6/22/2010 Pre-Market Commentary

So the Yuan thing turned out to be overcooked as we called yesterday. We just didn’t see any follow through – quite to the contrary. Oil sold off, the Euro remained weak off the open and got hammered and the bid returned to the 10s. The real star is the carry trade which has been pounded with a steep angle. Many didn’t anticipate the strength to the dollar from the Yuan news would obviously weaken the Euro. We can’t rally with weak Euro and weak oil folks. There is also an interesting thing happening in the currencies and that is that Canadian and Aussie dollars are being used as reserve currencies. A backstop for a blood bath in the Euro. So that just serves to further weaken the Euro which in turn increases global economic woes which hammers equities and spurs flight to quality. Support has now slipped right back to the ever important line in the sand – the VPOC for the last 3 years of trading at the 92-93 handle. Existing home sales is going to be weak in my view. I have a line on some non-public supply info and all I can say is if you think inventory is bad now, look out. So the home sales may put additional pressure on us today. Interestingly we saw the big traders buying the sell-off all day on heavy volume, but they all either took profits or sucked up losses overnight so we are essentially at parity there as of now hence the pre-open rally happening right now as I type. The big trader distribution is almost comical. They traded virtually nothing overnight other than to sell the center of the balance area at the 10-11 handle. As soon as that was complete we started to snap back. The structure is pretty straightforward other than a couple tricky spots. The OL/YL area should be very volatile and as usual you should try to wait and fade the outside of the range. Same deal with the OH tail which really has to be broken into 2 because of the pivot right in the middle of that range. If the homes news should happen a positive surprise we may not trend at all today. We shall see…