China devalues again! Bonds rally, Equities drop

Financials: Sept. Bonds are currently 13 higher at 159’07, 10 Yr. Notes 8.5 higher at 128’04 and 5 Yr. Notes 6 higher at 120’03.5. The German 10 Yr. Bund is 2 lower at 154.92. china has once again intervened and devalued the Remimbi (Yuan) by 1.6% for a total of just over 3.5% over the last 2 days in an effort to make their exports more competitive on the global market place and slow down the rate of their declining growth. The response in treasuries has been a drop in U.S. interest rate from 2.25% to 2.15% for the 10 Yr. and a drop from 2.92% to 2.76% for the 30 Yr. Since my last “Report” the long 5 Yr./short 10 Yr. spread has widened from 7’27 premium the 10 Yr. to 8’02 premium the 10 Yr. The ratio spread of long 5-5 Yr./short 3-10 Yr. has actually moved about 4 ticks per unit in our favor. For the moment I’m just sitting with the spreads. Late last week we took a small profit on a short Bund position and will cautiously (use a tight stop) try the short side again at current levels.

Grains: Dec. Corn is currently 2’0 higher at 389’4, Nov. Beans 1’2 lower at 969’6 and Dec. Wheat 4’2 higher at 516’4. Earlier in the week saw Corn above 400’0 before the devaluation of Chinese currency which put the market back to last week’s level of 386’0 and 970’0 vin Beans. We remain long Dec. Corn with a protective sell stop at 371’0 and remain long out of the money calls in Nov. Beans. Crop Report this morning at 11:00. I will take profits in Dec. Corn above 407’0 should the market rally or raise your stop should level be achived.

Cattle: Dec. LC gave us the opportunity to go short in the 151.00 area (yesterday’s high was 151.00. I am still looking to go short Dept. FC above 214.00. Today’s Grain Report should have an effect on both Live and Feeders.

Silver: Sept. Silver is currently 8 cents higher at 15.36 and Dec. Gold 9.00 higher 1117.00 continuing an uptrend from late last week. This market may have put in a bottom. We remain long Silver.

S&P's: Sept. S&P’s are currently 12.75 lower at 2067.00. The overnight low of 2053.75 was just below the 200 dat moving average (widely watched by hedge funds) of 2057.00 and just below support of 2056.00 (see “Report” of 8/7/2015). The market is currently interpreting the devaluation of the Chinese currency as possible evidence of slowing global growth. We continue to hold the combination of short futures and short the Aug. 2080 put which expires Aug. 21st.

Currencies: As of this writing the Sept. Euro is trading 132 higher at 1.1167, the Yen 73 higher at 0.8063 and the Pound 53 higher at 1.5610. The Euro is now in my recommended “zone” of 1.1150-1.1250, levels where I’m willing to go short with an initial risk of 170 points. Keep in mind that this is “just a trade” and I will gladly take a 100-200 point profit if given in a short period of time. We continue to have a long bias on ther Pound.