Japan falls into possible recession with consecutive negative GDP

Japan falls into possible recession with consecutive negative GDP. Equities trade lower, Bonds higher.

Financials: Dec. Bonds are currently 14 higher at 142’04, 10 Yr. Notes 6 higher at 126’28 and 5 Yr. Notes 3.5 higher at 119’22. A disappointing negative GDP number out of Japan has rallied the market due to continued deflationary fears and slowing global economies. We have been trading Bonds from the long side in a predicted range of 140’08 to 142’28. I am recommending taking profits from all long biased trades on this rally and am going to change my bias to the short side of the market on sharp rallies to the 142’28-143’06 area. I am looking at the market as “buy the rumor sell the fact”.

Grains: Dec. Corn is currently 2’6 lower at 379’0, Jan. Beans fractionally lower at 1022’2 and Dec. Wheat 1’6 lower at 558’6. Since my last “Report” (11/13/2014) we were stopped out of a short CZ position when the market traded through the 387’4 level. Fortunately we were more successful with our short SF5 position with a well placed stop at 1073’0 and a recommendation to either cover short positions below 1046’0 or to lower your stop to 1061’0 if the market trades below 1046’0. I recommend covering all short biased Bean position at this time and stand aside.

Cattle: Dec. Cattle closed out the week on new highs at 170.35 and look higher this morning. Jan. Feeder Cattle also closed sharply higher in the 236’22 area. Our only remaining position is long the Dec. 158.00 put. Silver: Dec. Silver is currently 21 cents lower at 16.10 and Dec. Gold unchanged slightly above the 1186.00 level. Both of these markets rallied sharply on Friday after comments from a Fed representative that the Dollar is ahead of itself and currently too strong. Only yime will tell if this rally has “legs”. I shoose the sidelines for the moment.

S&P's: Dec. S&P’s are currently 6.00 lower at 2032.00. Recessionary news out of Japan has many traders either heading for the sidelines or trading the short side of the markets. I am still looking at this market as a trading affair between 2022.00 and 2042.00 preferring the short side on rallies. A close below 2021.00 will generate a sell signal.

Currencies: As of this writing the Dec. Euro is currently 30 lower at 1.2498, the Swiss 28 lower at 1.0401, the Yen 5 lower at 0.8600 and the Pound 30 lower at 1.5645. After being on the sidelines the past few weeks I am now looking to the long side of the market on sharp breaks for short to medium term trades (1 -5 days). I’ll try the long side in the 1.2410 area on the Euro and the Yen below 0.8510 with a 100 point risk. At this time I feel that the GDP number out of Japan had been anticipated by the currency trading community given the month long slide in the Yen.