IBKR Quant Blog


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Macro

Risk Off Continues, Central Bankers Front & Centre


Morning Briefing June 18th 2018


Its a quiet Monday, with little in the way of data on both sides of the Atlantic.

The first data release comes at 1230GMT, with the publication of the NY Fed Business Leaders Survey.

At 1400GMT, the US NAHB Home Builder Index data will cross the wire.

With no other data scheduled for the session, central bankers are to the fore.

Bank of Canada Deputy Gov Lynn Patterson speaks at the, Industry Association of Canada and Institute of International Finance in Toronto, from 1645GMT.

At 1700GMT, Atlanta Federal Reserve Bank President Raphael Bostic to speak at the Rotary Club of Savannah in Savannah, with audience and media Q&A.

ECB President Mario Draghi speaks at ECB Forum on Central Banking, in Sintra, Portugal. The ECB gathering lasts for the next three days, with much of the debate likely to centre on the decision in principle to end the asset purchase programme in December.

Global Economic Trading Calendar


Markets


SNAPSHOT: Below gives key levels of markets in the second half of the Asia-Pac session: - Nikkei 225 down 241.31 points at 22610.65 - ASX 200 up 5.272 points at 6099.3 - Shanghai Comp. closed - JGB 10-Yr future down 0 ticks at 150.77, yield up 0.1bp at 0.039% - Aussie 10-Yr future up 2.75 ticks at 97.32, yield down 3bp at 2.663% - US 10-Yr future up 4+ ticks at 119.23+, yield down 1.46bp at 2.9059%

US TSYS: Risk assets have taken a hit in early dealing as the US-China trade issue dominates traders' thoughts, lending some support to fixed income, although liquidity is diminished with China & HK out on holiday today. - 7-Year paper has experienced some modest outperformance. - Back on Friday Fed non-voter Kaplan stated that he only sees three hikes in total in 2018, despite a median of four dots from FOMC (but he remains open minded re: a fourth hike); while outgoing NY Fed Pres Dudley came off more hawkish stating that the Fed needs to keep a check on growing inflation.

JGBS: JGBs have stuck to a tight range with futures going into the lunch break unchanged, while the longer end of the curve has given back a portion of Friday's gains. - This has ultimately led to some underperformance in Japanese paper vs. global peers ahead of this week's 5 & 30-Year JGB supply with no Rinban operations apparent today.

AUSSIE BONDS: The space has operated in familiar territory, edging a touch higher in early dealing this week as Tsys tick higher. Risk assets have taken a hit in early dealing as the US-China trade issue dominates traders' thoughts, lending some support to fixed income, although liquidity is diminished with China & HK out on holiday today. - The domestic 3-/10-Year yield spread continues to hover just above 55bp while the AU/US 10 Year spread trades at ~-25.0bp, as Aussie Bonds' outperformance persists. - 3-Month BBSW fixed around 0.1bp higher today, with the white and red Bill contracts last trading unchanged to 3 ticks higher, tracking Bonds. - The auction of the Nov '29 Bond (not in the 10-Year Bond future's deliverable basket) was well digested, as the bid to cover ticked lower alongside an increase in the tendered size when compared to the most recent auction.

STOCKS: Asia-Pacific stocks were lower in the main on Monday as US-China trade war worries hampered risk sentiment. - The Nikkei 225 shed 0.8% in the morning session as the utilities and materials sectors led the way lower, while consumer staples was the only sector to post (modest) gains. Australia's ASX 200 bucked the trend as the real estate sector led the charge, while telecoms, materials & energy weighed. - Hong Kong & China were closed for a market holiday. - Dow futures shed over 100 points, while the e-mini S&P lost 12 points.

OIL: Crude has fallen afoul of weekend reports that Saudi & Russia will push for an increase in OPEC+ crude production in Q3, although the likes of Iran, Iraq & Venezuela are pushing back against such suggestions. - OPEC+ producers will meet in Vienna later this week. - WTI's decline has outpaced Brent, with the former shedding $1.30 & Brent losing $0.80. - The latest Baker Hughes rig count data, released Friday, showed 1 additional US rig online in the most recent week.

