China manufacturing continues to contract, Japan rates go negative

Financials: Mar. Bonds are currently 7 higher at 161’08, 10 Yr. Notes unchanged at 129’18.5 and 5 YUr. Notes 1 lower at 120’21.2. On Friday morning Japan lowered rates on short term instruments to a negative yield in an effort towards stimulating their economy. The market was not expecting this and the reaction was as one would expect, Bonds ralled along with equities and the Dollar vs. the Yen. Overnight Chinese manufacturing numbers were disappointing although I will note that service industry numbers were constructive.
As mentioned after the FOMC meeting the market no longer expects 4 rate hikes this year and has priced in approx. two 25 basis point increases for the year by my calculations. I am still looking to ONLY trade the 10 Yr. Notes from the short side for short term trades from above the 129’14 level or the long side from the 127’22 area.

Grains: Mar. Corn is currently 4’0 cents lower at 368’0, Mar. Beans 4’0 lower at 878’0, Mar. Chi. Wheat 6’0 lower at 484’4 and Mar. KC Wheat 4’0 lower at 468’0. We continue to hold long KC/short Chicago Wheat spreads. I will be a buyer in Mar. Corn below 458’0 or on a stop should the market trade above 375’0.

Cattle: Live and Feeder Cattle closed moderately to sharply lower depending on the contract month. Long Aug./short Apr. spreads narrowed a bit trading as low as 13.85 premium Apr., but closed in the 14.30 area. I feel that Friday’s Inventory Report wasw a bit negative showing steers over 500 pounds approx 3.0% more than average expectations and all Cattle and Calves 1.2% higher than expectations. I will take profits on the Aug./Apr. spread below 13.37 should the market allow.

Silver: Mar. Silver is currently 6 cents higher at 14.31 and Apr. Gold 6.00 higher at 1122.50. I remain long. Of note: Silver has not maintained closes above my desired 14.26 level but has been close with settlements above 14.23. I still do not have a technical reason to add.

S&P's: Mar. S&P’s are currently 15.00 lower at 1915.00. On Friday we were stopped out of recent short positions as the market reacted to the upside aftwer Japan lowered rates and the Dollar and treasuries rallied. I want to maintain that further vlowering of rates, globally, is an indication that things are not getting better and retain a negative bias and will try the short side of the market with a smaller than usual position on rallies.

Currencies: As of this writing the Mar. Euro is currently 54 higher at 1.08925, the Yen 10 lower at 0.82535 and the Dollar Index 36 lower at 99.290. We remain short the Dollar Index. We also continue to holde long biased positions in the Yen. I certainly got beat up in the Yen as it broke sharply against the Dollar as they went to negative rates. If you were long calls and rolled them to higher strike prices you should have done all right overall. If you were long futures the market took away about all of our profits from the last 6 weeks. If you remain long futures use a sell stop at 81.90, if the market traded back over the 83.10 level, raise your stop to 82.30.