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Will the EU's Peace Prize Save them from Economic Turmoil?
The EU was awarded the Nobel Peace Prize for six decades of promoting peace...but that seems to be a nice, but inconsequential, consolation prize. The market seems to be mixed on the whether Spain requesting a bailout will be a positive or negative occurrence but it would certainly be a good excuse for the profitable bulls to continue ringing the cash register.This morning's economic news was surprisingly decent. The Michigan Sentiment index came in at 83.1, the highest level of consumer confidence since 2007. This is good news, but what concerns us is that consumers are a lot like the average trader in that they tend to be late to the party. For instance, in October of 2007 the S&P peaked and has yet to turn...and the highs were posted while the majority was "confident". Similarly, the lows were posted after all confidence had been lost. We aren't doomsayers, but we are realists. October is known for having severe volatility, and all we've seen thus far is a quiet drift lower. Caution is warranted.
Technical break out in Treasuries, or bull trap?Can we answer both? According to our chart work, both the 30 year bond and the 10-year note should find their way higher in the coming sessions. However, we'd rather look for a place to be a bear than chase the market higher.
In our view, the T-bond bulls will likely be gunning for the 151 area by early next week but if European headlines cooperate 152 could be seen. However, at such prices it would take a substantial turn for the worse in regard to economic news and European panic to hold prices at what we think are rather lofty levels.
According to seasonal analysis, the overall bias in Treasuries should be higher through much of November but the market is often at risk of selling pressure in mid to late October.
Treasury Market IdeasConsensus: We are leaning cautiously higher in the short run; Treasuries "should" catch up with the U.S. dollar and stocks in the "risk off" trade. Support: 148'02,147'03, and 145'02 (30-year Bond), 132'23 and 131'24 (10-year note) Resistance: 149'05 and 151'05(30-year Bond), 134'02 and 134'27 (10-year note)
Position Trading Recommendations
*There is unlimited risk in option selling
So far the bear feels more like a baby panda, can it last?
The market has clearly rolled over from the employment report highs, but let's be honest...there is very little roar to this bear. We would rather be bearish on rallies, but it seems prudent for any shorts that have benefited from the correction to lighten the load. After all, the ES is slightly oversold and could see technical bounce at any time.
Technicians (and us), are pointing out support near 1420 which if broken could trigger waterfall trade but thus far we haven't seen any signs of a melt-down. We've found that it rarely pays off to aggressively "sell" into support levels. Sure, they might break...but what if they don't? The key to survival is limiting yourself to high probability trades and heavily selling into the hole just isn't one of them. If you are going to play the short side, do it in moderation...the time to get aggressive is on a sharp rally.
With that said, we do feel like the market is due for some turmoil..1403ish could be on tap by early next week.
Stock Index Futures Market IdeasConsensus: The ES rolled over late on Friday, perhaps this is the post-employment selling we've been looking for. Cautiously bearish from here. Support: 1421 and 1403 Resistance: 1439, 1446 and 1464
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: Contact us Monday, a lot can change by then
Sell Levels: Contact us Monday, a lot can change by then
In other markets....
September 26 : Sell the November Euro 133/123.50 strangle for about 60 ticks or $750.
October 4 : Buy back the November Euro 123.50 put near 10 ticks to lock in a profit of about 20 ticks or $250 per contract before commissions. We'll hold the call for now.
October 4 : Sell the December crude oil $104 call and $80 put for about $1.14 in premium, or $1,140 (which is the maximum profit). The profit zone for this trade is between about $105 and $79, there us unlimited risk in option selling.
October 5 : Sell the November Euro 1.2700 put for about 30 ticks.
(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)
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.**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.