European Banks Fail Stress Tests

European Banks Fail Stress Tests, Italian markets drop more than 1%, Gold & Silver about unchanged.

Financials: Dec. Bonds are currently 10 higher at 142’01, 10 Yr. Notes 3 higher at 127’04 and 5 Yr. Notes fractionally higher at 119’30.5. The failure of several (17?) European banks, particular the Italians, to pass ECB initiated stress tests in the event of a financial debacle has rallied U.S. treasuries off of overnight lows in a minor flight to safety. Keep in mind this figure represented only about 15% of those institutions tested. Also coming up Tues. & Wed. is another FOMC meeting where it is expected that the Fed will discontinue their monthly Bond purchases but reserve the right to take action in the event of a financial crisis if needed. We are on the sidelines but have a somewhat bullish bias to the market and will be looking to the long side on breaks below the 140’08 level for short term trades.

Grains: Dec. Corn is currently 2’2 lower at 350’6, Nov. Beans 8’4 lower at 969’2, and Dec. Wheat 2’0 lower at 515’0. All these markets failed to trade and hold above last weeks resistance as fundamentals (huge crops of Corn and Soy) came into play. If you went short in the 360’0 area in Dec. Corn take the quick profit. If you went short Beans in the 1000”0 area take profits. Wheat may have also topped out above 532’0.

Cattle: We continue to hold the combination of short LCZ 162 puts/short LCZ 170 calls and long the lcz 158-154 put spread.

Silver: Dec. Silver is currently unchanged to slightly higher at 17.19 and Dec. Gold fractionally lower at 1231.20. We remain long at this time.

S&P's: Dec. S&P’s are currently 8.50 lower at 1951.00. The market is under a bit of pressure this morning due to some worse than expected German economic numbers, ECB financial institution stress tests and I feel the market has an underlying fear of higher rates if the FOMC discontinues their monthly Bond buying. We remain short from the 1920.00 area and still at a loss.

Currencies: The Dec. Euro is currently 20 higher at 1.2688, the Swiss 17 higher at 1.0521, the Yen 21 higher at 0.9277 and the Pound 40 higher at 1.6110. I am currently on the sidelines but looking for a reason to be long the Dollar (short the Euro). I will be watching to see if the Euro can rally above the 1.2920 level before “pulling the trigger”.