, APRIL 22 AT 10:00 A.M. ET

The pace of existing home sales is expected to rise to a 5.02 million annual rate in March after rebounding in February despite a weather-related decline in the Northeast. These data represent closings for contracts placed during the harsh weather in January and February, so some weakness is expected. The supply of homes for sales rose slightly in February, but was still down from a year ago and well below the growth pace of sales.

WEEKLY JOBLESS CLAIMS FOR APRIL 18 WEEK, THURSDAY, APRIL 23 AT 8:30 A.M. ET

The level of initial jobless claims is expected to fall by 4,000 to 290,000 in the April 18 employment survey week after a 12,000 increase in the previous week. Initial claims were at a level of 293,000 in the March 14 employment survey week. The four-week moving average rose by only 250 to 282,750 in the April 11 week, breaking the recent streak of declines. The March 21 week’s 288,000 level will roll off the four-week average calculation as the current week's is added, which would result in a rise of less than 1,000 in the moving average if the MNI forecast is realized, all else being equal.

Seasonal adjustment factors expect unadjusted claims to post a sharp decrease in the April 18 week after a 53,967 jump in the previous week. In the comparable week a year ago, unadjusted claim fell by 19,611. This was a smaller drop than expected, so unadjusted claims rose by 21,000.

NEW HOME SALES FOR MARCH, THURSDAY, APRIL 23 AT 10:00 A.M. ET

New home sales are expected to decline to a 500,000 annual rate in March from the 539,000 rate posted in February, as weather was more favorable for home buying. Sales were up sharply from a year ago in February before seasonal adjustment, outpacing year/year supply growth. Supply of new homes for sales could see further gains if single-family housing starts remain on their generally upward path.

DURABLE GOODS ORDERS FOR MARCH, FRIDAY, APRIL 24 AT 8:30 A.M. ET

Durable goods orders are expected to rise 0.7% in March. Boeing reported 39 total aircraft orders in March, down from 72 orders in February. However, the movements of seasonally aircraft orders in the Commerce Department's report do not always follow the unadjusted Boeing data, as seen in both January and February. Orders excluding transportation are also seen advancing at a healthy pace after recent weakness.

 

MNI is a wholly owned subsidiary of Deutsche Börse Group.

This article is from Market News International (MNI) and is being posted with MNI’s permission. The views expressed in this article are solely those of the author and/or MNI 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.

2015-04-17 16:01:09

Posted by
Bryan Rich
Founder
fxtraderprofessional.com
Contributor

Forex

Charts That Argue for Higher Oil

The collapse in crude oil has created sharp revisions in forecasts and outlooks from the professional trading community in recent months. Many smart people have swung from oil bulls to oil bears. And there was no shortage of calls for oil to have a 30-handle in the coming months.

But the bears overlooked a few damaging data points in their case, and perhaps are now penning yet another revision to their outlook. 

First, crude tested and held a huge seventeen-year trendline back in late January.

You can see from my tweet in the chart above, this line touched for a fourth time in seventeen years in January. 

Crude proceeded to bounce $11.00, but by March, came back to revisit the low 40s again.

In my tweet above, you can see the same long term chart. On this second test, after edging out a new low by $1.55, oil has since bounced more than $15.00.

So where do we go from here for the most widely traded commodity in the world?

First, it should be said that two very influential and successful oil traders called for a bottom in the 40s.

Boone Pickens, a self-made billionaire energy trader, has predicted oil will hit $70 by the end of 2015 and as high as $90 in 12 to 18 months. His oil prediction is based on the thesis that U.S. energy companies will drastically cut back on production. That would decrease the supply of oil produced, eventually driving prices higher again. Pickens said the number of rigs drilling for oil in the U.S. recently declined at the second biggest weekly rate in more than 24 years.

And now there is another top energy trader calling a bottom, and a return to higher prices for the world’s most traded commodity. His name is Andy Hall.

Hall was a Citigroup oil trader who made billions of dollars for the bank energy trading arm, Phibro in the early-to-mid-2000’s. He was one of the first energy traders to load up on oil futures in 2002, when oil was sub-$30, on the thesis that a boom in demand was coming from China.

Hall reportedly made $800 million in profits for Citigroup in 2005 from his original bullish energy bet. He then made over $1 billion in 2008 for the bank as oil prices soared to $147 a barrel and then abruptly crashed. Hall profited handsomely from both sides of the trade and earned over $100 million for himself that year.

Now, Andy Hall runs a $3.2 billion energy hedge fund, Astenbeck Capital Management. In his recently published letter to investors, Hall — who has made fortunes pegging bottoms and tops in oil over the past 15 years — is calling the bottom in oil.

He thinks the chances of seeing new lows in oil here are “relatively small.”  And he says a return to higher prices may come “more quickly than many expect.”

