Global Macro Trading Journal

Crazy crazy divergences.

I am looking at the trading action in the last 3 to 4 days, specifically:

* 10-year treasury yield
* SocGen share price (GLE)
* Credit Agricole share price (ACA) and hurt hard today on the downgrade
* EUR/USD
* Gold and oil liquidation

The moves in the above 5 instruments (and there are probably others) on Tuesday, Wednesday and (to a lesser extent) today suggest significant stress in the financial system.

Yet the ES futures rallied from 1198 to 1220.50 today, and most notably the VIX is at 24.40, and lower than the Monday close, despite the risk-off on Tuesday and Wednesday.

I watched the Kyle Bass interview on CNBC yesterday
http://www.zerohedge.com/news/prese...l-chains-or-gradual-evisceration-shadow-banki

and I question for how much longer (without "something" to save Europe, such as ECB printing) these divergences can last.

edited to add:
The Platt interview discussed above as well.
http://www.zerohedge.com/news/found...euro-banks-are-insolvent-euro-situation-much-

I think the low level of VIX, shows that there is quite a bit of complacency, despite the stress suggested by bond yields, and the French bank share price declines.

I think that US equities are setting up for a big fall given the above.

I am not posting this for a pat on the back if I am right. I just continue to be amazed that some markets trade as if Europe is a disaster waiting to happen, yet others don't seem to care that much.

Related to the $VIX, is there any merit to the idea that in mid to late December, there is decreased option premium due to the Christmas / New Year period?

Any other thoughts?
 
Quote from Debaser82:
So, will you apply the 3 strikes system? :)
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I always take anything anyone says in the media with a pinch of salt, no matter who it is. It's just interesting that Platt, who normally avoids publicity, has chosen to appear and talk about it so openly.
Quote from ralph00:
I saw it too. Curious, if anything, he's even more strident about this than Kyle Bass. In fact, they sound like they're email buddies. Not sure why you found what Bass had to say so distasteful.
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It's not that I found what he had to say distasteful. I may disagree or not, there may be more sides to the story that he never seems to mention etc, but that's not my beef. My main issue is that he's seemingly always in the media, always talking about his views on these trades he has done. You never ever see Platt out there, so that's the main reason why I found it interesting. I have built-in distrust and aversion towards finance gurus who appear to be resorting to the media excessively to achieve their goals. Besides, there's a very practical consideration. Bluecrest is $30bn AUM (although quite a bit of it is the CTA) and is the second biggest gorilla arnd here. The stuff that they do can (and does) move the mkt. Bass, on the other hand, isn't particularly relevant, flow-wise.
Quote from ralph00:
BTW, check out the end of the video, looks like Stephanie Ruhle is leaning over for a hug and a smooch. That's hot. :D
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From what I have heard, Mike Platt has quite a reputation, so, god knows, there might be smth going on there :).
 
Quote from Martinghoul:

From what I have heard, Mike Platt has quite a reputation, so, god knows, there might be smth going on there :).
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I say this as a confirmed heterosexual, but he's a handsome dude (and obviously has some dollars).
 
Quote from m22au:

Crazy crazy divergences.

I think the low level of VIX, shows that there is quite a bit of complacency, despite the stress suggested by bond yields, and the French bank share price declines.

I think that US equities are setting up for a big fall given the above.
Related to the $VIX, is there any merit to the idea that in mid to late December, there is decreased option premium due to the Christmas / New Year period?

Any other thoughts?
More...

I've said this before that the EU is having their version of 08' currently, whether or not NA gets dragged down into this remains to be seen. I'm of the belief that this is a regional thing that isn't going to spill over into global mkts, unless we find out US banks have some type of structured product linked to the EU leveraged 400:1. Hence I second ralph's saying that the Euro is gonna decouple from risk on/off.

Not sure about the decreased premium, but there are seasonal times of the year that the VIX falls, end of year holidays being one of them. I see where you are going with this, but the problem is variance. You could buy Jan puts on the SPX and it could go down and you still might not make as much as you thought.
 
I should add: be careful when trading correlations around holiday seasons. I've seen and participated in some divergences that were unreal. I can't give you any other reason than it's light trading. In fact, check out the rally from the late Nov lows on SPX and compare that to the VIX over the same time. You'll notice there's a period of a few days where both SPX and VIX rallied a few percent.
 
Quote from jj90:

I've said this before that the EU is having their version of 08' currently, whether or not NA gets dragged down into this remains to be seen. I'm of the belief that this is a regional thing that isn't going to spill over into global mkts, unless we find out US banks have some type of structured product linked to the EU leveraged 400:1. Hence I second ralph's saying that the Euro is gonna decouple from risk on/off.
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The EU is both China as the US biggest trading partner, and Japan's third largest.

Any suggestion a Eurozone collapse would be contained certainly is far out there wouldnt you agree.

If it wouldnt have any negative or significant impact every fundamental analysis on everything can be trown in the trash can.

That's not to say the US stockmarkets and currency wouldnt be able to profit from the turbulence obviously.
 
Quote from Debaser82:

The EU is both China as the US biggest trading partner, and Japan's third largest.

Any suggestion a Eurozone collapse would be contained certainly is far out there wouldnt you agree.

If it wouldnt have any negative or significant impact every fundamental analysis on everything can be trown in the trash can.

That's not to say the US stockmarkets and currency wouldnt be able to profit from the turbulence obviously.
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Thanks for your thoughts jj90 and Debaser (and again thank you Debaser for the KBC idea).

I tend to agree with Debaser's view that if the Eurozone implodes, then it will take everything with it.

Even though North American equities would still outperform those in Europe, I would expect them to fall.
 
Out of EUR and AUD shorts, likely for the remainder of the year (will remain long some March FXA puts, might pick up some FXE puts if I get the urge).

Nice run on both, but 400 pips on the EUR short in a couple of weeks is especially satisfying seeing how Paul Tudor Jones advised I was crazy. Paul Tudor Jones, you say? He posts here under the alias 'dhpar'. Junior trader, lol.:p
 
Quote from ralph00:

Out of EUR and AUD shorts, likely for the remainder of the year (will remain long some March FXA puts, might pick up some FXE puts if I get the urge).

Nice run on both, but 400 pips on the EUR short in a couple of weeks is especially satisfying seeing how Paul Tudor Jones advised I was crazy. Paul Tudor Jones, you say? He posts here under the alias 'dhpar'. Junior trader, lol.:p
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Good trade on EUR and AUD.

How do you know PTJ is dhpar....Is it some kind of joke :D

If he is truly here, then we are all fortunate to have him and hear his views. However, if that be the case, I think he will no longer post with the same handle, now that his identity has been revealed :)

Edit: and if he is PTJ, who are you ralph - you also some bigshot :) Tell us who you are.
 
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