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January 27th, 2010
Another Non-Event
The Fed day just isn't what it used to be; in the not too distant past the FOMC policy statement encouraged high trading volume and impressive volatility. However, it seems as though those days are gone. Instead, today (and most in recent history) was a relatively mundane trading session. The March T-bond futures rallied early on what was likely position squaring ahead of the event risk but after all was said and done it ended the day near unchanged.
The Treasury market has been flooded with semi-bullish news, but it just can't seem to make progress on the upside. Accordingly, although we think that there could be much more room for this rally to run in the next month or two we also feel like the bulls are running out of "bull"ets (sorry, that was lame...it has been a long week).
The Treasury auctioned $42 billion in 5-year notes at a rate of 2.37% and a bid-to-cover of 2.80. The strong showing likely prevented some Treasury selling but wasn't enough to rekindle buying interest. Additionally, new home sales were reported to be worse than expected and failed to ignite much of a bullish response from the bond pit.
The FOMC policy statement was a virtual non-event. The Fed maintained their "extended period" stance when it comes to maintaining low interest rates. However, this time there was one dissenting vote on this. They also confirmed that their mortgage backed securities purchases program will end in march as scheduled and of course the Fed Funds target rate remains near zero percent.
Our figures from yesterday are still valid:
We were right about our assumption of another retest of the highs in the March T-Bond futures, but tomorrow's call is a bit tougher. Our resistance area near 119'09 seems to continue to be valid, along with our mid-to-low 118 resistance in the note. Support in the long bond comes in near 117'18 and then again near 116'011ish. If you are trading the note, look for support near 117'06 and then again in the mid-116's.
We also like the downside prospects in the 5-year note. Look for a pullback to the mid 115's. * 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. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already be factored into current prices, any references to such does not indicate future market action.
Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.
January 20 - Our clients were recommended to sell call options this morning against the rally. Specifically, we like the idea of being short the March 30-year bond 121 calls. Fills were being reported anywhere from 23 to 26 ticks or $395 - $406. Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.
Flat
Carley Garner Senior Analyst / Commodity Broker DeCarley Trading cgarner@DeCarleyTrading.com 1-866-790-TRADE Local : 702-947-0701 www.DeCarleyTrading.com www.CommodityOptionstheBook.com *Due to the volatile nature of the futures markets some information and charts in this report may not be timely.
There is substantial risk of loss in trading futures and options.
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. 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.
