Rollover

by Larry Levin

Thursday begins the June to September rollover in earnest. Thursday will mark the first day that September is the "top step" or more commonly known as the "front month." Expect both the June and September contracts to have light volume in each, as traders are clearly up positions in June and just opening them in September. In other words, volume will be split in half.

Wednesday's early report showed that without the free government cheese for housing, mortgage applications continue to fall. This is the natural order of things after such a ridiculous level of malinvestment in housing and the government is only wasting YOUR MONEY by trying to prop up this sector. To believe otherwise is folly.

Bloomberg said the following of the report...Purchase applications continue to fall following April's end to second-round stimulus, down 5.7 percent in the June 4 week for a 35 percent decline from just four weeks ago. Refinance applications, after shooting higher in recent weeks on low mortgage rates, eased back in the latest week by 14.3 percent. The report warns that many homeowners who have yet to refinance may not be able to so if they remain underwater on their mortgages, have uncertain job situations, or have damaged credit. Mortgage rates were little changed in the week with 30-year loans averaging 4.81 percent.

The 10-YR Note auction went well and the Fed's Beige Book was seemingly a good one. Well, that's the media wanted you to think anyway. Traders, however, must have disagreed somewhat. When the Beige Book was released - the market fell apart.

The report said the following..."Consumer spending improved from the previous report. Spending continued to be concentrated in necessities as opposed to discretionary big-ticket items." NECESSITIES? Is this expansionary for GDP or, ummm, just "necessary" spending to keep GDP from going negative?

"Business spending increased moderately from the previous report. Most of the increase in spending on plant and equipment taking place in manufacturing, transportation, and energy industries." Moderately? I thought this was a killer "V" bottom recovery? Did the report say "moderately?"

"Residential real estate activity improved since the last report. Most Districts noted an increase in home sales and construction prior to the April 30th deadline for the homebuyer tax credit, with contacts in many of these Districts also indicating a corresponding slowing in activity in May."

"Commercial real estate activity generally remained weak. Office, industrial, and retail vacancy rates continued to drift upward in many Districts putting downward pressure on rents."

The Beige Book is clearly not a terrible report but isn't what the market needs to rally.



Previous Day's Trading Room Results:

Trade Date: 6/9/10

E-Mini S&P Trades*
(before fees and commissions):


1) Engf sell @ 9:16am at 1066.25 = b/e (1 lot)

2) FT sell @ 2:03pm at 1063.00 = +.75 & +.75 (2 lots)

3) Algorithm positions (26)

4) “Reading the Tape” positions (6) combined Secret’s, Algo, & “Reading the Tape” total… +16.75


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