Category: zerohedge

By: Chris Tell at http://ift.tt/146186R

I recall a long time ago when I was easily excited by the unqualified love of young inebriated women, hedonistic experiences, fast cars, guns and seemingly unusual setups in financial markets, which promised fortunes if traded correctly.

I now find that I just enjoy a day with my kids and later a decent glass of red. Ah, simpler times! I’ve also realised that “unusual” setups in financial markets typically turn into nothing more than a loss of my capital. Betting on outcomes which seem “so damned obvious” isn’t as easy as one would think. Probabilities, as I discussed last week, are a key factor, as is risk/reward. 

This is of course as it should be. The markets are there to extract money from inexperienced, gullible “traders”. OK, some are experienced and just careless, but many are newly minted dreamers, set out into the world by some seminar “guru” who convinced them they could day trade their life savings into a small fortune. You know what they say about small fortunes, right? Financial Darwinism!

Given this backdrop, I had a recent phone conversation with our friend Tres Knippa. For those that don’t know him, Tres is a broker and trader on the floor of the Chicago Mercantile Exchange (CME). Clearly not a Johnny-come-lately. Tres shared with me some numbers.

By the way, paying attention to “numbers” and trading them intelligently is far superior to chasing unqualified love from long-legged women. Traded intelligently has been known to pay for supercars and penthouses, which will inevitably attract said long-legged women, so fear not!

The numbers Tres shared with me were:

• -89,756.78 – This number represents the overnight movement of registered gold OUT of inventory at Brink’s, and INTO Eligible Inventory at J.P. Morgan.
• 370,137 – This is the number of ounces of Registered Gold for delivery.
• 300,000 – This is the number of ounces, represented in gold contracts, that any one entity can own (3,000 contracts).
• 81% – The percentage of supply at the Comex which would be exhausted should just ONE entity put on a “Limit Long” position, AND demand delivery.

These should be very scary numbers for the folks running the Comex, but even scarier numbers for anyone not holding physical gold and trading paper!

Tres also shared the chart below with me. This is a graphical representation of the amount of paper gold versus the Registered Gold available for delivery:

Zerohedge recently posted an excerpt from a video Tres did here. Now, for those who are paying attention, the similarities between this little setup and an extended game of Jenga cannot be dismissed out of hand!

Zerohedge also posted a neat little story about the German’s only having recovered a paltry 5 Tons of gold from the US, after a year! You can read all about it here. In short they have repatriated just 37 tons of the 674 tons they have promised to repatriate. At least the Comex may get forewarning of any demand for delivery from the NSA, who is likely still monitoring Sausage Lady’s iPhone. Regardless, it’s unclear to me what they would do about it should that demand for delivery actually come down the wire.

Over 2 years ago when we put together our Japan report I mentioned to Tres that I preferred to go long Gold, short Yen. At that time his preferred trade was centered around the JGB options market, and to be long the USD short the Yen. Looking back he was right and I was wrong. The USD has indeed performed better, and likely will continue to outperform in 2014. Although up to this point it’s been more a factor of a breather in the gold bull market than USD strength.

I’m a gold bull, not a gold bug. I do believe that the long term trend for gold is bullish. This current setup clearly has the potential for some fireworks. Maybe nothing happens (doubtful), but the risk/reward setup is rather favourable from where I sit. Heads I win, tails I win.

Whatever you choose to do with the above information, I encourage readers to never ever confuse “trading for profit” with investing. I’m happy to trade futures contracts, buy gold in the FX spot markets – essentially trade paper in one form or another, but I would NEVER let that obfuscate the fact that I need to hold PHYSICAL GOLD as protection. Timing a profitable trade is like passing gas, it is largely a matter of knowing when it is inappropriate, and acting accordingly!

Grant Williams, the prolific editor of Things That Make You Go Hmmm… said it perfectly in his latest missive:

“Gold is a manipulated market. Period.

“2013 was the year that manipulation finally began to unravel.

