October 2nd, 2009
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It has been an exciting week for Treasury traders and I think that I speak for all when I say that the weekend couldn't come soon enough. Bond and note bears suffered from buy stop running and the subsequent short squeeze on Thursday and in early trade on Friday. However, the momentum quickly subsided as it seems as though the last of the bears were out and the last of the bulls were in. When this happens, the market simply runs out of buyers and retreats. Similar, but opposite, price action was experience by the major stock indices.
The story of the day was the government's latest read on the employment picture. The September unemployment rate came in at 9.8% and the non-farm payrolls came in at a decrease of 263,000 jobs. Analysts were looking for a number under 200,000 so the miss was a catalyst for Treasuries to rally and stocks to decline. In brighter news, factory orders fell less than analyst estimates.
It is difficult to find anything positive in the employment report, but you have to account for the fact that much of the news was already known. After all, ADP suggested that this would be the case...although, their track record is questionable they managed to get this one right.
While it was a bit uncomfortable this morning, we still like the prospects of our short bond call recommendation. In fact, those with available margin and nerves of steel were able to add to their position at much better prices. We were getting fills back on the 128's for about 35 and near 23 for the 129's.
Yesterday we mentioned that the note seemed to be looking for 120, and today's high of 119'29 is close enough for me. From here we can't help but be bearish. Should stocks stabilize, we should see the note drop to just under 118 and the bond could see the mid-120's.
Check out this video made by our friends at DT Trading. They are our go-to guys for open outcry execution in CME/CBOT products and have a great feel for the markets. They will soon be providing an intraday commentary service to subscribers. I'll keep you posted!
* 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.
Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.
Senior Analyst / Commodity Broker
Local : 702-947-0701
*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.