It has been a busy day in the futures markets, so we will keep things short and sweet.
I hope anybody watching their futures quote board today had a puke bucket sitting next to their desk. It is becoming difficult to stomach the massive volatility we are seeing in financial and commodity markets; except of course if you happened to catch a ride on the right side of the market. I can honestly say, very few are making money in this environment because it takes nerves of steel and plenty of risk capital to stick with a position long enough to enjoy the benefits. On the other hand, option sellers are having a difficult time managing runaway prices in both futures and options. With all of this said, we are likely near the end of the chaos, at least for now.
There comes a point in these types of environments in which the speculators either run out of money, gumption, heart, or all of the above. When this happens pricing will get more reasonable in both the futures and the options markets, and volatility will collapse. If I was a gambler, I'd say that inflection point was either today, or at least in the coming session or two.
All we can say about Treasury futures is, WTH? (The "H" stands for heck).
I"m almost speechless in regard to the ridiculous rally in Treasuries. Not because I've never seen this type of price action before, because I have. I've traded through the flash crash, the debt crisis, the financial collapse; each of those events saw Treasuries behave in this manner. However, this time around it is hard to pinpoint a fundamental explanation for the panic. In fact, it feels like the damage is more self-inflicted as opposed to some real reason to panic.
The buying in Treasuries is based on fear, not facts...It probably won't last, but there is no limit to the chaos.
Treasury Futures Market Analysis
**Bond Futures Market Consensus:** The bond market might be overreacting. If you had the foresight to catch this move on the long side of the market, take your profits. If you are holding bearish trades, be sure to keep the risk tame, but we suspect the market will roll over shortly.
**Technical Support:** ZB : 159'03, 156'11, and 155'01 ZN: 128'13, 126'22, and 125'10
**Technical Resistance:** ZB : 169'31, and 171 ZN: 131'31, and 132'31
It would have been nice to see (I mean sleep through) a 1770ish print in the ES futures contract
From a technical capitulation standpoint, the market "needed" to see the 1770 area. And that price is still a possibility; nevertheless, the onslaught of bears seems to be a little overdone. According to the AAII sentiment index, only 27% of investors polled are bullish. The isn't much room left on the bear bus.
Next week is option expiration, a pattern we've noticed over the years is the market tends to make a low on the Thursday or Friday before expiration. Be on the lookout for a possible reversal!
Stock Index Futures Market Ideas
**e-mini S&P Futures Market Consensus:** Here is the fallout the bulls want to key off. We have a swift band of support from 1800 to 1770...1800 is holding for now.
**Technical Support:** 1799, and 1772
**Technical Resistance:** 1888, (minor), 1936, 1986, and 2074
e-mini S&P Futures Day Trading Ideas
**These are counter-trend entry ideas, the more distant the level the more reliable but the less likely to get filled**
ES Day Trade Sell Levels: 1846, 1878, 1899, and 1923
ES Day Trade Buy Levels: 1801, 1772
In other commodity futures and options markets....
November 24 - Roll long December corn into March to avoid delivery.
January 7 - Sell April crude oil 26.00 puts near 41 cents ($410).
January 14 - Sell March 10-year note 129.50 calls for about 19 ticks, or $300.
January 20 - Roll the April crude oil 26 put into the May 23 put to lower risk and margin.
January 28 - Buy back the May 23 crude oil puts to lock in profit, which went toward recouping losses on the original stab at it.
January 28 - Sell May crude oil strangles using the 25.50 puts and the 53 calls, collecting roughly $1,000.
February 3 - Buy back the March 10-year note 129.50 call, and replace it with a 2 short April 132 calls and 1 short 128 put. This spreads the risk out on both sides of the market, and slows things down.
February 3 - Buy back March ES 1600 put to lock in small profit and reduce risk ahead of payroll report.
February 9 - Buy back 53 crude oil call to lock in gain, sell 45 call to bring in more premium and give the position more balance (hedge the downside risk).
February 9 - Buy back the short ZN 128 put, replace it with 2 (double the quantity) of the 129 puts. This brings in more premium, and offers a better hedge to the upside risk.
February 11 - Roll ZN strangles higher to the 133.50/130.50 strikes to try to keep up with the rally and volatility.
(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)
Carley GarnerDeCarley Trading (a division of Zaner)
www.ATradersFirstBookonCommodities.com **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.