FOMC: Slowing global growth, % rates to remain low

FOMC: Slowing global growth, % rates to remain low. Bonds and Equities rally on Wednesday. Equities lower this morning!

Financials: Dec. Bonds are currently 16 higher at 141’05, 10 Yr. Notes 11 higher at 126’23 and 5 Yr. Notes 7 higher at 119’19. Yesterday’s release of the FOMC minutes from their last meeting suggested that the Fed is concerned about slowing global economic growth and that rates will remain at their current historic low rates for some time to come. This is no surprise as we have commented in the last few weeks that given the easing of rates and poor economic data coming out of Europe the spread has been widening when you compare European rates to that of the U.S. The long June 2017/short June 2015 Eurodollar spread, which we initiated to take advantage of this situation, has now fallen from 206 basis points premium the 2015 contract to the current 184 level, well below my expectation of 194. We have taken profits in the 195 area, if you continue in this spread, congratualtions, take profits or watch close enough to not let the spread trade once again above the 192 level. Being somewhat of a contrarian and a believer in buy the rumor sell the fact, my next venture into the interest rate market will be to look for an area to go short 5 Yr. Notes on the next rally.

Grains: Dec. Corn is currently 1’4 lower at 341’6, Nov. beans 4’2 higher at 939’2 and Dec. Wheat 7’6 lower at 500’0. These markets have come close enough to resistance of 344’0 in Corn, 960’0 in Beans and 510’0 in Wheat that I want to be out of any long positions purchased earlier in the week.

Cattle: Dec. LC are currently 60 higher at 168.65 and Nov. FC 130 higher at 244.22. We continue to hold the long Jan./short Nov. FC spread and the short LCZ 162 put/short LCZ 170put strangle which are somewhat against us at current prices.

Silver: I am pleased t6o report that Dec. Silver is currently 54 cents higher at 17.60 and Dec. Gold 22.00 higher at 1228.00. We remain long Silver which has benefitted from a recent set back in the Dollar vs. the Euro.

S&P's: The Dec. S&P is currently 5.00 lower at 1957.00. Yesterday the market rallied substantially after making a double bottom in the 1918.00 and reacting positively to the FOMC minutes which noted that % rates will remain low for some time. I feel that keeping rates low is an indication that “all is not right”. I am once again will to go short in the 1960.00 area with an initial 15.00 point risk. Earlier in the week we took profits from recent short futures positions. We remain short the Nov. 2000.00 call.

Currencies: As of this writing the Dec. Euro is currently 6 lower at 1.2732, the Swiss 13 higher at 1.0519, the Yen 26 higher at 0.9275 and the Pound 20 higher at 1.6171. You have probably noticed that I haven’t commented on the currencies on the last few “Reports”. To be honest I am in a state of confusion. I haven’t quite worked out in my mind if it is bullish or bearish the dollar if the rest of the first tier economies follow our example and institute quantitative easing measures to stimulate their economies. I also feel that ultimately funds will follow the search for yield, of which rates in the U.S. are higher than Europe and Asia. I am still on the sidelines, but, will gladly sell the Euro at 1.300 should “the market allow”.