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  • Proprietary Trading Weekly Market Recap For Friday, August 1, 2014

    Mixed Data Generates Increasing Volatility for Stocks

    The mixed bag of data released in the US released increased volatility creating choppy market conditions. Stronger than expected GDP and the Employment costs index, gave investors confidence that the Fed could raise interest rates sooner than expected. Stocks tumbled on Thursday, pushing volatility higher, ahead of the all-important jobs report Friday.

    The US released a deluge of data on Friday, including non-farm payrolls, the unemployment rate, ISM manufacturing, construction spending and consumer confidence. The payroll report, which is the most watch report of the month, was somewhat disappointing despite notching up a 200k+ number for the 7th consecutive month.

    U.S. nonfarm payrolls rose 209k in July from a revised 298k in June and 229k in May for a net 15k increase to prior reports. Expectations were for a 230K increase in non-farm jobs. The unemployment rate rose to 6.2% versus 6.1% previously, as the labor force rose 329k and household employment increased 131k. Expectations were for an unchanged rate at 6%. Average hourly earnings rose were flat after gains of 0.2% in May and June. The workweek was steady at 34.5.

    Private payrolls rose 198k, including a 58k gain in the goods producing sector, while construction employment was up 22k, with manufacturing jobs rising 28k. Jobs in the service sector increased 140k, with the government adding 11k, while business services added 47k.

    One of the bright spots of the data releases Friday was the U.S. ISM which jumped up to 57.1 in July after slipping 0.1 point to 55.3 in June. The index resumed its rise that had been in place from February through May as manufacturing recovered from exaggerated weakness to start the year. This is the highest reading since April 2011 and compares to the 59.3 cycle high from February 2011. The employment index surged to 58.2 versus 52.8. New orders rose to 63.4from 58.9. New export orders slipped to 53.0 from 54.5. Prices paid increased to 59.5 from 58.0. Data are better than expected.

    U.S. construction spending plunged 1.8% in June after a revised 0.8% May gain, with the 0.8% April jump boosted to 1.4%. Residential construction spending dipped 0.2% following a 1.0% May drop. Nonresidential spending declined 2.8% after gains of nearly 2.0% in April and May. Private construction outlays fell 1.0% following a 0.4% May gain. Public construction spending fell 4.0% following a 1.6% May gain and a 2.4% April jump.

    Sentiment on the other hand slipped. The July Michigan sentiment declined to 81.8 from 82.5 following Friday's increase in the July employment rate. Michigan sentiment remains below the 85.1 cycle-high from July of 2013. The average size of the monthly boost has dissipated to 0.7 this year from a larger 1.8 average in 2013. Michigan sentiment has enjoyed a 2014 lift from rising stock prices and home price gains, though confidence faces a headwind from limited credit availability, mortgage rate increases, disruptions from Obamacare, and a deteriorating geopolitical backdrop.

    While the S&P 500 index dropped 2.69% for the implied volatility as reflected by the VIX volatility index soared 34.2%, putting investors on notice that the calm might be over.

    Aug 04 12:09 PM | Link | Comment!
  • Proprietary Trading Weekly Market Recap For Friday, July 25, 2014

    Stocks Experience Bumpy Ride through Earnings Season

    The S&P 500 index experienced a choppy week for proprietary trading, with the S&P 500 notching up a number of new fresh highs. The VIX moved higher with the choppy trade, and investors continued to focus on the geopolitical risks in Russia and Ukraine. Economic data was mixed with new home sales falling along with jobless claims, and existing home sales and Richmond manufacturing perking up. Apple, Facebook and Amazon all released earnings, which highlighted a busy week of financial results.

    U.S. CPI rose 0.3% in June with the core rate up 0.1%. This follows a 0.4% headline surge in May and a 0.3% increase in the ex-food and energy component. Compared to last year, consumer prices are up 2.1%, the same as the prior reading; the core rate slowed slightly to 1.9% from the prior 2.0%.

