The #1 Indicator for 2011
Kevin Ferry
Chief Market Strategist
Cronus Contrarian Corner
www.cronusfutures.com
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The first month of decline has led to a double in the 5 year yield and OVER a tripling in Eurodollar spreads into 2012 and 2013…1 MONTH….the bankruptcy we are calling for in 2011 is most likely the Fed
The smartest thing I was ever taught about the market was “The ONLY thing that matters is the positions.” We believe that tidal shifts revolve around markets under the stress of liquidation. The context within which the coming seismic shift in F.I. positions comes will define success or collapse. Right now, we are leaning toward the former.
The key take-away of the recent (and not fixed) Euro blasting was the first sign of flexibility and elasticity in the US rates space. The crisis showed what happens when capital markets break from rigidity. The trading community continues to wax and wane toward the tail risk, binary conclusions but elasticity means life in the middle. The Fed, the curve slope and the rest of the Globe will continue to buffer the turning tide. Valuation should push back against momentum bulls and bears. The MOVE Index (Merrill Treas vol index) will rival the VIX for popularity. As we said in October, rolling over is a critical part of the process.
The 10 year future has dropped about 5 points since early November. How far and how long the bounce is the micro discussion for the holiday season. The bigger conclusion for 2011 has already been decided. Higher and wider remains our call. Our focus will be on what can be taken out not necessarily what will move the most. For reference I would suggest a gander at the Note from March to June of 2009. Add a year and a half of monetary voodoo from the Fed and a dozen broken dreams from the public to the picture. Tops are protracted, choppy and frustrating in development. (Bottoms tend to be acute) That we are now engaged in that process is no longer part of the debate.
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Kevin Ferry is the Co-Founder of Cronus Futures Management. He created the company in 2005 with five other traders focusing on fixed income, foreign exchange and equity futures trading in the electronic world. Currently, Chief Market Strategist, Ferry has 24 years experience in futures trading. Kevin Ferry Graduated from John Carroll University in 1983, majoring Economics.
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December 23rd, 2010 at 9:45 pm
Am a pedestrian here and don’t understand Mr. Ferry’s Greek. Can some one please translate it into the main street American language?
December 23rd, 2010 at 10:41 pm
A fine example of turgid lingo possibly meant to camouflage that he’s the last to call the general turn in bond rates.
December 25th, 2010 at 8:33 pm
It reads like Shakespeare and I don’t have my interpreter handy.
He’s using a fair amount of shorthand and some poetic license: first sentence, he’s aghast. The remainder is about the implications. Tidal shift, seismic shift is leaning positive, and wax and wane (increase/decrease). Beyond that it’s your call.
…You know, why would someone invest if they couldn’t follow what a financial writer was saying?
December 26th, 2010 at 11:47 am
I tried google translate, but did not gain any insight….
December 27th, 2010 at 3:26 am
guys, of above..
seemed that: “…The 10 year future has dropped about 5 points since early November. How far and how long the bounce is the micro discussion for the holiday season. The bigger conclusion for 2011 has already been decided. Higher and wider remains our call…”
&
“…Tops are protracted, choppy and frustrating in development. (Bottoms tend to be acute) That we are now engaged in that process is no longer part of the debate.…”
+
“…The MOVE Index (Merrill Treas vol index) will rival the VIX for popularity. As we said in October, rolling over is a critical part of the process…”
were the ‘takeaway’ “Ideas”..
differently, ~He believes He saw a ‘seachange’ in iRate Trend, as witnesssed in the UST 10-year Futes Contract…
the “High-Water”-Mark has been made, how high subsequent Tides reach is, to him, a minor discussion..
though, key, in his view, is the perception of ‘Rollover’”Risk”–with that, and its ebb and flow, increasin Price Volatility–a.k.a. T-Bonds.com(bomb) ..
~~
hope that was accurate/useful..~