Thursday, February 2, 2012

Another Green Day, Strength on Strength

Last night we saw prices up again, with adp payrolls not doing so well, but showing improvement in private sectors sales.

We saw China PMI doing better than expected, and US PMI also showing improvements (http://www.calculatedriskblog.com/2012/02/ism-manufacturing-index-indicates.html)

ASX equity prices are still lagging - the notable big names BHP, RIO, WPL etc are recovering a lot of lost ground from 4qtr last year, we should see a lift from the materials sector for the remainder of the quarter easy momentum.

 AMZN came in with a earnings report that came in significantly worse than expected - but the killer was probably modest guidance going forward - some positives were that margins were somewhat better - although still very very low - and we saw some strong buying at 175 to close at 179.

My natural Gas position is bleeding, as we are seeing a retest of the recent multi-year lows.  I just realised an issue that I had long known about, but have never thought would impact ETFs - that of contango - right now the contango on UNG is 7-8% -  The case of where contango gets higher the lower the underlying price gets - and this ETF position is going to really hurt, unless we see a continued bounce in prices - I am thinking of switching the position I hold to UNL - which will suffer from less contango as it spreads its futures exposures across the maturity curve.  I guess the CFA course does give you some practical applications after all.
http://vixandmore.blogspot.com.au/2008/07/natural-gas-implied-volatility-spiking.html