GOLD: The yellow metal steadied after Friday's sharp decline, with risk off flows supporting gold, last trading just shy of $1280/oz.

FOREX: Risk off flows prevail - Risk off flows dominated in Monday's Asia-Pacific session, with JPY demand (particularly via the EURJPY cross) underpinning the broader theme as the US-China trade issue dominated traders' thoughts, although liquidity was diminished with China & HK out on holiday. - Elsewhere, USD was stronger vs. the majors although CAD managed to shake off the OPEC+ production inspired pressure from crude, and AUD/USD managed to move back into unchanged territory after printing within 15 pips of YtD lows. - NZD was the underperformer, owing to its sensitivity to Chinese trade and with NZ Q1 GDP data due later this week. - DXY needs to close above 95.131 to confirm another major uptrend.

Technical Analysis


BUND: (U18) 55-DMA Support Key This Week

*RES 4: 162.75 Bollinger band top
*RES 3: 162.15 High May 31
*RES 2: 161.75 High June 1
*RES 1: 161.52 High June 15

*PREVIOUS CLOSE: 161.00

*SUP 1: 160.85 Hourly resistance June 15 now support
*SUP 2: 160.51 21-DMA
*SUP 3: 160.22 High June 11 now support
*SUP 4: 159.32 55-DMA    

*COMMENTARY: Support emerging ahead of the 55-DMA combined with daily studies correcting from O/S provided the catalyst for an aggressive rally that eased bearish pressure. Bulls now look for a close above 162.15 to confirm focus on 163.03-164.19. Daily studies remain well placed for gains. Bears continue to look for a close below 160.22 to ease bullish pressure and below the 55-DMA to confirm immediate focus on 157.14-158.23 where the 100-DMA (157.98) is noted.
 

EUROSTOXX50: Above 3600.36 To Target 2018 High

*RES 4: 3600.36 Low Jan 31 now resistance
*RES 3: 3566.53 Low May 18 now resistance
*RES 2: 3560.56 High May 24

*RES 1: 3540.64 High June 18

*PREVIOUS CLOSE: 3505.02

*SUP 1: 3497.32 High June 5 now support
*SUP 2: 3489.83 21-DMA
*SUP 3: 3454.12 High June 8 now support
*SUP 4: 3422.03 Low June 8

*COMMENTARY: Bulls failed to capitalize on Thursday’s close above the 200-DMA with the sell-off Friday leaving the contract looking a little heavy. The 21-DMA remains key support to start the new week. Bears need a close below the 21-DMA to ease bullish pressure and hint at a move back to 3383.17 with below 3454.12 to confirm. Bulls continue to look for a close above 3600.36 to confirm focus on 2018 highs.

Eurex Futures Market Close


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MNI’s news services are now available via the IB Trader platform. Please click here to view our provider page or contact MNI directly on sales@mni-news.com or +1 212 669 6400 for our Americas sales team and +44 207 862 7408 for our EMEA sales team.

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

CME - Market Movers: 5/15 June OPEC Meeting


With Jim Iuorio, CNBC Contributor & TJM Institutional Services & Scott Martin, Fox News Contributor & Kingsview Asset Management

 

Never miss out on daily futures and options trading opportunities - Click here to Subscribe to In FOCUS Newsletter for Active Traders.

This video is from CME Group and is being posted with CME Group’s permission. The views expressed in this video are solely those of the author and/or CME Group and IB is not endorsing or recommending any investment or trading discussed in the video. This material is for information only and 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 by IB 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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Macro

Pension Partners - Are You Investing or Merely Speculating?


Are you investing or merely speculating?

Naval Ravikant had an interesting take on this most important of questions (see above quote). The deciding factor: whether you’re “excited” or “nervous” to see your asset going down in price.

Why in the world would anyone be excited to see something they own moving lower?

Because it is giving them the opportunity to reinvest interest/dividends and add new capital at discounted prices. If you have a long enough time horizon and a diversified portfolio, buying at lower prices will increase your long-term returns. Which is why a stock market crash is the best thing that could happen to young investors.