“2014? Well now, THIS could be the year that true price discovery begins in the gold market. If that turns out to be the case, it will be driven by a scramble to perfect ownership of physical gold; and to do that you will be forced to pay a lot more than $1247/oz.

Count on it.”

Think about this as a parting thought. Would the Comex, if under pressure for delivery, ever void your positions in order to “stabilise” the market? Or, would that just not be palatable in the Land of the Free? As Grant said above, “Count on it.”

For the traders out there, Tres shared with me another anomaly in the gold markets which he’s been trading successfully for the last couple of months. I’m in the process of translating this from “trader speak” into English, and it will be sent out to members of our currently complimentary Trade Alert service shortly. You can get access to this and more by dropping your email here.

– Chris

via Zero Hedge http://ift.tt/1eoDPui Capitalist Exploits

Stocks and bonds disconnected today (again) with Treasuries pressing to lower yields – 30Y down 1bp to 3.73%, rallying 3 to 5bps off mid-Europe-session high yields to new 10-week lows. Stocks and VIX disconnected today as VIX trading higher all day – even as stocks opened energetically higher. Stocks and credit disconnected today (again) as the afternoon pump in stocks back from European-close turmoiling lows was not seen in credit at all. Equity indices were very mixed today with the Dow underperforming (after its exuberant run Friday) and the NASDAQ the big winner thanks to AAPL. Retailers continue to diverge from the market. The USD closed marginally lower from Friday's close (with AUD and GBP strength the drivers) and commodities diverged with oil and copper higher and gold and silver lower (though well off their smackdown lows by the close) – with their worst day of the year.

The S&P 500 rallied to near all-time highs to open the day-session… (and managed to creep to unchanged year-to-date)

…before tumbling into the European close –

…only saved by AUDJPY rally to close practically unch…

VIX and Stocks disconnected…

Credit and Stocks disconnected…

Treasuries and Stocks disconnected

As bonds rallied non-stop following the worse than expected German consumer confidence…

Commodities diverged notably with PMs suffering their worst day of the year so far…

Charts: Bloomberg

Bonus Chart: The last time we saw such a wide divergence between the market and the Retailers ETF was at the top in 2007… (h/t Brad Wishak at NewEdge)

via Zero Hedge http://ift.tt/1eoDNm2 Tyler Durden

Moments after the novelty news that Neil “Chump” Kashkhari will run for California governor (as a Democrat), the real PIMCO news hit: Mohamed ‘New Normal’ El-Erian is no longer a the ecompany.

From the press release:

Pacific Investment Management Company LLC (PIMCO), US-based Asset Management subsidiary of Allianz, has reorganized its leadership structure. Mohamed El-Erian, Chief Executive Officer and Co-Chief Investment Officer of PIMCO, today has resigned from his functions effective mid-March and will leave PIMCO at the same time. He will stay on the International Executive Committee of Allianz and will advise the Board of Management of Allianz SE on global economic and policy issues.

 

Mohamed El-Erian will directly report to Michael Diekmann, CEO of Allianz SE.

 

William H. Gross, founder of PIMCO, will remain Chief Investment Officer.

 

Portfolio management will be strengthened by the appointment of the Managing Directors Andrew Balls and Daniel Ivascyn as Deputy Chief Investment Officers.

 

In today’s meeting, effective as of the above-mentioned date, PIMCO’s Managing Directors also elected Douglas Hodge, Managing Director and currently Chief Operating Officer of PIMCO, as Chief Executive Officer and Jay Jacobs, Managing Director and currently Global Head of Talent Management, as President. Craig Dawson, Managing Director and currently Head of PIMCO Germany, Austria, Switzerland and Italy, will assume the position as Head of Strategic Business Management.

