Culebra Capital

Thursday, December 19, 2018                                                         Trading Desk: (312) 236-8907

 

TODAY’S GAME PLAN:  

DATA/HEADLINES:   7:00ET BoE rate decision; 8:30ET Philly Fed;  10:00ET Existing Home Sales, Leading Indicators; 11:30ET Pelosi – Schumer to meet regarding impeachment

UK PM Johnson will lay out his Brexit plans in the Queen’s speech. Sweden’s Riksbank raised rates from -0.25 to zero. Mexico is expected to cut rates today, its fourth in five months. China Premier Li: Downward Pressure On China’s Economy Could Be Even Bigger Next Year – State TV.

TODAY’S HIGHLIGHTS:   

There is another test of market year-end liquidity needs today when the Federal Reserve Bank of New York offers a $35 billion 14-day term operation which spans into the new year.

EQUITIES:   pre market movers at bottom of this page

U.S. index futures are slightly lower amid few new catalysts. Details of the recent trade deal between the U.S. and China remain vague, so traders appear to be in a holding pattern.  E-mini S&P is -0.08%,  Nasdaq -0.10%, RTY -0.13%, Dow future +0.02%. ESH has 3203.50 as initial resistance (Fibonacci extension of December move).  A break of 3187 would likely see some pressure, possibly to 3153 area (3149.50 in SPX*). 

Energy sector at potential pivotal pt with XLE testing its 200dma (has not had a settle above it this year).  XLE relative to SPY remains negative below the 100dma in the pair.

Emerging Markets:  After central banks in Indonesia and Taiwan left rates on hold, as expected, the focus turn to policy makers in Mexico, with economists predicting a fourth cut in five months. Argentina’s current-account balance and job-creation data in Brazil will round off the day. EM futures are slightly lower after gaining over 8% from the Dec 3 low. 14 day RSI is extended.

The Stoxx Europe 600 Index swung between gains and losses, with an increase in real estate and energy shares offsetting losses for automakers and insurers.  The Bank of England policy remained on hold even as expectations mount for further easing in 2020. U.K. retail sales figures which showed the longest run of monthly declines since 1996 add to that speculation. DAX future is lower by 0.5%, Eurostoxx future -0.35%, FTSE +0.16%.  We will use the 50dma in March DAX as initial key support area.

MSCI German ETF (EWG) remains negative relative to S&P 500 (SPY) below the 200dma in the pair.

In Asia, most markets in the region were down, with Taiwan and the Philippines leading declines, while India and Thailand rose. The Topix slipped for a second day as the Bank of Japan maintained its target for interest rates and asset purchases.  The Shanghai Composite Index closed little changed, as a bank rally countered declines in technology firms.  The Bank of China injected the most liquidity since January to ensure ample cash supply over the year-end period.

FIXED INCOME:   

Treasuries resume bear steepening with losses led by 7-year out to 30-year part of the curve. Treasuries following wider bear-steepening move across the German curve, while losses extend as gilts are pressured lower following BOE rate decision. Confirmation of Trump impeachment has little market impact given near certainty the Republicans, holding the Senate majority, will acquit him.  Italian bonds fall as prospects of referendum on the number of parliamentary seats next year raises the risk of early elections.

10 year yield seems likely to test its 200dma at 2.025%.  30 year yield has its 200 day at 2.49% (154’13 in March future).   TLT’s 200 day is at 134.02.

2/10 yield curve is testing the June and year high close at .30. Year intraday high is 0.318.   

March Bund is gaining some downside momentum after breaking the 200dma.

METALS: 

Gold Remains Steady as Open Interest Nears Record High. Impeachment and concerns about a no-deal Brexit are limiting declines in gold.

February Gold future is flat, holding a short term trend line (and below its 100dma).

ENERGY

Oil hovered near $61 a barrel for a second day after capping its longest streak of gains in almost two months as traders weighed bearish signs of swelling U.S. fuel inventories against a decline in domestic crude stockpiles. Official U.S. data showed gasoline, diesel and heating oil stockpiles swelled last week, reigniting demand concerns. 

Feb WTI testing the .786* retracement of the year and potential reversal area. If we do get a pullback from here, look for WTI to lead Brent lower once the 200dma is broken in the spread (-5.43). Feb Brent has 67.69 area as key resistance. RBOB remains negative below its .786.

CURRENCIES:     BANK OF ENGLAND LEAVES BANK RATE UNCHANGED AT 0.75%; “MIGHT NEED” TO CUT RATE IF GLOBAL GROWTH CONTINUES TO SLOW

The Pound rose after a two day decline (of 1.9%) ahead of the Bank of England’s policy decision, but pares gains after a U.K. retail sales data miss. Sterling gains after the rate decision. The Australian dollar strengthens after better-than-expected jobs report.  The yen was steady after Bank of Japan kept its policy rate unchanged. The US dollar index is slightly lower after the House of Representatives impeached President Trump on charges of abuse of power and obstructing Congress.

US$ Index is slightly lower; USDCAD has s/t .786 (potential reversal) at 1.3104.  Mexican Peso is negative short term after again hitting its .786 potential reversal

GBPUSD will remain positive with a weekly settle above its 200 week moving average.

