Circus at the Capitol I watched with great amusement as Senators from the World's greatest capitalist nation starts grilling oil executives on oil pricing.

"Is somebody rigging the price of oil?" asked Senator Pete Domenici. Its time like this that I'm proud to call myself a speculator and felt like shouting back through the TV screen "We do senator!". While I'm at it, I like to add "The price is set by this little thing called supply/demand otherwise also known as economics 101".

On the trading side, I'm still short the S&P futures, has been since last thursday. Volatility seems to have gone out since then though.  10:57 PM Permalink  0 comments

  Still On Interest Rates As a S&P futures trader, I don't like to rant about interest rates market all the time. But last couple of weeks that seems to be where all the action has been. Yields on 10 Year Treasuries ($TNX) has gone from 4.05% to 4.37%. That in my opinion is where the real action is as compared to the equities market.

Speaking of the equities market, apart from the post Rita relief rally plus some good old quarter ending window dressing, it hasn't managed to break out of a range which is hovering around the 50 day moving average  7:38 PM Permalink  0 comments

  Tool for Trading Index Futures Found a really useful site called IndexArb. It has all the data required for computing the fair value of stock index futures plus (as the name suggest) how to conduct arbitrage if prices goes out of line.  2:55 AM Permalink  1 comments

  The $200 Billion Bill The bond traders must have been reading my blog :) . Look at what happened to the 10 Yr Notes Yield (TYX) since my last post (the last 2 trading days) :



Note that Katrina hit the coast on August 29 when 10 Yr Yield is about 4.17%. The last 2 trading days it blasted through this level and reach 4.26%. Maybe the talk about $200b package for Katrina is spooking the market. They've been talking about it here on CNBC:

http://spaces.msn.com/members/squawkblog/Blog/cns!1p-PUKlKTyMV0J3SU8XbuxFQ!1528.entry

Seems the bond traders now are not too sure about the fed stopping raising interest rates. hmm..  9:46 PM Permalink  0 comments

  Katrina's Interest Rate Conundrum I haven't been posting for a while as I've been pondering a bit about the economic impact of Katrina.

Here's the amazing thing, there are a bunch of 'experts' out there who believe that the fed have to stop raising rates due to Katrina induced economic slowdown. Another bunch of experts believed the that the fed should keep on raising interest rate since they'll be a federal budget deficit blowout and oil induced inflation. And now you know why they call economics a dismal science.

Fortunately, rather than the 'experts' opinion to make my living, I have the traders from the Chicago pits to rely upon. Their money-on-mouth bet is that rates are staying flat or down. A look at the Yield on the 10 Year Notes went from 4.44 pre Katrina to a low of 4.0 post Katrina, to about 4.16 as I write this.

So my bias for the S&P will still be on the upside. The moral of this whole episode? See what they do (with their money) not what they say.  5:44 PM Permalink  0 comments

  The market as a guidepost Yesterday the market started off with a negative mood, obviously due to Katrina and oil. When the S&P futures opens at 1202 yesterday, I detect the overall sentiment was still negative although Katrina was downgraded to a category 4 as it hits land.

One of mechanical trading systems signaled a buy at 1207.50 level, and so I put in a buy stop order at that level thinking that it would probably have very little chance of getting filled. Within half an hour the order was filled as the S&P moved higher to around 1209.

I was looking around for any news that might have caused the mini rally but didn't find any. My thought was I have possibly bought the high of the day. Of course in the end the market just kept on moving higher throughout the day.

I am once again amazed by the predictive powers of the market. It seems that the market somehow always knows slightly beforehand.  3:13 AM Permalink  0 comments

  Katrina I have been away since friday. On TV I saw crude oil trading at $70 in Asian hours. I was initially pleased as I went short the S&P on Friday and thought this is probably one of those 'scares' to oil supplies that traders are getting used to.

It was only when I turn on my PC that I discovered about Katrina. A hurricane with such a beautiful name but such a devastating effect. My thoughts go out to those who are stranded in New Orleans as the storm approaches. I hope they will all be safe.  11:54 PM Permalink  0 comments