November 12th, 2009
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Rocky auction, but Treasuries survive
The yield on the long bond spiked higher to levels not seen since the middle of August on lighter than expected demand in the 30-year auction. The news came after a better than expected reading on weekly jobless claims and seemed to be a great excuse for trade to trigger the long line of lingering sell stops lingering beneath 118 in the 30-year bond.
The Treasury auctioned $16 billion in 30-year bonds at a rate of 4.469% and a disappointing bid to cover of 2.26. The indirect bidder participation rate was 44%. Overall, the week's auctions went well but the hitch in demand for the long bond was temporarily unnerving for the market.
Initial jobless claims are approaching the coveted 500,000 mark; this weeks' new claims were 502,000. Continuing claims are also on their way down, the latest reading was 5631k.
Now that the market has gotten the massive supply out of the way and the uncertainty of the 30-year auction, the next move could be higher. We had been looking for a "flush" of the longs that would bring the long bond "closer to 117" and provide a bullish opportunity that we could feel good about and we got it. Unfortunately, the move happened quickly making it difficult for many to have gotten off their trades before the massive rebound. Unfortunately, it takes more than a good idea to make money in the markets. I hope that some of you were able to capitalize!
We can't help but feel like the next move will be higher in the 30-year bond futures. Now that many of the weak longs were stopped out, they might try to chase the market higher. Look for resistance in the mid-119's but we think that 120'21 is in the cards.
Notes, on the other hand, have been outperforming bonds and might not have as much room to move on the upside. It seems like the mid-119's will be first resistance but 120 could be possible.
* 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.
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Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.
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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.