TECHNICAL LEVELS:  (futures)  

 

ESH

TYH

Feb Gold

CLG

DXH

Resistance

3258.50

130’03*

1526.4

*66.52*

99.000

 

3250.00

129’16+

1520.4*

65.00

98.735

 

3230.00

129’09

1500.0

63.87

97.275

 

3213/14

128’23-26

1496.1

63.16

97.825

 

3203.50

128’11

1486.5

60.95

97.265

Settlement

3199.25

128’05+

1478.7

60.85

96.963

 

3187.00

*127’30*

1470.0

59.95

96.215

 

3176.00

127’18

1464.0

59.20

95.365

 

3160/61

127’12

1450/52*

58.65*

95.100

 

3153.00*

127’00

1426.5

58.00

94.050

Support

3136/37

126’22*

1420/21

57.00-25*

93.500

Colors within the report: Green is always the 200 period (day, week). Red is always 21, Blue = 50, Brown = 100  *Stars have more emphasis, meaning 2 or more technical pts line up; cl = closing key 

Equity movers in early trading, as of 8:05am EST:

Advancers

  • PRTK +40.7% (+$1.20); Paratek Soars After Winning BARDA Contract for Nuzyra
  • CBIO +30.8% (+$1.47)
  • RAD +25.2% (+$2.10); Rite Aid Rises as 3Q Profit, FY View Beat Analysts Estimates
  • SDRL +12.7% (+$0.19)
  • MOSC +9.9% (+$0.94)
  • NBEV +9.1% (+$0.17); New Age Beverages Rises After Director Buys $191k Shares
  • AXSM +8.9% (+$7.93); Axsome Therapeutics Offering Prices 2m Shares at $87/Share
  • AMPE +8.7% (+$0.04); Ampio Pharma Jumps After Getting Vote of Confidence from Roth
  • INO +8.4% (+$0.22); Inovio Rated New Buy at Roth Capital
  • CAG +7.6% (+$2.20); CAG 2Q Adj EPS Cont Ops Beats Highest Est.
  • GSKY +7.4% (+$0.57)
  • I +5.5% (+$0.36); The Distressed Debt Trades That Gutted Bonuses This Year
  • TXMD +5.4% (+$0.13)
  • XXII +4.9% (+$0.05)
  • RUBI +4.7% (+$0.34); Rubicon Project, Telaria to Combine in All-Stock Deal
  • FBIO +4.6% (+$0.1)
  • OBSV +4% (+$0.12)
  • TIVO +3.9% (+$0.31); Xperi and TiVo to Merge in $1.21b All-Stock Deal
  • KRTX +3.8% (+$2.51); Karuna Therapeutics Rated New Buy at Stifel; PT $126
  • MU +3.8% (+$1.99); Micron 1Q Adjusted EPS Beats Est.
  • TRGP +3.4% (+$1.33)
  • MIRM +3.1% (+$0.74)
  • CHK +2.9% (+$0.03)
  • MTCH +2.9% (+$2.06); Match Group Gains on IAC Pact to Fully Separate Businesses
  • WDC +2.7% (+$1.57); Western Digital Analyst Hesitates to Back Memory Rebound Thesis

Indicated Higher

  • MSBF $16.85-$17.85 vs $15.20 close; Kearny to Pay 19% Premium in $94m Deal to Buy MSB Financial
  • ELAN $28.84-$28.98 vs $28.19 close; Elanco Raised as BofA Sees 2020 Marking the Bottom
  • CNTG $11.00-$12.25 vs $10.56 close
  • LEE $1.48-$1.59 vs $1.43 close
  • MGNX $10.95-$11.24 vs $10.57 close; MacroGenics Rated New Overweight at Cantor
  • ZEAL $31.22-$31.31 vs $30.59 close

Decliners

  • NERV -21.3% (-$1.47); Minerva Sinks After MIN-117 Study Fails to Show Benefit (1)
  • APOG -14.2% (-$5.71); Apogee Falls After FY Outlook Cut, Says CFO Porter to Retire
  • XPER -13.1% (-$2.74); Xperi and TiVo to Merge in $1.21b All-Stock Deal
  • KODK -12.5% (-$0.46)
  • MLHR -10.2% (-$5.09); Herman Miller 3Q EPS View Misses Lowest Est.; Shares Fall
  • DRI -4.4% (-$5.12); Darden 2Q Olive Garden Comp. Sales Miss Est.; Shares Fall
  • ORA -3.6% (-$2.76)
  • AMRS -3.3% (-$0.11)
  • WKHS -2.8% (-$0.09)
  • QUOT -2.7% (-$0.30); Quotient Tech Rated New Underweight at Morgan Stanley
  • SLDB -2.6% (-$0.11)
  • PTI -2.6% (-$0.04)
  • VNE -2.4% (-$0.40)
  • XCUR -2% (-$0.06); Exicure to Offer Shares via Guggenheim Securities
  • ERIC -2.8% (-$0.26)
  • AMRN -2.1% (-$0.43)
  • NYMT -3% (-$0.19)