Racer
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Futures circa 20 pts up on Fridays close at 10.45am. The only interesting piece of economic news out today is the Institute for Supply Management manufacturing Index for April, due shortly after the market opens at 10.00 EST.
No Dow companies reporting today. Market may tread water until tomorrows Fed hike. Almost certain to be 25 basis points so it's what they say in their accompanying statement, rather than what they do, that will set the market tone for this week.
Dax up 1.1% at the half way point in todays session. Oil below $50 today with OPEC having increased output by 2m bpd since March. Unless the Fed indicates any likely change to it's 'measured' rate of increases then we may see a further extension to Fridays short term Bull rally this week.
No Dow companies reporting today. Market may tread water until tomorrows Fed hike. Almost certain to be 25 basis points so it's what they say in their accompanying statement, rather than what they do, that will set the market tone for this week.
Dax up 1.1% at the half way point in todays session. Oil below $50 today with OPEC having increased output by 2m bpd since March. Unless the Fed indicates any likely change to it's 'measured' rate of increases then we may see a further extension to Fridays short term Bull rally this week.
Racer
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OMAHA (MarketWatch) -- American International Group delayed its annual report for a second time late Sunday and said that accounting errors and other problems will wipe $2.7 billion, or 3.3%, off its net worth.
The company also said its auditor, PricewaterhouseCoopers, will conclude that the company's internal controls over financial reporting are deficient.
The company also said its auditor, PricewaterhouseCoopers, will conclude that the company's internal controls over financial reporting are deficient.
senyorqueso
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Thanks peterpr - I'll take a look.
I really want to better understand how the index/futures prices relate, how much variation can be expected between the two, the cause of the variation, etc. Futures price is obviously a supply/demand thing - heavy futures buying will put the futures price up, but unless the index goes up too, the futures price must drop back into line with the index.
SQ
I really want to better understand how the index/futures prices relate, how much variation can be expected between the two, the cause of the variation, etc. Futures price is obviously a supply/demand thing - heavy futures buying will put the futures price up, but unless the index goes up too, the futures price must drop back into line with the index.
SQ
Racer said:
AIG has already fallen 30% over the past few months since thses accounting 'irregularities' came to light so the latest data may already be factored into the stock price.
Futures already 28 pts ahead of Fridays close. Don't see much to take the market down today unless the ISM numbers are really poor.
Looks like 10260 is the key resistance level to be breached if the market is to have an upday. Otherwise it may just oscillate in the 10100 - 10260 range.Racer said:
Closed out my shorts this morning to take 40 pts profit. Will look for a new short entry point but am not particularly optimistic in finding one today unless the ISM figures do the trick.
How do you see it ?
peterpr
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That's as may be. But it is beneficial to understand what the main futures supply/demand influences are and how they are tied - lock-step to the underlying market. There are a few fundamental point worth making:senyorqueso said:
1. The futures price at any given time says nothing at all about what market participants estimate the contract price will be at maturity. All other things being equal (which of course they rarely are) the price represents the underlyings price +/- financing cost to maturity +/- dividends payable to maturity. That's it. It's called 'fair value'
2. If the price deviates significantly from 'fair value', then it will trigger arbitrage trades which will tend to pull it back towards fv.
3. If price is persistently out of sync with fv (and you need to be clear about your 'persistently' time-frame) it is an indicator of underlying market direction.
You need to understand who the futures market participants are to get a real feel for it. Briefly and to greatly oversimplify, they can be categorised as:
1. Hedgers/commercials - those who have an interest in the underying stocks/commodities that needs to be hedged (ie a wheat grower who is happy to forward sell his crop at the current futures price to be certain of his eventual profit).
2. Speculators (Liquidity providers) - Those prepared to take the other side of the hedgers' trades because they think they know better - or whatever.
3. Arbitrageurs - Clever sods who try to take a turn from both the other categories at the same time.
Racer
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Briefing. com Futures market suggesting a higher open for the cash market amid falling oil prices and M&A activity... Crude oil prices ($49.18/bbl -$0.54) have fallen to a two-month low amid speculation that slowing economic growth and larger than expected oil inventories will restrain demand.
Oh brilliant, growth is slowing, buy shares...
Go ahead, just further to fall and I can put my shorts on higher up and make a few bob on a long whilst I am waiting!
Oh brilliant, growth is slowing, buy shares...
Go ahead, just further to fall and I can put my shorts on higher up and make a few bob on a long whilst I am waiting!
senyorqueso
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Thanks again peterpr,
Do you think there's any way for the likes of small time traders to profit from the swings above and below fair value, as a sort of spread trade between the futures and the underlying index? As any deviations must come back into line at some point (but I've no idea how long an interval this could be), this would be a pretty low risk strategy.
SQ
Do you think there's any way for the likes of small time traders to profit from the swings above and below fair value, as a sort of spread trade between the futures and the underlying index? As any deviations must come back into line at some point (but I've no idea how long an interval this could be), this would be a pretty low risk strategy.
SQ
Racer
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The discovery that AIG had been underestimating the value of its derivatives was unexpected. Normally, such a development is viewed negatively, regardless of whether it hurts or helps earnings. In AIG's case, however, the derivatives problem may actually reduce the overall impact of the insurer's accounting irregularities
Oh and that is fantastic news isn't it! They made even more mistakes!!
Oh and that is fantastic news isn't it! They made even more mistakes!!
peterpr
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That pretty well defines an arbitrage opportunity. What a small trader needs to profit from it is a reliable proxy for the out-of-line future, other than the underlying spot or other derivative price. All spot (SB/CFD etc) prices are just quotes supplied by myriad providers all of whom will hedge their book in the futures market, which is one good reason why SB's are not optimim instruments for intra-day trading (Your provider is always trading against you - albeit at one remove). In other words, they are the commercials/hedgers. If you could find another future, or a single (or small basket of) stocks that reliably tracked the underying you are interested in then yes, you can make an arbitrage profit by trading opposite directions in each (with risk limited to the extent to which you have accurately identified the proxy). Believe me, there are thousands of players who do little else. The IB trading platform even has an 'arbitrage meter' attached to its platform to identify such opportunities real-time.senyorqueso said:
senyorqueso
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Sounds worth further investigation. Don't like the sound of buying a small basket of stocks that follow the index because sod's law will make sure that these particular stocks don't conform to expectactions during the time that you're in the trade, and also this would make it more complicated to quickly get in or out. As for just 1 stock, this sounds too risky.
So something that reliably tracks the index and is easy quickly get in and out of would be required.
Anyone got the answer?
So something that reliably tracks the index and is easy quickly get in and out of would be required.
Anyone got the answer?
Racer said:Closed my long, didn't like going long anyway but not complaining at a profit!
Have put a short on again, not sure how it is going to play today being first trading day of the month
You'll have made a good profit on the Long - well done !
I'm still holding back on any new short entry while it ranges between 240 - 260. It's now tried to break 260 four times and failed. AIG, HP & Home Depot are the the main strength so far.
Where have you gone short ?
I'm looking to see another attempt on 260 fail first before I look for a short entry point.