Is this an indication that the bond pessimism has topped out, or does it simply mean that it is now time to move on from the New Normal to the New New Normal

via Zero Hedge http://ift.tt/1eoDKGR Tyler Durden

Some of us stopped believing in fairytales long ago and then there were those that never thought that Goldilocks ate anybody’s porridge. So, there are two types of believers. Those that did and now don’t anymore because they have grown up and those that never ever did have the wool pulled over their eyes. It’s the same with the economy these days. Either you believed that it was getting better and listened to the propaganda emanating from the once-hallowed portals of the statist politik bureau of the government or you never believed a word of what got spun by the spinners and the media-controlling decision-makers that are there to eat your porridge and sit in your chairs (even lie in your beds). The latter have always thought it was all just a load of old Tom Cobbley from the start.

So is the economy getting better or is it a fairytale dream?

Who knows the answer to that question today? Well, if we believe the International Energy Agency (IEA), then the economy is getting better around the world since oil consumption is increasing. It has been forecast to increase and will outstrip even shale oil production which is most certainly taking off in the USA today and is set to do the same elsewhere (in the UK, for example). Whether we believe the IEA is another matter entirely, but it is the organization that advises the largest energy-consuming countries in the world on their policies regarding energy consumption and production.

• The IEA has just increased it forecast of demand for oil from OPEC countries by 200k barrels per day, now standing at a total of 29.4m barrels per day.
• It has also stated that this year oil consumption should increase by 1.3m barrels per day. 
• The US is forecast to increase oil production by 780, 000 barrels per day by the end of 2014. 
• This increase offset the drops due to civil unrest in Libya (sometimes falls in production of up to 10% were being experienced).
• There were also drops in production from Iran as sanctions were still being imposed (a drop of 320, 000 barrels per day; although the drop was largely reversed towards the end of the year with the warming of relations with Iran). 
• The US mainly benefited from that fall in production by upping their own levels. 
• Not only has there been a rise in the projected level of production for 2014, but this will consolidate last year’s increase of 990, 000 extra barrels per day being produced in the USA in 2013. 
• That was one of the largest annual growth rates for the country.

Demand for oil has increased so much over the past few months in the world that the reserves have been almost depleted and OPEC will have to pump more in order to keep up with the growing rate of demand. Oil stocks in the Western world are reported as having plummeted by 53.6 million barrels last November. That is the highest level of depletion since 2011.

Brent crude oil is trading at $107 today. That’s just lower than the $108.70 it was trading at in 2013. In 2012, it was at the $111 mark. Are we in for another increase in oil this year? If we are to believe the IEA, we are. Oil is set to rise.

Whatever happens in the future and whether the economy takes a turn for the better (finally, some might hasten to add), we might just well read behind the lines and see the true meaning of the fairytale that is being spun. Fairytales are intended to teach us something. This one tells us that when the closing lines are called, the same old people will be reaping the benefits. The oil companies will be raking it in as the price of all goes sky-high. Once upon a time, we were surprised when good old Texas Tea hit $100 a barrel. Now, it doesn’t even wake Goldilocks up from her sleep.

And they lived happily ever after?

Originally posted: Oil Set to Rocket

You might also enjoy:Working for the Few | USA:The Land of the Not-So-Free 

via Zero Hedge http://ift.tt/1dN7SxL Pivotfarm

It was back in December 2012 when we summarized the biggest failing with the Eurozone: a continent in which due to the lack of a flexible currency (also known as a gift to Germany and what otherwise would be a very, very expensive Deutsche Mark) the member nations were unable to devalue their way out of depression. Namely, that absent the ability to engage in external devaluation, Europe’s troubled nations (i.e., most of them) had only one option: internal devalution, also known as plunging wages.

Here is what we said:

Most European countries (including France) face a desperate need for external devaluation, which is impossible under a monetary union, leaving only internal devaluation as an option. This is where the much maligned concept of austerity comes in:  from a macroeconomic perspective, austerity is not so much an exercise at moderating the pace of debt increase (as neither Spain nor Italy have reduced their rate of debt issuance), but of gradually becoming more price competitive with Germany: a key outcome that will be needed for the Eurozone to have any chance of survival, i.e., lowering sticky unemployment rates from levels that virtually assure social “disturbances” in the months and years ahead.

