Home > August 2017 > August 8, 2017 Party like 2007!

August 8, 2017 Party like 2007!

August 8th, 2017

Well the market can care less about the slowing in China and Central Bankers coming to the end of the Road. The world, or rather Mom and Pop investors are flooding in and buying “good companies”. Speculators are at a record in selling short interests in the VIX. Does this make any sense at all? China Copper Import Data was flat MoM, even with the Rumors of China Banning Scrap Copper next year which has spiked up copper prices. Chinese Import/Export data missed estimates. Last, we have a WEAKER SWISSY!!! If the swissy is dropping against the euro, then the SNB doesn’t have to go in and buy ALL the US TECH companies it can. Doesn’t make sense at all?

August 2017

  • Trading_Nymph

    From Reuters..DERIVATIVES-VIX shorts hit new record
    Helen Bartholomew
    4 MIN READ
    LONDON, Aug 8 (IFR) – Net short positioning in the CBOE’s VIX volatility index futures has hit record highs as investors continue to position for a further decline in the index, despite it trading at historic lows.

    The latest Commitments of Traders report from the CFTC, released on Friday, showed that speculators including hedge funds and asset managers held a net short of -158,114 contracts – beating the previous record of -143,845, that was hit in mid-June.

    The data comes in spite of Wall Street’s “fear gauge” falling back into single-digit territory in recent sessions, defying an array of economic and geopolitical concerns. Two weeks ago the index touched 8.84 in intra-day trading – a record low – after the US Federal Reserve kept interest rates on hold.

    “It isn’t surprising to see the VIX where it is given that we’ve seen realised volatility at four or five for days in a row, but to have this low volatility regime is quite surprising considering geopolitical risk in Korea and Qatar and economic disappointment with Trump failing to deliver on his promises,” said an equity derivatives head at a European house.

    “We’ve never seen such uncertainty at the macro and geopolitical level and at the same time have the volatility of equities below the volatility of bonds five years ago.”

    The CFTC data show that 337,590 short contracts outstanding – a reduction of just over 1,000 contracts on the previous week – was offset by a dramatic slump in long positions. Contracts positioning for an upside jump in vol fell from over 200,000 to 179,476 on the week.

    Extreme positioning reflects ongoing demand for the volatility carry trade, which sees investors monetise the gap between realised and implied volatility. That gap has proven to deliver more lucrative returns in times of low volatility, as options implied vol is typically floored while realised vol can slump much lower.

    “Central banks have completely collapsed the level of sovereign bond yields and that has translated into corporate bonds and mortgage-backed securities so people do not have so much product to get some yield,” said the equity derivatives head. “People are reluctant to buy US equities given the high valuations so they are happy to sell volatility as a way to get yield, and the premium between implied and realised is still there.”

    According to data from Societe Generale, one-month realised volatility on the S&P 500 currently stands at a historic low of 4.1%, compared to at-the-money implied volatility of 7.9%. One-month VIX futures are currently trading at 11.13, according to CBOE data.

    OPTIONS RAISE ALARM

    Amid the apparent calm, however, investors are positioning for a potential volatility jump through the VIX options market. Open interest in VIX call options, which pay out when the index rises, stood at 466,000 – outstripping put options on the index by more than four times. That is close to the historic highs for the ratio, according to analysts at JP Morgan.

    That contrasts with put/call ratios on S&P 500 options, where downside bets have been rising for much of the year, but remain at twice the level of upside options and well below June highs.

    “There is more extremity in the former [VIX options] implying greater demand for hedging against equity tail risk or a volatility spike relative to hedging against a typical equity market correction,” said Nikolaos Panigirtzoglou, global asset allocation at JP Morgan. (Reporting by Helen Bartholomew

  • Trading_Nymph

    From Shanghai Daily…Positive factors despite slowing foreign trade
    Source: Agencies | 00:01 UTC+8 August 9, 2017 | PRINT EDITION
    CHINA’S foreign trade rose more slowly than expected in July partly due to weather conditions. Currency appreciation and a higher base also had an effect. However, economists said the outlook remained robust.

    Exports in yuan-denominated terms rose 11.2 percent year on year to 1.32 trillion yuan (US$197 billion) in July, slower than June’s 17.3 percent increase, data with the General Administration of Customs showed yesterday.

    Imports rose 14.7 percent to 1 trillion yuan, slower than June’s 23.1 percent growth.