    U.S. existing home sales rose 2.6% to 5.04 million in June after jumping 5.4% to 4.91 million in May. This is a third straight monthly gain that more than erases the three months of declines to start the year. Single-family sales increased 2.5% while condo/coop sales climbed 3.4%.

    The U.S. Richmond Fed's manufacturing index rose 3 points to 7 in July, after slipping 4 points to 4 in June. The employment index improved to 13 from 4, while the workweek dipped to 3 from 5. New order volume was steady at five while prices paid increased to a 1.99% annualized pace.

    New home sales release was less than impressive. U.S. new home sales sharply undershot estimates with an 8.1% June drop to an anemic 406k rate, after massive downward revisions that left rates of 442k in May, 408k in April and 403k in March. Inventories rose to a 197k three-year high in June, while the median price fell 3.2% to $273,500.

    U.S. initial jobless claims dropped 19k to 284k in the week ended July 19 from a revised 303k for the prior week. That is the lowest since February 2006 and brought the 4-week moving average down to 302k from 309.25k. Continuing claims fell 8k to 2,500k for the July 12 week from a revised 2,508k.

    Facebook (NASDAQ:FB) reported earnings of 42 cents per share, ex-items, vs. expected EPS of 32 cents, excluding one-time items. Revenue was $2.91 billion, a growth of 61 percent from the same quarter last year. Shares hit an all-time high on Thursday, and for the week the social media giant is up 9.6%.

    (click to enlarge)

    Jul 29 9:50 AM | Link | Comment!
  • Proprietary Trading Weekly Market Recap For Friday, July 18, 2014

    Volatility Increases as Geopolitics Returns to Capital Markets

    U.S. stock experience a tumultuous proprietary trading week, with prices surging to new highs on Wednesday and then tumbling on Thursday following the news that a Malaysian Airplane was shot down on its way from Amsterdam to Malaysia. President Obama has again warned Vladimir Putin of increased sanctions if Russia does not change its stance of backing Ukrainian rebels. Israeli troops move into Gaza with the intention of crippling the Hamas regime. Despite the volatility the S&P 500 index closed higher by 0.54%.

    Risk aversion has started to rear its ugly head, as yields have declined and gold prices have perked up. The US 10-year yield has declined to 2.44% which is a 6-week low at it is poised to test the low made in early June near 2.4%. Gold prices have been on a rollercoaster, moving higher in early July but peeking out near 1,340 per ounce.

    Oil prices rebounded after slicing through $100 dollars a barrel, as perceived demand has dropped off relative to supply. Earlier in the week, the Department of Energy released its short term energy outlook which reduced the amount of production expected out of Iraq into 2015.

    Economic news has been light this week, but both housing starts and retail sales were weaker than expected. U.S. housing starts fell 9.3% to 893k (median 1,020k) from 985k in May. November's 1,105k headline was the highest since February '08, the recent low was 536k in June '10. Permits for June were 963k from 758k in May. Completions fell to 789k in June from 897k in May.

    June retail sales grew 0.2% compared to a median estimate of 0.6% and sales excluding autos were up 0.4% with a median expectation of 0.6%. The May headline was revised to 0.5% from 0.3%. The vehicles & parts components fell 0.3% in June versus the 1.3% June increase in unit vehicle sales. Gas station sales were up 0.3%, after a May increase of 0.7%

    On a positive note, U.S. initial jobless claims dipped 3k to 302k in the week ended July 12; from a revised 305k previously. The headline figure is important as it coincides with the BLS survey week. The 4-week moving average was 309k from 312k. Continuing claims fell 79k to 2,507k in the week; ended July 5 from a revised 2,586k to end June.

    In earnings news, financials started the week on a positive note with Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), JP Morgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) all notching up results that were better than expected. In the technology space, IBM beat the street but its forward-looking guidance was disappointing. Google's second quarter earnings per share of $6.08 missed by $0.15 although revenue jumped 22% year over year to $16B beating estimates by $350M. Next week earnings season will kick into full gear.

    (click to enlarge)

    Jul 21 10:07 AM | Link | Comment!
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