 

 

And herein lies the rub: because while protests against “austerity” (which as we observed recently has still not been truly implemented in Europe, and certainly not in Portugal or Spain) are a daily event in most PIIGS nations, “you ain’t seen nothing yet.“ The reason: to achieve the unavoidable macroeconomic rebalancing, and to collapse the spread between soaring labor costs in the periphery and those of Germany (see chart below), the bulk of European countries will need to see wages collapse by anywhere between 30% and 50% to compensate for the lack of state-level currency devaluation optionality. And yes, this includes France.

This much is now accepted by all. Our conclusion, however, demanded more: an actual admission from the brutal oligarchs of the artificial monetary union whose only purpose -like everything else in the New Normal – is to facilitate the transfer of wealth from the poor to the rich.

… telling a continent, which in its desperation is hopeful and confident that the worst is behind it (as its lying politicians take every opportunity to note) that the most acute of standard of living collapses is yet to come, is borderline cruel and unusual. So we will just keep our mouths shut and let Europe’s politicians bring this depressing message to their people. We are confident the reaction will be more than dignified.

Well, today the unthinable finally happened when the following stunner was released by László Andor of the European Commission, in a press release discussing the “Employment and Social Developments: Annual Review highlights need to address risks of in-work poverty“:

Social dimension of the EMU

 

The still growing macroeconomic, employment and social divergences threaten the core objectives of the EU as set out in the Treaties, namely to benefit all its members by promoting economic convergence and to improve the lives of citizens in the Member States. The latest review shows how the seeds of the current divergence were already sown in the early years of the euro, as unbalanced growth in some Member States, based on accumulating debt fuelled by low interest rates and strong capital inflows, was often associated with disappointing productivity developments and competitiveness issues.

 

In the absence of the currency devaluation option, euro area countries attempting to regain cost competitiveness have to rely on internal devaluation (wage and price containment). This policy, however, has its limitations and downsides not least in terms of increased unemployment and social hardship, and its effectiveness depends on many factors such as the openness of the economy, the strength of external demand, and the presence of policies and investments enhancing non-cost competitiveness.

So there you have it, not from some fringe blog or some radical, foaming in the mouth euroskeptic, but from the bastion of that most artificial construct of modern times itself: a “united Europa.”

And now, we hold our breath for the reaction from the general public upon their realization that for the past decade they were opnely lied to every single time a politician opened their mouth, and all they have to show for it is record high unemployment and the worst standard of living for most (if not for the top 1% – they have never had it better) in history.

via Zero Hedge http://ift.tt/1aISzjQ Tyler Durden

It was back in December 2012 when we summarized the biggest failing with the Eurozone: a continent in which due to the lack of a flexible currency (also known as a gift to Germany and what otherwise would be a very, very expensive Deutsche Mark) the member nations were unable to devalue their way out of depression. Namely, that absent the ability to engage in external devaluation, Europe’s troubled nations (i.e., most of them) had only one option: internal devalution, also known as plunging wages.

Here is what we said:

Most European countries (including France) face a desperate need for external devaluation, which is impossible under a monetary union, leaving only internal devaluation as an option. This is where the much maligned concept of austerity comes in:  from a macroeconomic perspective, austerity is not so much an exercise at moderating the pace of debt increase (as neither Spain nor Italy have reduced their rate of debt issuance), but of gradually becoming more price competitive with Germany: a key outcome that will be needed for the Eurozone to have any chance of survival, i.e., lowering sticky unemployment rates from levels that virtually assure social “disturbances” in the months and years ahead.

 

 

And herein lies the rub: because while protests against “austerity” (which as we observed recently has still not been truly implemented in Europe, and certainly not in Portugal or Spain) are a daily event in most PIIGS nations, “you ain’t seen nothing yet.“ The reason: to achieve the unavoidable macroeconomic rebalancing, and to collapse the spread between soaring labor costs in the periphery and those of Germany (see chart below), the bulk of European countries will need to see wages collapse by anywhere between 30% and 50% to compensate for the lack of state-level currency devaluation optionality. And yes, this includes France.

