Tag Archives: Nikkei

Wednesday Morning Notes: Strength Across The Board as Spooz Break Closely Watched Trendline Resistance

HedgeFundLIVE.com Morning Notes

- Global indices are up strong today
- Nikkei rallied to close up 2.6%- yen was weak
- Nuclear situation in Japan has not improved, however- reports out that radiation in seawater outside Fukushima plant rose to highest levels- govt may cover three of the reactors with tarps in attempt to contain radiation
- Situation in Middle East has not improved either- Gaddafi’s forces regained control of a refinery town; also, Pres. Obama said he is confident that Gaddafi will ultimately step down
- S&P downgraded Greece and Portugal, but European bourses are trading up
- Portugal 5 yr note yield at highest level ever in the “euro era”, at 9%
- Strength overseas has carried over to domestic market with S&P futures up 5 handles from FV ahead of open- futures have been pulling in slightly
- March ADP Employment Change: 201K vs. 208K; prior revised down to 208K from 217K
- Small pullback followed ADP number release


Monday Morning Recap: Quiet in the Pre Following Mixed Trading Overseas

HedgeFundLIVE.comMorning Notes

- Mixed trading in overseas markets with Nikkei facing some pressure as negative reports were out regarding very high radiation levels in water near Fukushima plant
- Nikkei closed down 60bps
- Hang Seng down 40bps, Shanghai Comp up 20bps
- Local election in Europe ousted German Chancellor Angela Merkel’s party in a key state- DAX (and rest of European bourses) reacting somewhat favorably (at least not negatively) as the index is up small this morning
- Fighting in Middle East continued over the weekend- Libyan rebel forces pushed west while in Syria Pres. Bashar al-Assad deployed army in main port of Latakia
- Gold and crude seeing a bit of pressure
- Treasuries under some pressure as well- weakness may be attributed to Fed Pres. Bullard’s comments that Fed should review QE2 policy
- Dollar is up
- S&P futures are up about 1.5 handles from FV ahead of the open
- February Personal Income: +0.3% vs. +0.4%; prior revised up to 1.2% from 1.0%
- February Personal Spending: +0.7% vs. +0.5%; prior was revised up to +0.3% from +0.2%
- February PCE Deflator m/m: +0.2% vs. +0.2%
- February PCE Deflator y/y: +0.9% vs. +0.9%
- Futures not really reacting to latest batch of economic data release
- Remaining on economic calendar for today: Pending Home Sales at 10a ET; 2 yr Note auction results at 1p

Fighting in Libya Spreads Westward


Friday Morning Notes: Set Up to See Continuation of Week’s Uptrend

HedgeFundLIVE.comMorning Notes

- Strength from all of this week continues into Friday
- Nikkei, Hang Seng, Shanghai all closed up 1.1%
- Weekly change for Nikkei is +3.6%
- In China, PBOC made comments that it may consider allowing foreign participation in its Forex mkt (this announcement was made after their mkt close)
- Headlines out that one of the Fukushima reactor cores may be cracked and leaking radiation
- In Europe, S&P downgraded Portugal, but bourses not reacting negatively to this news as they are all up small
- Portuguese debt yields increase to highest level ever (10 yr yield of 7.8%)
- Euro is trading down small, but has held up nicely in context of this week’s issues around Portugal
- France GDP came in in line
- German IFO came in better than expected, although it is important to note that half of the surveys were returned AFTER the Japanese earthquake
- Lots of key corporate earnings out last night with ORCL trading higher, RIMM trading significantly lower, and ACN trading higher
- Oil trading flattish while Gold and Silver are up
- Bahrain protests planned for today
- Q4 GDP Third Estimate: +3.1% vs. 2.9%; prior was +2.8%, so upward revision
- Futures not reacting much to latest data releases
- S&P futures are about 3 handles from FV ahead of the bell
- U.Mich Sentiment number out at 9:55a
- Fed President speakers throughout day today- Kocherlakota, Fisher, Plosser

Workers covered with tarps before receiving decontamination treatment


Thursday Morning Recap: Market Pointing Higher, Are Bulls About to Take Firm Control?

