Here comes April
March 31, 2020
–A couple of levels: ESM0 current 2630 and NQM0 7942. 38% retrace from high to low, ESM0 2641 and NQM0 7833. So ES is testing the first retrace, while Nasdaq is thru. 50% retrace levels are 2786 and 8204. For some reason, it seems as if the futures trading limits act as support and resistance levels. The initial down limit (trading halt) on 9-March when oil crashed $10/bbl was 2809 and in Nasdaq 8085. I would anticipate strong resistance in ESM in the 2790 to 2810 area, which should be a mid-April target even as US COVID cases likely peak around the same time.
–At the futures settle I marked tens down 6 bps at 67.6%. However, late in the day the long end sold off and treasury futures are somewhat lower this morning. There have been some stories about mortgage players getting hurt by the Fed’s aggressive buys, as prices increases led to margin calls on short hedges. I suspect that was part of the reason for yesterday’s price action. Implied vol firmed significantly from Friday’s levels. In eurodollars the curve was marginally flatter. Reds +0.625, greens +1.875 and blues +2.25. Peak contract on the curve is EDH1 at 99.70 or 30 bps, which compares to the 2-yr treasury yield of 22.5 bps. One notable trade was the exit of 100k EDU0 9887/9937 cs at 46.5 (settled 47.0 vs 9962.0). If I recall these were originally purchased between 3 and 5. EDJ0 currently up on the day at 9890. Low settle was 9878 or 1.22%.
–Visa notes a sharp contraction in credit card purchases. MS estimates a drop of 34% in Q2 GDP with a 2020 federal deficit of 18%.
–Having pierced $20/bbl and settled just barely above that level, CLK0 is seeing a modest bounce today and is now 21.45.
