Back and fill, but the ES probably hasn't seen the high of this move.

Trade Financial Futures with DeCarley Trading

It will be a busy news week!

The economic calendar is full, and so are the the piggy banks of speculators.  Despite the massive equity rally, we suspect that most traders missed the move and are sitting on piles of cash (primarily from poorly timed equity market liquidation in mid October). 

Similarly, the COT report suggests that speculators have liquidated bullish crude and gold plays.  In our view, the environment is ripe for a lot of "green" on the quote screen.  If we are right, we could see a scenario in which commodities and stocks move higher in tandem.

On a side note, we are looking forward to the ADP report in the morning; this will give us an arguably inaccurate glimpse into Friday's government data.   Nonetheless, it will be Friday's session that could see fireworks.

Specs are getting shorter, seasonal low isn't due until early December

According to our stats, the 10-year note (considered the benchmark of interest rates) isn't due for a seasonal low until early, to mid-December.  Thus, there is still plenty of time for prices to drift lower.  Yet, we are getting a plethora of mixed signals. 

For one, the COT report released on Friday conveys a speculative community that wasn't deterred from their bearish positions by last month's historic short squeeze.  Particularly, small speculators are still sitting on over 130,000 net short 10-year note contracts (as of last Tuesday). As we've seen multiple times this year, the more aggressive the bears get the bigger the rallies (short covering). 

Eventually, the market will fall and speculators will get what they are looking for, but Murphy's law suggests it will happen after most of the shorts have exited the markets in disgust.

In addition, the ZB (30-year bond) is already seven to eight handles off of the spike high. On some measures, it is technically oversold. 

Accordingly, although our overall bias is lower we are neutral in the short-run and probably due for some more consolidation (grind higher) trade.

Treasury Futures Technical Analysis

Treasury Market Ideas

**Consensus:** We're overall bearish, but expecting some near-term strength.  We're playing it with neutral short strangles.

**Support:** ZB: 139'26, and 136'29 ZN: 125'24, 125'04, 124'16, and 123'17

**Resistance:** ZB:  142'16, 144'25, 146'04, and 147'29 ZN: 127'01, 128'10, 129'19, and 130'17

Position Trading Recommendations

*There is unlimited risk in option selling

Short January 136 puts and 145 calls for about 56 ticks (see details at bottom of newsletter).

Now that the short squeeze is over, we "should" see the market chasers

We are still in awe of the recent equity rally.  In more normal times, we'd probably be salivating to put on bearish positions.  Yet, this time around we are hesitant.  Not because we necessarily believe the fundamentals are gangbusters, but because we've traded holiday markets before and they almost always grind higher.  For example, the week before Thanksgiving has seen a positive close in the Dow 15 of the previous 20 occasions. In addition, anybody that sold the lows a few weeks ago hoping for a pullback to get in might run out of patience...thus, we could get into a scenario in which investors are chasing prices higher.

Also, don't forget...Novembers have ranked as the #2 month to be long stocks during midterm election years!

We are well aware that the rally is a little overheated, but today's back and fill looked like a simple reload before moving into new-high territory.  We still have our eyes on 2044ish. 


e-mini S&P technical analysis 

Stock Index Futures Market Ideas

**Consensus:**   This might be too far too fast, but it probably won't matter.  We wouldn't be willing to consider getting bearish until prices see 2044ish in the ES.

**Support:** 1985, 1958, 1927, 1910, and 1882

**Resistance:** 2022, 2033, 2044, and 2055

Position Trading Ideas

Flat

Day Trading Ideas

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

Sell Levels: 2014 (minor), 2022, 2033, and 2044

Buy Levels: 1990, 1980, and 1967

In other markets....

June 12 - Buy September mini corn futures near 440.

July 8 - Add on to mini corn scale trade.

August 19 - Add to the mini corn and wheat scale trades by purchasing December mini futures contracts.

August 21 - Sell a December DX futures contract and buy an October 83 call for about $300.  The total risk on the trade should be about $1,000 before commission (depending on your fill prices).  The profit potential is theoretically unlimited.

August 26 - Roll September mini grains (wheat and corn) into December contracts to give the market more time to recover.

September 4 - Sell October DX 83 call to lock in a profit of about $700 before transaction costs.  The futures portion of this trade is underwater, we are hoping for a reversal in the coming week or so.

September 9 - Sell November Euro 133 calls and 125 puts for about 65 ticks ($812.50).

September 10 - Sell December crude oil 82/98 strangles for about $1.10 ($1,100).

September 15 - Buy March 2015 sugar 18.00 calls near 32 ticks.

September 24 - Buy back the November Euro 133 call to lock in a profit.

September 24 - We've reached our pain threshold in the dollar, let's exit the DX and go to the option market. We recommend selling double the quantity of the December Euro 123.50 puts and the 132 calls for about $800 per strangle.

September 29 - Buy back the December crude oil 82 puts to lock in a profit of $370 to $400 per contract, and replace them with short 86 puts.  This brings in more premium and rebalances the trade.

October 2 - Buy back November Euro 125 puts at a small loss (combined with call you should be slightly ahead, or at least breaking even on this venture after commissions).

October 2 - We made a big mistake rolling our 82 puts higher.  Let's rebalance the trade and look for volatility to decline by offsetting the existing strangle and selling the December 95/82.50 strangle.

October 9 - Buy back 95 crude oil calls to lock in gain on that side of the trade.

October 10 - Sell December crude oil 92 calls for about 60 cents to hedge the 82.50 puts. 

October 14 - Sell December bond 147 calls for about 30 ticks.

October 15 - Roll the December crude strangles into a January 70/90 strangle AND a December 74/88 strangle.

October 15 - We were clearly a day early on this one, roll into December 151/142 strangles.

October 17 - Buy back December bond strangles and sell 140/146 strangles to restructure the trade.

October 22 - Buy back December crude strangles to lock in profit of about $1,000 (this goes toward the premium lost on the 82.50 put).

October 29 - Buy back the 30 year bond 146 calls to lock in profit of about $500 per contract before transaction fees (this goes toward loss on original call sale).

October 29 - Buy back Euro 132 calls to lock in profit of about $300 per contract before transaction costs.

November 4 - Sell December Euro 128.50 calls for about 28 ticks.  This re-strangles the market and brings in a little more premium ahead of the employment report.

November 4 - Buy back December bond put at a small profit, then sell a January 145/136 strangle to establish a neutral short option strategy.

(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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1-866-790-TRADE(8723
www.DeCarleyTrading.com
www.ATradersFirstBookonCommodities.com


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.**


 

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