September 14th, 2009
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Treasury rally on pause
Bonds and notes took a much needed breather on Monday. It is easy to forget that this rally is 5-weeks old but at this stage some consolidation is necessary. However, the selling was tame and the volume light; this makes me feel as though this correction will eventually become another buying opportunity. Something tells me that the bulls aren't giving up so easily.
We often note seasonals in this newsletter and have pointed out the reversal that is often seen in late September to early October. If Friday's spike high was also the trend reversal then the seasonal top came early. Perhaps this is the case, but I doubt it. There is still a considerable amount of pessimism surrounding the economic recovery, the health of the equity rally and, at least for now, Treasury demand remains strong.
Supplies are large, but the market knows this. The next piece of supply info for the market to chew on will be the Treasuries auction announcement on Thursday. Next week, the government will auction notes in the two to five year space. The previous issuance of such securities took place in August and the market absorbed $109 billion worth of the notes without much of a hitch.
Some of today's selling may have been a delayed reaction to weakness in the greenback. As weak as the U.S. dollar has been, I believe that a majority of the selling has already occurred. A possible reversal in the currency markets could support the Treasury rally.
On Friday we recommended that our clients sell bond calls into the rally, most sold the November 128 calls for 18 ticks. As it turns out, things have gone relatively well with this trade thus far. However, we would like to take advantage of the dip and will be interested in looking to buy them back shortly. We have recommended that they place GTC orders to buy them back at 5 or better, but we might look to adjust the price accordingly.
In the meantime, it seems as though the 30-year could trade as low as 119'09 before finding support and the 10-year note could see 117ish. At such levels we will be relatively neutral with a bullish bias. We still think that our 122 and 119 initial targets in bonds and notes respectively are a real possibility. Don't forget about our secondary targets of 124 and 121.
* 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.
September 11- Our clients were recommended to sell the November 128 calls for 18 or better, we are now trying to buy them back for 5 or better to lock in a quick profit of about $200 per contract before commissions and fees.
Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.
Flat
Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.
June 29 - Our clients were recommended to sell September Eurodollar futures while buying a 9937.5 call as insurance. The calls were getting filled near 7 ticks, and the futures near 9933. This makes the total risk on the trade at expiration $287.50 before commissions and fees.
Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
1-866-790-TRADE
Local : 702-947-0701
http://www.carleygarnertrading.com/
http://www.decarleytrading.com/
*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.
