Consolidation pattern will soon resolve, but which way?


DeCarley Trading Futures Market Analysis



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Slight uptick in GDP, pending home sales pick up


The second estimate of second quarter GDP ticked slightly higher to 1.7% from 1.5%. Clearly this isn't a number to celebrate, but it is reason for a sigh of relief...if we can't get growth, stability is better than the alternative.


Pending home sales, on the other hand, were a nice surprise. In June, sales had slumped 1.4% but in July they've grown by 2.4%.


The third significant economic release of the day was the Fed's Beige Book. As you know, the Beige Book is the Federal Reserve's broad based outlook on the domestic economy. According to the report, the economy continues to expand at a moderate rate. In addition, hiring in most districts saw slight improvements and the demand for loanable funds looks to be on the increase.


The recent string of slightly positive, but more importantly stable, economic data has contributed to market complacency and a lack of volatility. However, sometimes it is the quiet markets that one should look out for. Is this the calm before the storm?



T-Bond Futures Daily Chart Support Resistance


Back and fill trade in Treasuries, but momentum still higher


Treasury traders look to be locking on their "QE profits" ahead of the Jackson Hole convention. For all intents and purposes, Jackson Hole isn't intended to be the place for Fed members to release market moving information, but for some reason that is often the case.


Last year the talk of the event was the debt ceiling, this year it will be QE...with a little bit of debt ceiling chatter in the background. However, as we get closer and closer to the mid-September deadline I would expect the debt ceiling debate to move into the headlines. In fact, in light of last year's unnecessary debacle and market panic, I'd say it could easily be a cause for stress in the markets.

There is a substantial amount of event risk looming over the holiday weekend, and this keeps us from having any desire to be overly committed to any particular direction. Nonetheless, we continue to feel as though the path of least resistance will be higher.


Treasury Market Ideas


Consensus: Seasonals and fundamentals leave us slightly bullish, but not enough to justify significant risk exposure.


Support: 149'01 (minor) and 147'11, and then again 145'09 (30-year Bond), 133'10 (minor), 132'27 and 132'05(10-year note)


Resistance: 149'24 and 151'12 (30-year Bond), 134'05, and 134'28 (10-year note)


Position Trading Recommendations


*There is unlimited risk in option selling






Dollar Index Futures Contract Chart


Consolidation pattern will soon resolve, but which way?


We've seen a rather remarkable decrease in market volatility but there is plenty of events looming to shake things up. Unfortunately, the charts don't give us any high probability expectations for the direction of the next move.

The fact that the market has found comfort between 1400 and 1410 leaves little reason for directional traders to be backing up the truck. In fact, perhaps the best trade is to wait for better opportunities in a post Jackson Hole, or Labor Day, environment.


The U.S. Dollar appears to be setting up for a trend reversal but sluggish trade could trigger another slide into the 80/79 range before things turn around. Such a move would correspond with another round of buying in the e-mini S&P, before a larger correction can take place.


We prefer the short side from much better levels (don't we all), if seen.


S&P ES SP $es_f



Stock Index Futures Market Ideas


Consensus: We prefer to be bearish on rallies, but short traders must be patient. If Bernanke delivers on QE, we could see a run into the mid 1430's in the ES.


Support: 1397, 1376, and 1354


Resistance: 1428 (minor), 1435 and 1448


Position Trading Ideas




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: 1401 and 1393


Sell Levels: 1418, 1424 and 1434


In other markets....




(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.


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




**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. 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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