Action packed news calendar coming up

Financial Futures Report by DeCarley Trading
 

This week's economic calendar was tame, but next week should be different. In fact, next week's action packed schedule will probably make or break the financial markets. Monday slot is blank, but on Tuesday we'll start off with retail sales and PPI. Later in the week we'll hear about price pressures on the consumer level along with housing data, consumer sentiment and the Fed's Beige book. Put on your seat belts!

Gangbuster 30-year auction yesterday, but where is the equivalent rally?

  

The U.S. Treasury issued 30-year bonds at much better than expected demand. I believe Rick Santelli of CNBC gave the outing an A-...which is rather rare.

We were expecting this to be the case, but we were also suspecting the news would trigger an immediate rally. However, it took the market almost 24 hours to finally press higher. We were hoping to see much more conviction in the trade, but the truth is the chart still looks positive. We continue to like the idea of being bullish on dips.  

The first upside objective will be a gap fill, left over from the fiscal cliff chaos near 147 in the long bond.

Keep in mind that the dollar and Treasuries tend to be correlated. The current correlation coefficient is 68. If the greenback finds a way to recover against the Euro, it will be highly supportive for Treasuries. The idea of a reversal in the currency market doesn't seem far-fetched...the Euro is beginning to look a little over-stretched (we won't even mention the Yen).

 30-year bond futures contract 

Treasury Market Ideas

  
Consensus: It will take another string of positive economic news to keep Treasuries down...anything in line with expectations or worse should be bullish for bonds and notes.
  
Support: 144'06, 143'17 and 143'06(30-year Bond), 131'09 and 130'26(10-year note)
  
Resistance: 146'24, 148'23 and 149'30(30-year Bond), 132'10, 133'02, and 133'18 (10-year note)
  

Position Trading Recommendations

 *There is unlimited risk in option selling  

December 18: Buy the March 5-year note futures contract near 124'05 and purchase a 124 put for insurance for about 16 ticks ($250). The maximum risk on this trade is about $400, but the profit potential is theoretically unlimited.

ES rally is maturing, it will take another round of good earnings and data to keep it afloat  

The stock market has reached a critical point in which investors will come to some sort of inflection in the near future. From where we are sitting, the market appears to be setting itself up for disappointment. We wonder if all of the good news is already out and accounted for; in such an environment it can be difficult for investors to find fresh reasons to buy.

Similarly, sentiment is beginning to look grossly lopsided. According to the AAII index, 46% of investors are bullish. This is much higher than the long term average of 39% (I realize it doesn't sound like a big difference...but it is). If "everyone" is bullish, the buying can easily dry up.  

From a charting standpoint, Friday's test of the 1470 mark should have been enough to run the buy stops that accumulated over the last week; without a new catalyst this could exhaust the rally.

 ES e-mini S&P 500 futures analysis   

Stock Index Futures Market Ideas

  
Consensus: We've been noting 1470 as resistance and a possible reversal point. It is now or never for the bears...
  
Support: 1445, 1434, and then 1422
  
Resistance: 1470, 1479 and then 1491
  

Position Trading Ideas

January 2: Sell February S&P 500 1490 calls for about $10 in premium (or $500).  

Day Trading Ideas

These are counter-trend entry ideas, the more distant the level the more reliable but the less likely to get filled.

 
Buy Levels: Let's see what Monday brings
  
Sell Levels: Let's see what Monday brings
  

In other markets....

  

January 4: Sell March crude strangles using the $100 call and $84 put for about $1250 in premium.

 

(Our clients receive short option trading ideas in other markets such as gold, crude oil, corn, soybeans, Euro, Yen, and more. Email us for more information)

   
DeCarley Trading 
Twitter:@carleygarner 
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Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.

**Seasonality is already factored into current prices, any references to such does not indicate future market action.  

There is substantial risk of loss in trading futures and options.

  

Doing so may not be suitable for everyone. These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives.

  

Past performance is not indicative of future results.  The information and data in this report were obtained from sources considered reliable.  Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities.  Website administrators, affiliated brokers, employees etc. may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.  Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

  

 

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