This much is now accepted by all. Our conclusion, however, demanded more: an actual admission from the brutal oligarchs of the artificial monetary union whose only purpose -like everything else in the New Normal – is to facilitate the transfer of wealth from the poor to the rich.

… telling a continent, which in its desperation is hopeful and confident that the worst is behind it (as its lying politicians take every opportunity to note) that the most acute of standard of living collapses is yet to come, is borderline cruel and unusual. So we will just keep our mouths shut and let Europe’s politicians bring this depressing message to their people. We are confident the reaction will be more than dignified.

Well, today the unthinable finally happened when the following stunner was released by László Andor of the European Commission, in a press release discussing the “Employment and Social Developments: Annual Review highlights need to address risks of in-work poverty“:

Social dimension of the EMU

 

The still growing macroeconomic, employment and social divergences threaten the core objectives of the EU as set out in the Treaties, namely to benefit all its members by promoting economic convergence and to improve the lives of citizens in the Member States. The latest review shows how the seeds of the current divergence were already sown in the early years of the euro, as unbalanced growth in some Member States, based on accumulating debt fuelled by low interest rates and strong capital inflows, was often associated with disappointing productivity developments and competitiveness issues.

 

In the absence of the currency devaluation option, euro area countries attempting to regain cost competitiveness have to rely on internal devaluation (wage and price containment). This policy, however, has its limitations and downsides not least in terms of increased unemployment and social hardship, and its effectiveness depends on many factors such as the openness of the economy, the strength of external demand, and the presence of policies and investments enhancing non-cost competitiveness.

So there you have it, not from some fringe blog or some radical, foaming in the mouth euroskeptic, but from the bastion of that most artificial construct of modern times itself: a “united Europa.”

And now, we hold our breath for the reaction from the general public upon their realization that for the past decade they were opnely lied to every single time a politician opened their mouth, and all they have to show for it is record high unemployment and the worst standard of living for most (if not for the top 1% – they have never had it better) in history.

via Zero Hedge http://ift.tt/1aISzjQ Tyler Durden

Via Bloomberg Brief’s Richard Yamarone,

According to the Chinese Zodiac, 2014 will be the “Year of the Horse.” And judging from some of the early comments in the quarterly earnings season, it looks like this year’s economic horse will pull up lame. The Bloomberg Orange Book Sentiment Index – a proxy for the overall state of economic affairs in the U.S. – has been running below 50 for 49 consecutive weeks, which implies a stagnant growth rate in GDP in the 2-to-2.5 percent range.

Expectations for real GDP this year are slightly higher than the 2.3 percent pace posted in 2013. Economists polled by Bloomberg anticipate a 2.8 percent increase while the Federal Reserve has a similar 2.8-to-3.2 percent forecast range. The Fed traditionally has lofty, and often incorrect, expectations for GDP.

The driving theme behind this subpar, sluggish recovery is the lack of desirable growth in real disposable personal incomes, which grew at just 0.6 percent during the 12 months ending in November.

This is also the reason behind weak activity in the retail sector this past holiday season. Howard Levine, CEO of Family Dollar Stores noted the company’s core lower income customers have faced high unemployment levels, higher payroll taxes, and recent reductions in government assistance programs. “All of these factors have resulted in incremental financial pressure and a reduction in overall spend in the market,” Levine said in a recent conference call. Consumers can’t spend what they don’t have.

In this year of the horse, household-related industries – retail, restaurants, entertainment, products – appear to have stumbled out of the starting gate. This is mainly due to a highly competitive and promotional environment.

Virtually every consumer-related company has made mention of the need to discount in this economy. Announcements from the retail sector imply profound weakness for retailers. JC Penney disclosed its intention to close 33 stores and eliminate 2,000 workers. Macy’s said it would shutter five department stores and furlough about 2,500 employees. Meanwhile, other retailers have reduced expectations. Best Buy’s domestic same store sales fell 0.9 percent compared to year-ago levels for the nine weeks ended Jan. 4.