HedgeFundLIVE.comMorning Notes

- Mixed trading in the overnight
- Nikkei and Shanghai Comp closed down marginally
- In China, Manufacturing PMI showed expansion
- In Europe, Moody’s downgraded 30 Spanish banks
- A clearing house in Europe, LCH Clearnet, increased margin to 35% on Irish bonds
- Bond yields have gone up as a result
- Concerns growing that Portugal will need a bailout after Parliament rejected austerity measures
- Portugal PM resigned as a result of vote to reject austerity plan
- European bourses are up small
- Unrest in Middle East continues
- Israeli Defense Forces shelled targets in Gaza after more rockets were launched into Israel
- Syrian security forces persist in cracking down on protestors in Dara- 25 more protestors may have been killed
- A “Day of Departure “ is being planned for Friday in Yemen- those loyal to President Ali Abdullah Saleh clashed with army units supporting opposition groups
- February Durable Goods Orders: -0.9% vs. +1.1%; prior revised up to +3.6% from +3.2%
- February Durable Goods Orders Ex Trans: -0.6% vs. +2.0%; prior revised up to -3.0%
- Jobless Claims: 382K vs. 380K; prior revised up to 387K from 385K
- Continuing Claims fall to 3.721M from 3.723M
- Small pullback following latest dose of data
- S&P futures are up 7 handles from FV ahead of the bell

Portugal Prime Minister Socrates Resigns


Tuesday Morning Recap: Another Quiet Day Ahead?

HedgeFundLIVE.comMorning Notes

- Not much out overnight, and markets continue to climb higher
- Nikkei reopened today and closed up a nice 4.4%
- Nuclear situation in Japan continue to show progress, although there was a 6.6 magnitude earthquake, but that is not having much of an effect on the markets
- European bourses are trading higher as well
- Oil was flattish, but has since moved lower- note that May contract becomes front month at close of pit trading session today
- S&P futures are trading along flat line as well ahead of the open, down just about two ticks
- January FHFA Housing Price Idx out at 10a ET
- Otherwise, another light day in terms of data releases
- Note yesterday’s rally was on weak volume- may be another quiet day like yesterday


Friday Premarket Recap: Surprising Strength Following G7 Agreement on Yen Intervention

HedgeFundLIVE.comMorning Notes

- Major headline of the night was that the G7 agreed on a Yen intervention (or “Yen-tervention, as Dean likes to call it) to weaken the currency- financial institutions will have to repatriate funds to pay for insurance claims and reconstruction
- Nikkei closed up 2.7% while the yen sold off aggressively
- UN authorized military strikes against Gaddafi forces- oil has rallied
- The no fly zone vote passed with 10 UN votes and no opposing votes- however, a few countries (e.g., Germany, Russia, India, China, and Brazil) abstained from voting
- Details of no fly zone policy to be cranked out
- Nothing extreme in Manama, Bahrain this morning as large number of security forces remain in the streets
- Regarding nuclear situation in Japan: Japan increased alert level up to 5 from 4 (out of 7 point scale
- A little past 8:39a ET, Libyan Foreign minister announced Libya will close all air space and has decided on an immediate ceasefire
- China increased reserve requirement ratio by 50bps
- No economic data releases scheduled for today


Trading on the Ides: Breakdown of a Meltdown

Et tu Brute?

HedgeFundLIVE.com - In ancient Roman times the Ides of March referred to the 15th day of the month; a day marking the beginning of a new moon cycle and a celebration of Mars, the god of war.  The day was typically marked by a festive celebration including a military parade and the inevitable orgy or two.  Despite its mirthful roots, our collective cultural consciousness will perpetually associate this day with the Bard’s famous word: beware.  Today, 2055 years after Caesar’s untimely demise, we find ourselves on another conspicuous March 15th.  The overnight trading session saw an explosion of volatility set off by the explosion of the Fukushima Daiichi nuclear complex.  The Nikkei 225 index plunged 14% before closing down 10.6% while the broader Topix finished down 9.5%.  Around 10:00 p.m. US indices began to feel the aftershock.  Over the next two hours, the S&P futures broke through support at 1280, cascading 28 handles to settle at 1252.

There's a meltdown in sector 7-G


As the roof flew off Reactor #2, spewing radiation into the environment, Japanese PM Naoto Kan pleaded for calm amongst his people but warned that risk of further contamination remained “very high.”  The New York Times’ homepage featured an image with the caption “The worst nuclear accident since the Chernobyl explosion in 1986 is unfolding in Northern Japan at the Fukushima Daiichi nuclear power plant.  Three reactors have been critically damaged and one caught fire.”  These explosions are likely attributable to the rapid rise in temperature of the nuclear fuel rods after the normal cooling system failed in the wake of the earthquake.  This caused the zirconium casing of the fuel rods to fail, releasing radioactive gasses into the environment.  The greatest fear still remains; the threat of a full meltdown.  This scenario occurs when the nuclear fuel pellets overheat to such extreme levels that they are able to escape the containment vessel and are exposed directly to our environment.