So we have two of the greatest and wealthiest oil traders in the world going long oil in past weeks and calling for a return to higher prices sooner rather than later.

Technically, as you can see in the next chart, oil has cleanly broken out from an inverse head and shoulders pattern. That's a very bullish signal. And this pattern projects a move in oil up to $63. That would put crude oil back to levels last seen in early December of last year.

In my tweet above, you can see the same long term chart. On this second test, after edging out a new low by $1.55, oil has since bounced more than $15.00.

So where do we go from here for the most widely traded commodity in the world?

First, it should be said that two very influential and successful oil traders called for a bottom in the 40s.

Boone Pickens, a self-made billionaire energy trader, has predicted oil will hit $70 by the end of 2015 and as high as $90 in 12 to 18 months. His oil prediction is based on the thesis that U.S. energy companies will drastically cut back on production. That would decrease the supply of oil produced, eventually driving prices higher again. Pickens said the number of rigs drilling for oil in the U.S. recently declined at the second biggest weekly rate in more than 24 years.

And now there is another top energy trader calling a bottom, and a return to higher prices for the world’s most traded commodity. His name is Andy Hall.

Hall was a Citigroup oil trader who made billions of dollars for the bank energy trading arm, Phibro in the early-to-mid-2000’s. He was one of the first energy traders to load up on oil futures in 2002, when oil was sub-$30, on the thesis that a boom in demand was coming from China.

Hall reportedly made $800 million in profits for Citigroup in 2005 from his original bullish energy bet. He then made over $1 billion in 2008 for the bank as oil prices soared to $147 a barrel and then abruptly crashed. Hall profited handsomely from both sides of the trade and earned over $100 million for himself that year.

Now, Andy Hall runs a $3.2 billion energy hedge fund, Astenbeck Capital Management. In his recently published letter to investors, Hall — who has made fortunes pegging bottoms and tops in oil over the past 15 years — is calling the bottom in oil.

He thinks the chances of seeing new lows in oil here are “relatively small.”  And he says a return to higher prices may come “more quickly than many expect.”

So we have two of the greatest and wealthiest oil traders in the world going long oil in past weeks and calling for a return to higher prices sooner rather than later.

Technically, as you can see in the next chart, oil has cleanly broken out from an inverse head and shoulders pattern. That's a very bullish signal. And this pattern projects a move in oil up to $63. That would put crude oil back to levels last seen in early December of last year.

Finally, it should be noted that the sharp collapse in oil from the mid 60s had everything to do with a geopolitical chess match. With Russia flexing its muscles with the Ukraine invasion, the global response, by all appearances, seems to have been this: crush oil = crush Russia.

With the collapse in oil, came the collapse in the Russian ruble. Capital was leaving Russia at a fast pace and speculators were hammering away at the ruble. Russia was forced to raise interest rates to 17% to stem the speculative selling in the ruble, which hammered an already stagnant economy.

That calamitous economic fallout has resulted in a cease fire in Ukraine. The aggressive posturing by Putin has waned. And the ruble has recovered briskly. 

In the chart below, you can see the lag in oil relative to the ruble recovery. Given the relationship of the oil decline with the ruble decline since November, the evidence would suggest that oil should close this gap with further recovery. 

Join me next week, April 23rd at 12pm ET, in collaboration with Interactive Brokers and Nasdaq, for my presentation on the gold and dollar relationship, how certain currencies are impacted and how to express views using FX Options.

 

To read additional commentary from Bryan Rich please visit fxtraderprofessional.com or follow @fxtraderprofess.

 

This article is from FXTraderProfessional.com and is being posted with FXTraderProfessional.com’s permission. The views expressed in this article are solely those of the author and/or FXTraderProfessional.com 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.

2015-04-17 16:00:56

Posted by
Caitlin Duffy, CFA
Equity Options Analyst
Contributor

Options

Apple options volume

Traders exchanged more than one million option contracts on Apple (Ticker: AAPL) today amid a 1.2% dip in the price its shares. The 1.04 million contracts traded so far in the session compares to an average daily options volume for Apple over the past 10 days of roughly 750,000 contracts. The below snapshot displays the day’s option volume split out into call and put options across active strike prices. The chart includes monthly expiration options, while excluding weeklys. The 125.0 strike April 17 ’15 expiry calls and puts are most active today, but cease trading as markets close out another week this afternoon.

2015-04-17 13:01:53

Posted by
Russ Koesterich, CFA
BlackRock
Contributor

Macro

The Labor Market Recovery's Missing Ingredient

Why are so few Americans participating in the labor market even as jobs become more plentiful? Russ explains, noting two implications for investors.

 

Despite last month’s poor jobs report, the U.S. labor market is improving.

Job creation is running at the fastest pace since the late 1990s, and there is some evidence that wage growth is finally starting to accelerate, albeit modestly.

