Oct 31. Will it get scary this afternoon?
–Stocks continue to bounce this morning, approaching the initial spike lows set Oct 11: 2712 in ESZ and 6908 in NQZ which should now act as resistance levels. Fed’s liquidity withdrawal continues today with the roll-off of >$22 billion in maturing treasuries. Treasury futures are lower this morning in conjunction with higher stocks. It used to be that days in front of employment reports saw buyers of high gamma puts on the first red ED midcurve. This buying appears to have shifted further out the curve with a new buy of 27k TY2X (week-2 Nov, expires on the 9th, just after midterm elections). Traded 13, settled 14 ref TYZ8 118-25.0. There was also buying of 2EZ 9675/9662ps for 4 (3.75s) appears to have been rolling the long put into higher strike.
–Yesterday tens rose 2.5 in yield to 3.108. The old yearly high set in May was just over 3.12; this high was vaulted in early October but should act as a pivot of sorts; we’re currently around 3.14%.
–China’s manufacturing PMI signals slowing growth at just 50.2 (vs 50.6 expected). CNY this morning edges closer to 7 at 6.97. Japan holds policy steady. RBI’s head Urjit Patel said to be considering resignation as the independence of India’s central bank is threatened. Growth at the sacrifice of sound monetary policy? The Fed holding out so far, helping the dollar index which has edged to a slight new yearly high.
–US news today includes ADP expected 187k, Employment Cost Index +0.7 and Chicago Purchasing Mgr, expected 60. The cranes are still dotting the Chicago skyline, but sales don’t appear to be keeping pace.