The data support Orange Book anecdotal observations. Goldman Sachs-ICSC weekly retail sales index fell 1 percent during the week ending Jan. 11. This followed a 5.4 percent plunge during the previous week. Looking at the 13-week moving average of the year-over-year change, this high frequency barometer of retail activity appears to have returned to its downward trend and is rapidly approaching the 2 percent threshold associated with the onset of recession.

Housing data have also exhibited weakness. Housing starts fell 9.8 percent in December, while the level of forward-looking building permits slumped 3 percent. The MBA Purchase Index has also shown no sign of recovery and has trended lower in recent weeks.

As a result of all this domestic weakness in key interest rate sensitive sectors, the Federal Reserve may have to rethink its tapering initiative, particularly its mortgage purchases. My one “surprise” for this year is that the Yellen Fed may consider eliminating the interest paid on borrowed reserves to help open up the lending spigots and fuel economic growth.

via Zero Hedge http://ift.tt/1mBZbbY Tyler Durden

Submitted by Alasdair Macleod via GoldMoney blog,

A number of readers have recently suggested there must be collusion between America and China over the transfer of physical gold from Western capital markets. They assume that governments know what they are doing, so there is a bigger game afoot of which we are unaware.

The truth is that China and Western capital markets view gold very differently. You will hardly find anyone in the London Bullion Market who regards gold as money; and for them if gold is no longer money Chinese demand for it is not a monetary issue. Instead it threatens the bullion banks’ business that a useful financial asset, capable of earning many times its physical value in fees, commissions, turns and interest, is being leeched out of the market by Chinese aunties.

It is clear that nearly all Western central bankers share this view, believing that gold will never play a monetary role again. We also know that Marxist-educated government advisers in China have been sheltered from the Keynesians’ antipathy against gold and instead have been brought up on Marx’s belief that Western capitalism will eventually destroy itself. It therefore follows they believe that western paper currencies will probably be destroyed as well.

Otherwise we can only speculate, but the following conclusions about why the Chinese are accumulating gold seem to make most sense:

• There is a fundamental view in China that gold is ultimately money, so it is always worth accumulating by selling potentially worthless foreign currency.
• Encouraging her citizens to accumulate gold achieves two objectives: if they have real wealth to protect it makes them potentially less rebellious in difficult times; and secondly private buying of gold reduces the trade surplus, which in turn reduces the accumulation of foreign currency reserves.
• Gold is generally accepted as superior money throughout Asia, which is China’s long-term regional interest.
• The Chinese Government (and/or the Communist Party) is buying gold for itself. Assumptions it will use gold to beef up the renminbi makes little practical sense, beyond perhaps some window-dressing for currency credibility. Instead she appears to be accumulating gold for unstated strategic reasons.
• Keeping the West short of gold gives China huge leverage in today’s cold currency war, and even more if the currency war heats up.

The idea that America is colluding with China in the gold market must therefore be nonsense. The truth has everything to do with different philosophies about gold.

Advanced western economies have survived without using gold as money for a considerable time. Currency and credit inflation have created a modern finance industry wholly dependent on fiat paper and everyone in mainstream finance is conditioned to believe in the profitable world of fiat currencies. They are therefore predisposed to dismiss gold as never being money again.

That is why the West is less worried about losing physical gold than it should be, and China is glad of the opportunity to buy it. And she can be expected to continue to do so whatever the price, because she knows that in the final analysis gold is the only true money.

via Zero Hedge http://ift.tt/1mpumnQ Tyler Durden

“Treasuries have turned medium term bullish,” writes Macneil Curry in his latest reports, advising traders to “get ready to buy a dip,” in bonds. At a minimum, he notes, BofAML expects yields to test the 2.691% area, but the most likely outcome is for a push to the multi-month range lows between 2.544% and 2.459%. Curry adds that he expected 5s30s to flatten to around 201bps and while they remain equity bulls he warns, “watchout” as seasonals turn much less constructive once February rolls around and the ratio of 3m-to-1m implied volatility is fast approaching the 1.20 level that traditionally coincides with complacency and market corrections.