However, one key component is missing from the labor market recovery: rising labor force participation. In March, labor force participation declined 0.1% to 62.7%, the lowest rate since the late 1970s.

Why are so few Americans participating in the labor market even as jobs become more plentiful? I see three main reasons.

1. An aging population.

While the Great Recession inflicted significant damage on the labor market, much of the decline in the participation rate can be traced to the simple fact that the population is getting older. Older individuals tend to work less than younger ones. This is why the participation rate has been declining for 15 years. According to a White House Study, from the beginning of 2011 through the second quarter of 2014, the participation rate fell by 1.4 percentage points. Roughly 70% of the decline can be attributed to the aging of the population.

2. Fewer women working.

Male labor force participation has been dropping for decades, but for most of the past 60 years that decline has been offset by a steady rise in female participation. This trend seems to have come to an end. Female participation started to peak in the late 1990s, at around 61%. It plateaued at that level until the financial crisis. Since then, it has been steadily slipping. As of last month, female labor force participation was down to 58.1%, the lowest level since the early 1990s.

3. A mismatch between skills employees have and those employers need.

While a large part of the decline in participation is secular, there is a cyclical component as well. People typically drop out of the work force during, and immediately after, recessions. What is different this time is that those individuals are not returning to the labor force as was the case in past cycles. This is arguably a function of the unique nature of the last recession. Demand for workers has shifted. In many industries, construction for example, demand is still well below the pre-recession peak. Displaced workers also may lack the necessary skills for the new jobs, for example in healthcare.

Other factors may be contributing to the decline as well, including a larger percentage of younger Americans in college and a sharp spike in Americans on Social Security disability. Looking forward, while a stronger labor market should slow, or at least temporarily reverse, some of the decline, demographic trends and structural changes in the labor market suggest that participation rates will remain under pressure.

For investors, this has two critical implications: slower real U.S. economic growth and low rates. If aggregate hours worked grow more slowly because fewer Americans are working, absent a spike in productivity, real growth will be slower. And to the extent real growth slows, nominal growth is also likely to be slower, a trend normally associated with lower interest rates.

Source: Bloomberg

 

Russ Koesterich, CFA, is BlackRock's Chief Investment Strategist and Head of the Model Portfolio & Solutions business. He is a founding member of the BlackRock Investment Institute, delivering BlackRock's insights on global investment issues. For more of Russ’s weekly commentaries, visit the BlackRock site.
 

This article is from BlackRock and is being posted with BlackRock’s permission. The views expressed in this article are solely those of the author and/or BlackRock 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.

2015-04-17 11:51:04

Posted by
Steven Levine
Fixed Income Reporter
MNI News
Contributor

Fixed Income

MNI's U.S. Risk-O-Meter

New sales of investment-grade bonds rose this past week, as several overseas issuers took advantage of the quiet landscape amid earnings season blackouts. Credit quality was a little less diverse compared to the prior week, but there was still a deal for all levels of risk appetite. Average deal size rose to $1.0 billion from $794.56 million week-over-week, with large-sized deals from the Financials sector comprising the bulk of new supply. These offerings included a $5 billion, three-part bond from Bank of America Corp., a $3.0 billion, four-part issuance from Standard Chartered Bank, and a $3.0 billion note sale in two parts from China Cinda Asset Management. Supranational/Foreign Agencies also came to market with big transactions, including a $5.0 billion issuance from the European Investment Bank.

 

Keep pace with the latest corporate news with MNI's US Risk-O-Meter, a weekly recap of credit risk appetite!
For more information and a full version of the US Risk-O-Meter, email Steven Levine at slevine@mni-news.com.
Click here for more about MNI.

 

This article is from Market News International (MNI) and is being posted with MNI’s permission. The views expressed in this article are solely those of the author and/or MNI 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.

2015-04-17 11:10:17

Posted by
Caitlin Duffy, CFA
Equity Options Analyst
Contributor

Options

Volatility sellers step in as SPX slips

Implied volatility on the S&P 500 Index (Ticker: SPX) popped Friday morning amid a more than 1.0% decline in the index to the lowest level since April 9. The roughly 12% move higher in the reading of IV on SPX is perhaps the motivation for sellers of iron condors in the April 24 expiry options contracts. The trades were of different sizes and at different striking prices. One of the trades was constructed through the sale of the Apr 24 ’15 1875/1975 put spread against the sale of the Apr 24 ’15 2140/2210 call spread at a net premium of $0.55 per contract. The 1,500-lot trade makes maximum potential gains of approximately $82,500 as long as the SPX trades above 1975 and below 2140 at expiration next week. The smaller of the two condors yields a net credit of $0.50 per contract and involved the sale of the 1885/1985 put spread against the sale of the 2150/2210 call spread. The seller of the 500-lot iron condor stands ready to bank maximum possible profits of around $25,000 in the event that the index trades above 1985 and below 2150 at expiration. The chart below displays a one-week chart of the VIX, which rallied roughly 14% this morning to 14.44.

