Treasury Futures tick higher, ES stalls


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U.S. Treasury Futures Chart

Treasuries Creep higher, seasonal strength ahead

Bonds and notes traded mostly higher to start the week as traders express some concern over the upcoming European Stability Mechanism (ESM) vote. The ESM is a proposed international organization intended to provide financial assistance to members of the EU. This program would replace the temporary programs already in place. The plan needs approval by Germany, but it seems the vote scheduled on September 12, could be delayed.Also working in favor of Treasuries and against equities was word that Mohamed El-Erian, one of the world's largest bond fund managers, pegs the odds of a worldwide-recession at one-third.Our stats specialist, Wayne Whaley, pointed out that history suggests the odds favor higher bond prices and lower yields this week. Similarly, we suspect the technical picture of the market is improving, and this should leave the overall path of resistance higher.

Treasury Market Ideas

Consensus: Bullish on dips, possible eventual retest of July highsSupport: 147'22 and 146ish (30-year Bond), 133'06 and 132'14 (10-year note)Resistance: 150'18 and 152'05 (30-year Bond), 134'11 and 135'05 (10-year note)

Position Trading Recommendations

*There is unlimited risk in option sellingNone
ES Futures Daily Technical Analysis

Light Volume and Little News to Guide Trade

By afternoon trade the ES had traded a mere 800,000 contracts. It isn't unusual to see light volume during the summer months, but this is an incredibly dismal figure. Light volume has the propensity to do one of two very different things, exaggerate volatility, or result in a quiet "melt-up". Thus far, it seems like the latter scenario is trumping the former. Although it might be difficult to fundamentally justify higher prices, talk of more QE domestically, and the European fund (ESM) could prop up asset prices in the short term.The latest COT Report issued by the CFTC depicts a dramatically undecided market. Both large and small speculators are holding relatively neutral positions. Similarly, the AAII investor sentiment index is approaching long-term average levels, suggesting no real bias.According to the AAII, about 36% of those surveyed are bullish, 36% are neutral and 27% are bearish. These levels have yet to point toward an overheated market and could be reason to look for a moderate continuation of the rally. With that in mind, we ultimately believe the best move will be to be bearish rallies at higher levels.

Stock Index Futures Market Ideas

Consensus: Bearish on rallies. Look for possible short squeeze above 1400 in the ES to be a bear.Support: 1370 and 1351Resistance: 1416 and 1428

Position Trading Ideas


Day Trading Ideas

These are counter-trend entry ideas, the more distant the level the more reliableBuy Levels: 1391 and 1384Sell Levels: 1407 and 1416

In other markets....

August 6th - Sell October crude oil 106 calls and 80 puts. Premium collected = 93 cents ($930)(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)
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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.

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**There is substantial risk of loss in trading futures and options.** 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. 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. Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.

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