How do you know if your time horizon is “long enough”? Examine the odds…

Holding stocks for a day or a week is not much better than a coin flip. In that time frame, you don’t have the luxury of waiting for stocks to come back and any decline should make you nervous. In contrast, holding stocks for 20-30 years has never yielded a negative return, even for investors who bought at the peak in 1929 and held throughout the Great Depression. If that is your time frame you want stocks to go on sale – the earlier, the better.

Data Source for all Charts herein: Bloomberg, YCharts.

The big money in markets is made with patience and time. The longer the time horizon, the more time to compound, and the higher the expected returns.

Short-term speculation can at times lead to extremely large gains (ex: 17% in one trading day). If you find yourself in such a situation, understand that luck – not skill – is the driver. The real skill? Saving and investing for long enough to minimize the role of luck. This, unlike fortuitous short-term gains, is a repeatable process.

One appeal of short-term trading is the notion that losses are truncated. This is generally true, up to a point. The worst day in stocks (-20%) is far lower than the worse month (-43%) or worst year (-71%). But at the 5-year mark, this trend begins to reverse course, and by 20-years the worst return was actually positive.

The worst 30-year rolling return in the S&P 500? 559% – which equates to an annualized total return of 6.5%.

The next time the stock market has a large decline, check your emotions. Are you exuberant or despondent?

The answer will tell you if you are an investor or merely a speculator.

--

CHARLIE BILELLO, CMT

Charlie Bilello is the Director of Research at Pension Partners, LLC, an investment advisor that manages mutual funds and separate accounts. He is the co-author of four award-winning research papers on market anomalies and investing. Mr. Bilello is responsible for strategy development, investment research and communicating the firm’s investment themes and portfolio positioning to clients. Prior to joining Pension Partners, he was the Managing Member of Momentum Global Advisors and previously held positions as a Credit, Equity and Hedge Fund Analyst at billion dollar alternative investment firms.

Mr. Bilello holds a J.D. and M.B.A. in Finance and Accounting from Fordham University and a B.A. in Economics from Binghamton University. Charlie holds a J.D. and M.B.A. in Finance and Accounting from Fordham University and a B.A. in Economics from Binghamton University. He is a Chartered Market Technician (CMT) and also holds the Certified Public Accountant (CPA) certificate.

In 2017, Charlie was named the StockTwits Person of the Year. He is a frequent contributor to Yahoo Finance and has been interviewed on CNBC, Bloomberg, and Fox Business.

You can follow Charlie on twitter here.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

This article is from Pension Partners, LLC and is being posted with Pension Partners, LLC's permission. The views expressed in this article are solely those of the author and/or Pension Partners, LLC 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.


18525




Technical Analysis

Nasdaq - Technical Take


The S&P 500 sector movers:

                                                     

Nasdaq's Market Intelligence Desk (MID) Team includes: 

Charles Brown is Associate Vice President on the Nasdaq Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.

Steven Brown is a Managing Director on the Nasdaq Market Intelligence Desk with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Nasdaq Market Intelligence Desk. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Brian Joyce, CMT is a Managing Director on the Nasdaq Market Intelligence Desk. Before joining Nasdaq, Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).

Michael Sokoll, CFA is a Senior Managing Director on the Nasdaq Market Intelligence Desk with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing Nasdaq-listed companies with real-time trading analysis and objective market information.

This article is from Nasdaq and is being posted with Nasdaq’s permission. The views expressed in this article are solely those of the author and/or Nasdaq and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and 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 by IB 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.


18545




Macro

Franklin Templeton - Three Things to Think about When It Comes to Trade


As the Trump administration continues to threaten tariffs targeting a variety of imported goods, from electronics to washing machines to automobiles, many market commentators have suggested the US-led trade skirmishes could turn into a trade war.

While the fear of a potential trade war has heightened market volatility, our investment leaders haven’t been overly concerned that the trade disputes will derail the global economy—at least not yet.

Here, we highlight three things for investors to think about when it comes to global trade and the markets.

1. China is the US’ Largest Trading Partner

While there are a lot of misunderstandings about global trade, the fact is, China is the largest US trading partner in terms of goods, with US$636 billion in bilateral trade during 2017.1 And, as the chart below shows, the US trade deficit with China stood at US$375 billion, as of 2017.2 This imbalance—far larger than with other US trading partners on an absolute basis—is often cited as a reason for tariffs.