Chart – One-week performance of the VIX

2015-04-17 10:13:18

Posted by
Waverly Advisors, LLC
Technical/Quantitative Market Research
Contributor

Technical Analysis

Waverly Advisors Summary Stats

%Chg: percent change from the previous day’s close

SigmaSpike: the day’s change expressed as a standard deviation of the last 20 trading days. Values inside +/- 1.0σ are generally insignificant, +/- 2.5σ are large (for the volatility of the particularly instrument), and +/-4.0σ are very large.

C/DayRng: the current price as the pipe “|” within the day’s range. Can easily see at a glance if trading near high or low of the day. The day’s open is “:”. You can read more about this indicator in my book.

For sectors: analysis is done using the State Street Sector SPDRs (XLE, XLF, etc.) %Chg is the day’s change for the SPDR, and Excess is the Excess Return for the day (the SPDR’s return – the S&P 500 return).

 

For more information about Waverly Advisors please click here.

2015-04-17 10:08:57

Posted by
Waverly Advisors, LLC
Technical/Quantitative Market Research
Contributor

Technical Analysis

Waverly Advisors Update: Largest Advances / Declines

The individual stock tables are simply ticker lists showing the largest values for the following criteria:

SigmaSpike: Largest volatility-adjusted moves. (Note that this measure, though we might call it a “standard deviation spike”, does not assume that anything is normally distributed. You’ll see a handful of +/-4.0σ moves on many days, and +/- 10σ do happen.)

GapOpen: The stock’s opening gap, expressed as a SigmaSpike.

FromOpen: Stocks often reveal stronger trending character by their relationship to their opening print, rather than to the previous day’s close. This screen evaluates the move off the open as a SigmaSpike.
 

For more information about Waverly Advisors please click here.

2015-04-17 10:04:18

Posted by
Waverly Advisors, LLC
Technical/Quantitative Market Research
Contributor

Technical Analysis

Waverly Advisors Morning Update

Largest Rel Volume: Stocks with the largest multiple of their 20 day average volume. Note that the “average” value for this number will change as the trading day progresses, but the relative position of a stock within this list should show some persistence. These are likely stocks in the news, or stocks experiencing a sharp flow of new information.

Largest Rel Ranges: First, we express each stock’s daily range as a % of the 20 day average range, and then choose the 10 with the largest values of that measure. These are the stocks with the largest daily ranges, relative to their own typical daily ranges.

Gap Analysis shows stocks with open gaps (today’s high < yesterday’s low or today’s low > yesterday’s high) remaining.

Stocks with Open Gaps (for the Day): Many!

 

For more information about Waverly Advisors please click here.

2015-04-17 06:09:11

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor

Technical Analysis

Nikkei (NK) Rejected by Ascending Wedge Resistance on Weekly Chart

NK continued sliding gradually yesterday after hitting upchannel resistance late last week (on the daily chart), and can be seen in a steady downchannel (in the 4hr chart).  Of concern to bulls should be the ascending wedge that NK appears to be close to completing in the weekly chart, where it is in the current week being rejected at wedge resistance.  Daily and 4hr RSI, Stochastics and MACD are all sliding lower.

 

Nikkei (SGX NK Jun15) Weekly/Daily/4hr/Hourly

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity 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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We appreciate your feedback. If you have any questions or comments about IB Traders' Insight please contact ibti@ibkr.com.

Options involve risk and are not suitable for all investors. For more information read the "Characteristics and Risks of Standardized Options". For a copy visit interactivebrokers.com/disclosures or call 203-618-5800.

Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

The material (including articles and commentary) provided on IB Traders' Insight is offered for informational purposes only. The posted material is NOT a recommendation by Interactive Brokers (IB) that you or your clients should contract for the services of or invest with any of the independent advisors or hedge funds or others who may post on IB Traders' Insight or invest with any advisors or hedge funds. The advisors, hedge funds and other analysts who may post on IB Traders' Insight are independent of IB and IB does not make any representations or warranties concerning the past or future performance of these advisors, hedge funds and others or the accuracy of the information they provide. Interactive Brokers does not conduct a "suitability review" to make sure the trading of any advisor or hedge fund or other party is suitable for you.

Securities or other financial instruments mentioned in the material posted are not suitable for all investors. The material posted does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before making any investment or trade, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice. Past performance is no guarantee of future results.

Any information posted by employees of IB or an affiliated company is based upon information that is believed to be reliable. However, neither IB nor its affiliates warrant its completeness, accuracy or adequacy. IB does not make any representations or warranties concerning the past or future performance of any financial instrument. By posting material on IB Traders' Insight, IB is not representing that any particular financial instrument or trading strategy is appropriate for you.

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