Waiting for a selling opportunity on the Euro in the 1.1150-1.1250 area

Financials: Sept. Bonds are currently 30 higher at 155’17, 10 Yr. Notes 9.5 higher at 127’00.5 and 5 Yr. Notes 5 higher at 119’18.5. German 10 Yr. Bunds are 24 higher at 154.09. “Risk off” has favored treasuries over the last few sessions as equities declined over Chinese slowdown and gov’t. backing off from support of equities on Shanghai exchange. Traders are still expecting a rate hike sometime in 4th quarter 2015-1st quarter 2016. I still favor short biased positions favoring either the long 5 Yr./short 10 Yr. spread and particularly favor the ratio ( yield curve) spread of long 5-5 Yr. notes/short 3-10 Yr. Notes. Bunds are finally once again above the 154.00 level, yielding below 0.68%, a level of which I am willing to trade from the short side of the market.

Grains: Dec. Corn is currently 11’4 lower at 391’4, Nov. Beans 14’4 lower at 950’4 and Dec. Wheat 5’4 lower at 514’2. We recently covered the short Corn leg of a combination trade of short Corn/ long a quantiy of 2-Nov. bean 12.00 calls. We remain long these calls from the 4’4 level ( currently at 2’4). Crop progress reports have been improving the last 2 weeks, but I feel at this time that there could be problems because of the severely wet weather earlier this month and will now look to the long side of Dec. Corn below 390’0 with an initial 15’0 risk.

Cattle: Friday’s Cattle on Feed Report showed the following:

I would say on the surface these numbers confirm the idea that expansion of the herd will be a reality down the road but have to put forth the caveat that this has been built into the market given the break over the last few weeks in the Live and Feeder markets. Add to this the recent decline in feed grain prices I am expecting a bounce off the recent lows. We have been short Dec. Lc and I recommend either covering the postion or using a close buy stop and standing aside. I do not have an opening call at this time (7:15am) but suspect slightly higher with FC gaining on LC.

Silver: Sept. Silver is currently 7 cents higher at 14.56 after making low of 14.33 on Friday and rallying as high as 14.74 overnight. The market has been under pressure on speculation that there has been quite a bit of selling (both long liquidation and short selling) out of China as the Chinese have banned short selling of equities and restrictions on selling in general and market participants have turned to selling precious metals as a proxy for selling equities. I am staying long but reducing my position. Gold is currently 4.00 higher at 1089.50.

S&P's: Sept. S&P’s are currently 12.00 lower for all the reasons stated elsewhere in this morning’s “Report”. We have partially hedged current short biased positions by selling the Aug. S&P 2080 put for 32.00 against short futures positions giving us some protection and profit making opportunities should the market rally. Alternatively this will limit our downside profit potential to the 2048.00 level.

Currencies: As of this writing the Sept. Euro is currently 120 higher at 1.1109, the Yen 44 higher at 0.8129 and the Pound 24 higher at 1.5529. I am patiently waiting for a selling opprotunity in the Euro bnetween the 1.1150-1.1250 area.