CTA Trading Desk Morning Report
[7:00am ET] Good morning, Geoff here.
From yesterday morning:
“The Cyprus situation is extremely interesting. According to just about every news agency, old Russian money is deposited in the Cyprus banks and the KGB will be out for revenge should their money be “taxed” alongside the Cypriots deposits. We shall see if this outright confiscation of private capital will come to pass without repercussions, but I have to ask; how can this possibly go over well with the public? If it happens in Cyprus, it can happen anywhere, and I do mean anywhere.
This event has the makings of a catalyst worthy of squeezing the massive gold short position taken by hedge funds. At the very least, the CEF and GDX long trades posted here in the last few weeks continue to work and may have marked the lows.”
The US markets ended up shrugging off the Cyprus situation, but clearly this is a big deal. It is clear that this was the first attempt at confiscation – they chose a small country to see what happened. The Russian KGB deposits were probably a miscalculation that has turned this event into a bigger mess than they anticipated.
What should worry everyone is a bank run that starts small but grows to large proportions. As deposits are removed, the fractional reserve banking system comes into question. Thankfully, we have not seen panic but public perception can turn on a dime.
Here in the United States, Ben Bernanke has repeatedly stated that they have an exit plan from QE programs, but I see that as difficult at best. Could taking money from the public be part of that plan? I don’t want to sound like a conspiracy nut but I wouldn’t put it past them. Leaders in Washington have been discussing retirement saving reform that may include mandatory US Treasury purchases by participants in said programs. The US can’t buy its own treasury issuance in perpetuity, so why not force the public to place a portion of their savings in Treasuries as part of the reform? I can see that happening and people accepting it because; “it isn’t as bad as having money being confiscated like they did in Cyprus”. We shall see how this all plays out, but Social Security reform is coming and don’t be surprised if you are buying bonds against your will.
The people of the world should be paying attention to the fate of the Cypriots. Not only because the same fate may befall them, but because confiscation is wrong! Those citizens do not deserve to pay for the sins of the bankers who made themselves rich, yet have not gone to jail from their fraud. Those bankers knew what they were doing when they tranched bad mortgage paper, slapped a high credit rating on it and sold it to the world as high quality securities. The bottom line is that the people of a small country such as Cyprus should not be paying for the banker’s Long Island estates.
As I mentioned yesterday, this is bullish for gold and if I was one of those hedge funds short the yellow metal, I would be worried about the size of the exit door when price begins to rise.
The S&P 500 is starting to show signs of weakening, but since the all-time highs are only a few percent higher, I expect a test of that area before a sustained decline can begin in earnest, if at all.
Here are the indicators that pointed to last October’s decline:
You can see that cracks are starting to form in the S&P 500 as new highs were not confirmed in the majority of the indicators. The trend is UP but if you are risk averse, you might want to review your portfolio at this time. We continue to be long but very wary of the rally.
You can see that the public’s appetite for leveraged long positions spiked recently:
(chart courtesy of sentimentrader.com)
I guess they got tired of missing out on the rally.
Will the public be left holding the bag once again as they buy all-time highs?
Have a great trading day!
Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.
