For variety, I will begin today from the chart and link of my trade.
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| chart 1. futures SP500 Index, Daily, 2014-10-16 |
Today I decided to to close my position on the SP500. According to me the potential for further falls is already very limited. In addition, the wave system also shows the possibility of the end of correction. So my profit from the transaction amounted +172 points.
Published in yesterday's Beige Book did not bring anything new. Accordingly, the publication does not have a major impact on the markets. This time the publication prepared by the Fed from Minneapolis.
Within a few weeks of falls in the stock market and already some members of the Fed come before a range and decide to comment on the situation on the capital market, which is not their duty. Definitely in my opinion, should focus on monetary policy. But unfortunately, the truth is that talking is what employers they force them to.
Fisher Head of the FED from Dallas gave a television interview in which he said, among other things, that:
- Correction in the stock market does not mean that the economy is in trouble;
- It is too early to consider introducing the next QE program.
From among the many hypotheses trying to explain yesterday's big moves on Wall Street and in the debt market in the United States most likely would appear to be associated with the liquidation of large positions by large hedge funds that have suffered huge losses yesterday following the news that most likely there will be no merger of the two giants of health sector - Shire and AbbVie.
Hedgefunds (fund headed by John Paulson) has long been buying huge quantities of shares in Shire, in the hope of just that one of the American pharmaceutical giants take over the Irish company in connection with the powerful tax benefits that such a solution could bring. In fact, the share Shire found himself willing - giant biopharmaceutical Chicago - AbbVie. The merger of companies has gained acceptance from the board of the Shire, and the voting shareholders had come in the coming weeks. Generally, everyone was happy. However, at this time appeared ... the government.
People in Washington seeing a rash of mergers in the so-called. tax inversion decided to disrupt the businesses fleeing from paying taxes in the United States and change the law. That's why yesterday AbbVie received information that the merger may not occur. Shire Shares in London were thrown down by as much as 28%. Hedge funds have suffered strong losses, and here comes the connection with yesterday's price reduction on Wall Street and the movements in the debt market.
According to. various unofficial reports, hedge funds as a result of massive losses on shares of Shire have to close other items. These were primarily long positions in shares of other companies in the United States (hence the strong depreciation on Wall Street) and short positions in American bonds (hence the strong increase in prices and a drop in yields on 10Y to 1.86% at one point).
But, fortunately it's just my scenario. :)
regards,
oscarjp