    The monthly trade surplus stood at 321.2 billion yuan in July, up 1.4 percent year on year.

    For the first seven months of 2017, exports increased 14.4 percent year on year while imports rose 24 percent.

    In US dollar terms, imports rose 11 percent and exports rose 7.2 percent, slower than the market expectations of 18 percent and 11 percent.

    The slower growth was a result of a stronger yuan in recent weeks and a higher base in the second half of last year, said Bai Ming, a researcher with the Chinese Academy of International Trade and Economic Cooperation.

    The yuan has been on an upward trajectory this year due to a weakening US dollar and the Chinese economy’s steady expansion.

    Bai expects the pressure for appreciation to persist in the second half of the year, while predicting overall stable growth in foreign trade.

    Australia and New Zealand Banking Group said the slower trade growth in July was likely due to the hot weather and flooding in some areas, while the imports figures revealed a potential slowdown in demand for iron ore.

    The trade data did contain positive factors, ANZ said, as the value of exports edged down only marginally and the export outlook remains positive.

    Bloomberg chief Asia economist Tom Orlik said it was important to see the data movement in coming months before concluding that a deceleration had set in.

    “Trade data are volatile, and a miss in a single month doesn’t necessarily signal a change in the trend,” he wrote in an analysis.

    Orlik listed stronger consumption in the United States and Europe and a weaker yuan than a year earlier as positive factors for China’s export outlook, while cautioning that its share of global exports had already topped out and would be difficult to expand further.

    Morgan Stanley said in a note said that while exports and imports growth missed expectations, the bank expected export growth to reach its forecast of 9 percent this year due to strong external demand.

    “The stronger exports should boost domestic private manufacturing capital expenditure, cushion the impact of a declining credit impulse, and support a structurally higher industrial revenue growth,” the note said.

    China’s broad economy remains resilient, as indicated by other data including that on expanding manufacturing activity, said JZ Securities analyst Deng Haiqing.

    Deng described the combined trade growth in the first seven months as relatively high. “The economic momentum remains sufficient,” he said.

    With milder trade growth but still sound economic fundamentals, Deng said China was likely to keep its monetary policy “not too tight or too loose.”

    China set its monetary policy as prudent and neutral for 2017 as authorities try to balance financial deleveraging and support economic growth.

    In the first seven months, trade with the EU, China’s biggest trade partner, climbed 17.1 percent from a year earlier to 2.33 trillion yuan.

    Meanwhile, trade with the US, ASEAN countries and Japan went up by 20.6 percent, 20.9 percent and 16.9 percent respectively.

    Exports of machinery, electronics and labor-intensive products continued to expand in the first seven months, while the volume of steel exports dropped 28.7 percent year on year to 47.95 million tons.

    An indicator of the outlook for China’s exports increased from 41.5 to 41.9 month on month in July, signaling sound momentum.

    Huang Songping, a customs spokesman, said last month that foreign trade may face tough conditions in the second half due to a higher comparison basis, stronger international competition and uncertain global outlook in monetary policies, protectionism and commodity prices.

  • Trading_Nymph
  • panther341

    Hi TN – today might be an important reversal day. Look up short interest in equity – pretty low. No buyers of last resort.

    No guaranty on importance of today’s little reversal. LOL

  • panther341

    But for stupid – see AA today!

  • panther341

    PCLN – first reaction not good for bulls. But that is first reaction. It means shorts aren’t covering! It’s a big stock (pricewise) but not so huge market cap wise.

    DIS – likewise not a great reaction.

  • panther341

    The expected move in PCLN was about 83.00 – based on the price for the at-the-money straddle in the weekly options. Market makers not going to be happy.

  • panther341

    Ooops. FANGs. DIS ditching NFLX, plans new streaming service. http://www.reuters.com/article/us-walt-disney-results-idUSKBN1AO2C4?il=0

  • panther341

    And Glen Campbell died. RIP.

  • Trading_Nymph

    That is sad…Dementia is one rough illness

  • Trading_Nymph

    FWIW, after cutting cable I believe that streaming is the only way to go!!! There is so much content that is free out there…Cable Plays smell like major shorts.

  • Trading_Nymph

    That Boat is so loaded on one side.

  • Trading_Nymph

    OMG up 4%….yep market top.

  • Trading_Nymph

    did you see FOSL after earnings too…ouch.