| Symbol | Name | Last Trade | Change | Related Info |
|---|---|---|---|---|
| ^ATX | ATX | 2,455.67 |  15.15 (0.61%) | Components, Chart, More |
| ^BFX | BEL-20 | 2,621.00 |  13.00 (0.50%) | Components, Chart, More |
| ^FCHI | CAC 40 | 3,791.36 | 34.11 (0.89%) | Components, Chart, More |
| ^GDAXI | DAX | 7,968.35 | 42.35 (0.53%) | Components, Chart, More |
| AEX.AS | AEX General | 350.90 | 2.11 (0.60%) | Components, Chart, More |
| ^OSEAX | OSE All Share | 524.87 | 0.25 (0.05%) | Components, Chart, More |
| ^OMXSPI | Stockholm General | 376.24 | 1.29 (0.34%) | Components, Chart, More |
| ^SSMI | Swiss Market | 7,797.30 | 33.07 (0.42%) | Components, Chart, More |
| ^FTSE | FTSE 100 | 6,435.94 | 21.98 (0.34%) | Components, Chart, More |
| FPXAA.PR | PX Index | 987.42 | 0.62 (0.06%) | Chart, More |
| MICEXINDEXCF.ME | MICEX Index | 1,462.82 | 0.00 (0.00%) | Chart, More |
| GD.AT | Athex Composite Share Price Index | 935.85 | 24.57 (2.56%) | Chart, More |
http://finviz.com/futures.ashx
http://finviz.com/fut_chart.ashx?p=m5&t=ES
http://finviz.com/fut_chart.ashx?p=m5&t=ZB
http://finviz.com/fut_chart.ashx?p=m5&t=DX
http://finviz.com/fut_chart.ashx?p=m5&t=GC
http://finviz.com/fut_chart.ashx?p=m5&t=SI
http://finviz.com/fut_chart.ashx?p=m5&t=CL
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
Cara 100 Company research notes from Seeking Alpha
Boeing (BA)
Mar19: 5:55 AM Boeing (BA) has won an order for 175 737-800 jets from Dublin-based Ryanair (RYAAY) in a deal worth $15.6B at list prices. The booking makes up for some of Boeing’s hurt for losing out on a $24B order from Indonesia’s Lion Air. 3:14 AM Boeing’s (BA) technical engineers have overwhelmingly approved a new four-year labor agreement, thereby averting a possible strike at a critical time for the company as it works to solve the 787’s battery problems. The authorization comes after the technical works rejected the same offer last month while Boeing’s engineers accepted it. The agreement will lower the firm’s pension costs, as it eliminates pensions for new recruits.
Coca-Cola (KO)
Mar18: 4:49 PM Coca-Cola (KO) looks to capture more ground between bottled-water and its sugary mainstay with the April 1 launch of “Fruitwater,” a line of fruit-flavored seltzer waters. The product will be housed in the company’s Glaceau unit which also produces fast-sellers Vitaminwater and Smartwater.
Juniper (JNPR)
Mar18: 7:02 PM Juniper (JNPR) has jumped on board the 100G optical bandwagon: a line card containing two 100G links has been introduced for Juniper’s PTX switches, which combine optical and data networking capabilities in the same box. Among the systems the line card works with is the new PTX3000, which delivers twice the density of the older PTX5000. In the wake of the announcement, Light Reading thinks Juniper, still best-known in the carrier realm for its routers, has a “very strong claim on being an optical company.”
McDonald’s (MCD)
Mar19: 7:17 AM McDonald’s (MCD) plans to shift its strategy in Russia to initiate franchising with Yum Brands, Burger King, and Subway all making a splash in the nation. Last year, the company saw revenue fall off in Russia.
Schwab (SCHW)
Mar18: 11:24 AM Schwab (SCHW) files for a lineup of “fundamental indexing” ETFs, with 5 of the offerings copycats of already-available mutual funds. Jokingly called by its creator Rob Arnott “active management in drag,” fundamental indexing looks at earnings, cash flow, dividends, and book value, and tends to favor smaller-cap stocks. The most popular current RAFI ETF is PowerShares’ (PRF) which has outperformed the SPY.
Starbucks (SBUX)
Mar19: 7:20 AM Starbucks (SBUX) buys its first coffee farm with the purchase of a 600-acre property in Costa Rica. The company plans to test new coffee varieties and do research at the location.
Vale (VALE)
Mar18: 5:05 PM Vale (VALE) has almost doubled its estimated cost of its potash project in Argentina to $11B, as exchange rate controls amid rampant inflation caused the Rio Colorado mine to become commercially unviable, CEO Murilo Ferreira says. Argentina’s government blasted Vale’s claims, but Barrick Gold (ABX), developing the Pascua-Lama mine, had to boost its cost estimate by ~70% within a matter of months.
Vad’s Catch of the Day
Kaimu’s Sound Money
Deron’s Daily ETF Analysis
Point and Figure on Canada
OptionOracle
Harp’s Roadmap
Cara on the Metalminers
Cara on the International Markets
CTA Trading Desk Mid-Day Report
CTA Trading Desk Post-Close Report