Via BofAML’s Macneil Curry:

Buy a dip in US Treasuries, the m/term trend is BULLISH

The Friday push to 2.816% in US 10yr Treasury yields completed an impulsive (5 wave) decline from the 3.049% high of Jan-02 and confirms a bullish medium term turn in trend. At a minimum, we expect yields to test the 2.691% area, but the most likely outcome is for a push to the multi-month range lows between 2.544%/2.459%. We could even see a test of the 2.420%/2.399% pivot zone before renewed basing and a resumption of the LONG TERM BEAR TREND to 3.45%/3.50%. Having said that, we cannot recommend longs HERE. After an impulsive decline a market will correct higher before the downtrend resumes. Wait for a pullback into the 2.905%/2.960% before entering into longs. PATIENCE WILL BE REWARDED.

Throughout this move the curve should maintain its strong positive correlation with yields (inverse correlation with price). Looking specifically at 5s30s, we look for a base into 205.2bps/201.0bps from which a counter trend steeping bounce is likely into 225.0bps/230.9bps.
 
Finally, we remain equity market bulls.

The ESH4 intra-day consolidation below 1846.50 is best described as a bullish continuation pattern, with a break of 1846.50 clearing the way for 1865/1876. However, seasonality and the slope of the volatility curve say that once these targets are reached, WATCHOUT.

Seasonals turn much less constructive once February rolls around and the ratio of 3m-to-1m implied volatility is fast approaching the 1.20 level that traditionally coincides with complacency and market corrections

via Zero Hedge http://ift.tt/KDpyyR Tyler Durden

“Treasuries have turned medium term bullish,” writes Macneil Curry in his latest reports, advising traders to “get ready to buy a dip,” in bonds. At a minimum, he notes, BofAML expects yields to test the 2.691% area, but the most likely outcome is for a push to the multi-month range lows between 2.544% and 2.459%. Curry adds that he expected 5s30s to flatten to around 201bps and while they remain equity bulls he warns, “watchout” as seasonals turn much less constructive once February rolls around and the ratio of 3m-to-1m implied volatility is fast approaching the 1.20 level that traditionally coincides with complacency and market corrections.

Via BofAML’s Macneil Curry:

Buy a dip in US Treasuries, the m/term trend is BULLISH

The Friday push to 2.816% in US 10yr Treasury yields completed an impulsive (5 wave) decline from the 3.049% high of Jan-02 and confirms a bullish medium term turn in trend. At a minimum, we expect yields to test the 2.691% area, but the most likely outcome is for a push to the multi-month range lows between 2.544%/2.459%. We could even see a test of the 2.420%/2.399% pivot zone before renewed basing and a resumption of the LONG TERM BEAR TREND to 3.45%/3.50%. Having said that, we cannot recommend longs HERE. After an impulsive decline a market will correct higher before the downtrend resumes. Wait for a pullback into the 2.905%/2.960% before entering into longs. PATIENCE WILL BE REWARDED.

Throughout this move the curve should maintain its strong positive correlation with yields (inverse correlation with price). Looking specifically at 5s30s, we look for a base into 205.2bps/201.0bps from which a counter trend steeping bounce is likely into 225.0bps/230.9bps.
 
Finally, we remain equity market bulls.

The ESH4 intra-day consolidation below 1846.50 is best described as a bullish continuation pattern, with a break of 1846.50 clearing the way for 1865/1876. However, seasonality and the slope of the volatility curve say that once these targets are reached, WATCHOUT.

Seasonals turn much less constructive once February rolls around and the ratio of 3m-to-1m implied volatility is fast approaching the 1.20 level that traditionally coincides with complacency and market corrections

via Zero Hedge http://ift.tt/KDpyyR Tyler Durden