Enis’s Macro Wrap – Month and Quarter End

by Enis July 2, 2012 8:03 am • Commentary

For efficient market theorists, the calendar shouldn’t matter.  Who cares if it’s the 1st of the month or the 10th of the month, value is value.  But market structure has certainly changed over the last 10 years.  More of the players are short-term focused.  Fewer retail and institutional investors buy stocks and sit on it for years.  As a result, month-end and quarter-end matter.  A lot.

I’m very curious to see what happens the next 2 weeks.  My hunch is that Friday’s move was as much a month and quarter-end mark higher as it was a genuine approval of European action.  I agree with the gentlemen at Global Macro Monitor, who called Friday’s move an example of the Placebo Effect.  Given that we knew they would do something, I’m surprised at how quickly people change their trading strategy based on news like this.

I did not change my positions on Friday.  My largest position continues to be short FXE through long puts.  In the near term, I am most focused on price action in SLV, since I have Jul 27 puts that expire on July 20th.  I was pleased that SLV held below 27 resistance on Friday, and would be especially pleased if it could break 25.50 convincingly in the next 2 weeks.

Aside from Jul options which will start to decay quickly, I am comfortable sitting on all of my other positions as people react to the placebo.  Global growth slowing unfortunately has no quick fix, and markets will probably come off their placebo high to realize this in short order.