Japan's greatest fear

So what’s next?  At this moment, money managers across Wall Street are discussing whether they should be taking risk off the table, putting more risk on, and if so, how much?  These individuals are trying to piece together a myriad of uncertainties into a comprehensive market thesis.  What is the likelihood of an actual meltdown?  If a meltdown occurs, how will Tokyo be affected?  How will this effect the price of oil?  Only one thing is certain, fear is running rampant.  Money managers are waiting for the next shoe to drop and will be quick to hit the bid in order to hedge against a long cash portfolio.  In this hostile trading environment I only have one piece of advice: beware the Ides of March.


News Flash


News related to the earthquake.  

1. Prior to the quake Japan was suffering from high debt and a shrinking economy. 

2. The Nikkei has fallen 16% since Friday.

Some of the destruction caused by this massaive earthquake.

3. BOJ has injected $183 billion in order to stabilize the financial markets.

4. The fear of power loss for exteneded period of time could devistate the economy. There is a possibility of 10-20% power loss which would be crippling to the economy. This is according to Takuji Okubo a Tokyo economist.

5. There are at least 10,000 deaths recorded and millions without power.

6. BOJ is working with the banks in order to provide liquidity to the markets.

7. After an explosion Tuesday from one of the reactors of the Fuushima Daiichi nuclear plant, Japan ordered 140,00 people to seal themselves in doors.

8. Financial Markets throughout the world are declining in fear of a nuclear meltdown.

9. Prime Minister Naoto Kan said, “a substantial amount of radiation was leaking from the power plant.”


Monday Market Expectations 3/14/11 - Jeremy Frommer vs Jeremy Klein, The Debate Continues


Dear Jeremy Klein:

I have waited since Monday, Feb 28th to respond to you, my old partner and dear friend.

First, I have covered all my shorts and started to build a small long book. The trade back through 1300 that I’d blogged about has occured. We had a nearly 5% correction from recent Highs on the S&P futures of 1343 to the Lows set in overnight of 1283. The next time I’ll attempt to short this market will be near the 1304 - 1308 level. I will be slowly buying speculative take out names as they have cheapened up significantly.

I will now respond to your points one at a time.

1. You recently made your perception clear that oil could soon return below 90, when you stated “crude was trading at 85 just prior to the Libyan crisis.” Well, its been 2 weeks, we are nowhere near 90, and I still believe it will be a while longer before we somehow find our way back to that level. We are far from out of the middle east oil crisis, and this could continue for the rest of the year.

2. You also believed that the revised GDP was not all that important as it was a look back of very old data, and more importantly thought the housing data is priced into market. Perhaps this is true, but the bottom line is that we have 5 years of inventory build up. So while I am long term Bullish and have been short term bearish, my bullish thesis is a slow and steady grind from here. Not the Hyper bull market we were in the last 6 months.

3. You’ve commented that the jobless claims have resumed their downward trend. However, most recently we were a little too close to 400,000 for my comfort. It is going to be an ongoing struggle for the labor environment to improve. Again this is why I look for a much slower grind up in the market than we have experienced recently.

4. Michigan sentiment came in a little lighter than expected. And while you importantly pointed out that it is near its 3 year highs, that is exactly why I think we needed a small correction, a pause, and a slower resumption of the bull market.

5. As far as the Index of out performing names, lets keep in mind that:

a. I trade names that may not be in the S&P 500; although I know you, my esteemed colleague, believe that outside of the S&P nothing else matters.

b. Often a handful of stocks are sustaining an Index due to extremely strong moves up, while the rest of the names in an index suffer.

6. In response to the market not being overbought;  I think the move below certainly shows us that we cannot expect a market to be up 4% every month, and we were in some need of a pull back, which is what came to fruition.

7. And finally, if you read the blog below, you’ve questioned my probability of an extreme event occurring in Saudi Arabia. Well, I think we know the answer to that now. Sauid Arabia has demonstrated that they will fire on protestors. And clearly the show of force on the streets of their major cities implies that the Kingdom is nervous.

Now I am no soothsayer. And I do wish I had taken your opinions more seriously last year as I would have saved hundreds of thousands of dollars. You saw the sell off in April and May of last year and warned me. I probably would have made a great deal of money. I have happily paid attention ever since. So I only felt it appropriate to give you a heads up on my bearishness, 4 - 5 percent higher than where we are today.