While perhaps the bigger global economic threat is a rise in protectionism, trade can’t simply be shut off between China and the United States, as Franklin Templeton Emerging Markets Equity’s Sukumar Rajah noted recently:

“This issue is another example of a trend of rising protectionism globally that remains a potential risk facing the markets. But despite the tit-for-tat measures we’ve seen between United States President Donald Trump and Chinese officials, we don’t think this war of words will affect China in the long term. In our view, the importance of bilateral trade for both sides should ensure they maintain stable relations. Without stable relations, it would be more difficult for Chinese or US companies to navigate complex international supply chains.”

-Sukumar Rajah, April 23, 2018.

2. Trade as a Driver of Global Growth

While global growth has been strong in the last few years, escalating trade tensions could have a detrimental impact. In a commentary in April, the World Trade Organization (WTO), the intergovernmental organization that regulates international trade between countries, warned of the impact of restrictive trade policies on global growth.

As the chart below shows, the WTO projects world merchandise trade volumes to increase by 4.4% in 2018. However, it said economic activity would likely “take a hit from escalating trade restrictions, which could result in more negative scenarios being realised.”3

“The strong trade growth that we are seeing today will be vital for continued economic growth and recovery and to support job creation. However, this important progress could be quickly undermined if governments resort to restrictive trade policies, especially in a tit-for-tat process that could lead to an unmanageable escalation. A cycle of retaliation is the last thing the world economy needs.”

-World Trade Organization, April 12, 2018.

Here’s what Franklin Templeton’s head of Equities, Stephen Dover, had to say:

“In our view, the underlying earnings growth we anticipate from the US tax cuts this year and going forward, along with falling interest rates in some countries, are likely to be bigger near-term influences [on global growth] than trade.”

Stephen Dover, April 12, 2018.

3. Trade Issues Have Ripple Effects

While most of the media focus in regard to trade so far has been on the relationship between the United States, its traditional allies and China, our investment professionals note there are many ripple effects on markets around the world.

In this article, Chris Siniakov, our managing director of Australian Fixed Income, explains why Australia’s goods and services sectors depend on China.

“So far, the net effect of Trump’s ambit claim and China’s response has been relatively mild. However, should trade-policy tensions escalate … then we would expect that China could respond more forcefully on services to offset a decline in goods exports and to maintain a net trade surplus.”

-Chris Siniakov, May 2, 2018.

In addition, Franklin Templeton Multi-Asset Solutions’ Stephen Lingard thinks the entire North American automobile industry would suffer if Canada and Mexico are forced to pay announced US tariffs on steel and aluminium.

As the chart below shows, as of 2017, Canada and Mexico are the top two US exporters of vehicles to the United States, so the industry is an important one for all three countries.

And who might pay the price of all these tariffs? According to Templeton Global Macro’s Michael Hasenstab, the end result could mean a big dent in consumers’ pocketbooks.

“I think underpinning this is the Trump administration’s view that these free-trade agreements were not good for the United States…I don’t think it ends trade, but certainly the price of goods…that’s going to be shifted from benefiting the consumer to maybe benefiting a narrower sector of manufacturers that make those [goods] within the United States. And so, prices go higher.”

-Michael Hasenstab, February 15, 2018.

Franklin Mutual Series’ Katrina Dudley thinks if companies can’t pass on higher costs to consumers, it could lead to near-term margin pressures.

“We think an outright trade war is a low-probability event, but it is a risk we continue to monitor. The imposition of trade barriers—and how they are implemented—is something we think needs to be considered, in particular the potential impact on supply chains.”

-Katrina Dudley, June 1, 2018.

The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.

This information is intended for US residents only.

What Are the Risks?

All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments.

To get insights from Franklin Templeton delivered to your inbox, subscribe to the Beyond Bulls & Bears blog.

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This article is from Franklin Templeton and is being posted with Franklin Templeton’s permission. The views expressed in this article are solely those of the author and/or Franklin Templeton and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and 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 by IB 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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