Recap 4-30-13


Query: Can anyone think of a reason that will cause equities to correct more than 5% over the next month?


  • Chicago PMI declined to 49 vs 52.5 exp and 52.4 prev. This was the lowest reading since Sept 2009
  • US Consumer Confidence improved to 68.1 in April vs 61 exp and 61.9 prev
  • US CaseShiller Home Prices rose 1.24% MoM in Feb vs 0.9% exp and is now up 9.3% YoY
  • EU Unemployment hit a new all time high of 12.1% in March.
  • GfK consumer confidence in Germany increased to 6.2 from 6.0, above expectations of 5.9.
  • German Retail Sales declined -2.8% YoY in March vs -1.2% exp and -2.2% prev
  • The SNB increased their allocation to equities from 12% to 15%, buying 10bn CHF in stocks. The central bank also sold 3bn CHF each of USD and EUR and bought 5bn CHF in yen. FX reserves increased by 2.5bn, which cannot be accounted for and may be covert FX intervention by the SNB during the quarter.

Upcoming Data:

  • Wed: UKMfg PMI, US ADP, ISM, Oil Inventories, FOMC, Japan Monetary Base, China HSBC Mfg PMI
  • Thu: Italy Mfg PMI, ECB, US Trade Balance, Initial Jobless Claims, Australia Services PMI, China Non-Mfg PMI
  • Fri: UK PMI Services, US Employment, US ISM Non-Mfg
  • Mon: Australia Retail Sales, China HSBC Services PMI, Italy Services PMI, EU Retail Sales, CanadaBuilding Permits, Au Trade Balance
  • Tues: RBA

8 thoughts on “Recap 4-30-13

  1. The htf algo’s may have provided us a clue, wrt the white house thing.
    Judging but LB’s (TMM) complaints on stop execution………a few more positioned like that and yeeha, let May begin.

    1. Thanks. Yeah, that Twitter thing was freaky. But at the end of the day, the US market stayed strong, (even though I thought it would at least trigger some take profit trades) and suggested to me that there was still buying pressure…

    1. Perhaps, AJ. But historically, over the past decade, most corrections had a plausible ‘reason,’ at least to me. So the fact that I can’t think of one suggests that either we are in a new regime or I’ve ‘lost it’ somewhat. I’m hoping it’s the former!

  2. Patience grasshopper. If markets were genuinely rational, not many of us would be doing this as long as we have. Sometimes it really boils down to simple concepts: equity market DNA is structured in a way that favors long direction, which often leads to overshooting. This is especially emboldened when a good number of global equity markets have paled in comparison to US, which has likely generated some comparative strength surplus bid. Then there is the retail “late to the party” crowd, and their historical lack of rationale. MF flow has been showing heavier retail throughout recent momentum push. Would question the use of quantitative macro “reasoning” in order to timely anticipate a correction on what seems to be a rather short time-scale (ie 5% correction). With emphasis on short time-scale, seems like a tough racket in our TinkerBell QE environment. Of course you should treat my words with suspicion as I trade and interpret the market in an entirely different manner (high pace, larger volume independent ES/10Y trader). Perhaps some personal anecdotes will be of some relevance: I’ve traded roughly ~0.32% of net ES emini volume for 2013, non-HFT independent operation, intra-session only. Vapor liquidity post AP tweet gave insight to what cards the market may be holding. My measure of actual transaction fill quality has markedly deteriorated (~1.0 STD) in the last 20 sessions. Orderbook actual depth (not displayed) is noticeably thinner at specific times of ES session when accumulation algos have often throttled up over last ~3 months. Performance of a certain sector of my strategy portfolio has started to wane. All of these symptoms occur at high incidence rate within zones of intermediate market congestion. From a purely trading perspective, if there is a lack of convincing catalyst, I would not at all be surprised to see SP push 2-3% higher to probe conviction/maximize pain, then a hammer drops. Up at this altitude tied to weakening data, 9-11% correction would not be unreasonable. Copper may be getting ready to tell us something…keep an eye on 2.8-3.0 line in sand. Keep up the good work, enjoy reading the viewpoint of a completely different realm. Let’s see what Ben brings us in an hr…

    1. Thanks for your detailed reply – it’s very much appreciated. Intra session market microstructure is very much out of my circle of competence. I use a variety of macro and statistical data to trade equities on weekly time frames, and have had some success over the past several years. However, as you may be able to surmise, over the past several months, most of these indicators have essentially stopped correlating with equity index prices.
      I have a few hypotheses for why this has happened, but without confirmation, they’re just hunches. So in the absence of useful short term indicators, I am left with only the longer term indicators, which of course are mostly bullish, but also somewhat noisy.
      Anyway, thanks again for your thoughts!

  3. When asked what is most likely to blow governments off course, Harold Wilson is purported to have responded ‘Events, dear boy, events…’

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