In addition, you do have an uncanny ability to pick the year end close of the S&P. Pay attention members. Klein is looking for an end of year 1435 close. And although I have to look over my previous blogs, I believe I was looking for 1425.

As usual my good friend, great minds think alike.

Best Regards,

Jeremy Frommer


——————————Below is my previous response to Jeremy Klein’s own response which is bolded———————————-

My old friend, partner, renowned economist, and all around great guy, Jeremy Klein, provided a counter point to my most recent blog “Stock Market Commentary 2/25/2011 – My Advice”

In all fairness and in the interest of thoughtful debate, it is only appropriate to publish it as its own blog.

Three other important points about the distinguished Jeremy Klein

  1. He is a wine connoisseur
  2. He is known at Goldman Sachs as “The one that got away”
  3. He is the winner of HFL pick the year end close on the S&P 2010

His response follows:

Hedge Fund Live - The Battle of The Jeremy's


“To my old friend Jeremy Frommer,

As you know I hold your opinion in the highest regard, you are by far one of the wisest and talented individuals I know, that said, I am not sure I agree with your view. First, crude traded at $85 just prior to Libya. It sold off there, after Egypt calmed down and may do the same when Libya reaches a resolution assuming another major oil producing nation doesn’t fall. Ironically, you argue that consumer is worse off than people think which would imply demand for oil would decrease which would also bring crude back down below $90.

A revised reading on Q4 GDP is not all too relevant as it looks back at chunks of data 5 months old. New Home Sales was disappointing, but much of that was the snap back from the CA tax credit expiring last month. More importantly, the housing sector remains depressed which most everyone agrees with and is priced into market.

Jobless Claims has resumed its downtrend and Thursday’s print was without any seasonal adjustments, so it’s clean. Most

Hedge Fund Live - Frommer Vs Klein



importantly, you ignore the University Michigan number, which now sits on 3-year highs and clearly shows that consumer sentiment is important.

I am also not sure how stocks in general have underperformed the S&P 500 when the latter is an index average.

I am not sure the market is overbought let alone leveraged overbought. The TICK information and open interest in the futures actually imply managers are very nervous and looking to hedge aggressively and quickly at the first sign of trouble. Therefore, we will continue to get sharp 1-3 day sell off such as the one on Jan 28 and this week before grinding back higher as the managers scramble to cover. The increase we have seen in open interest on these sharp down days contradicts greatly what one would expect when coming off 2 1/2 year highs such that we saw panic selling through Thursday afternoon.

Hedge Fund Live - Economist vs Entrepreneur



Finally, what percentage would you put on Saudi Arabia falling into same malaise as Egypt, Libya, and Tunisia? I am no expert on Middle East, but given monarchy is liked much more than Gadaffi, proactively trying to reform, and the U.S. will do anything in its power to aid the nation in keeping pumps flowing, I would put it at 10%. Earnings on the SPX for 2012 are $110. I think that’s a bit of stretch and will use $105. If oil prices continue to rise, I will use $85 as an estimate as energy names (12% of index and rising) will see solid increases. I will use a 14x forward multiple for the former and a 13x for the latter given additional risk premium for geopolitical uncertainty. Using my aforementioned, yet understandably arbitrary, probabilities yield a year-end level of 1435.

Been tuning in a great deal lately, as Hedge Fund Live has become the top ten go to destinations for a real time look at the markets. I really enjoy the content.

I look forward to hearing your response.

All the Best

Jeremy Klein”

Well J. Klein, you will hear from me soon as I have quite a bit to say. For now I hope our members, readers and listeners enjoy our debate




Wednesday Morning Recap: Libyan Fighting Persists, Oil Recovers Off Lows

HedgeFundLIVE.com -Morning Notes

- Global indices are net positive this morning
- Not too much out overnight
- Nikkei closed up 60bps on the heels of relatively strong action in domestic markets yday
- Crude oil is now up small after opening up fairly weak
- In Libya, fighting persists and the town of Zawiyah (rebel-held) is being attacked by gov’t forces
- In Europe, UK trade balance came in better than expected, which helped FTSE catch a bid
- Note that six Greek banks were downgraded by Moody’s, but bourses did not react much to the news
- S&P futures are about 2 handles from FV
- Pivot level resistance ahead for ES at 1325.50
- Only item on economic calendar for today is January Wholesale Inventory at 10a
- 10 yr Notes auction results out at 1p
- All in all fairly quiet on news front, but still not expecting quiet trading given the whippy action over the past few weeks