December 11th, 2009
Register for our upcoming option selling webinar hosted by the New York Institute of Finance http://clicks.aweber.com/y/ct/?l=6K1iZ&m=1dm7Q76R6aigzm&b=LhqA4gaS81SKWtlpMZ8DMQ
More selling in Treasuries but can it last?
Better than expected economic data and gave bears an edge and they took full advantage. After peaking near 123 a few short weeks ago, the 30-year bond has given back nearly all of November's gains. At the time of this writing, the long bond was nearly 6 handles from its recent highs. This is an incredibly large move in a short period of time but we can't help but feel like the move has been overblown.
The University of Michigan consumer sentiment pointed toward an improvement in attitude toward financial stability and is seen as a welcomed catalyst for holiday shoppers. Also pointing toward recovery, retail sales were up 1.3% last month to nearly double analyst estimates.
The dollar index is forging a recovery and the short covering was boosted by the day's positive data. In the short-term, this has a negative impact on Treasuries because it is thought to be a deterrent for new overseas buyers. On the other hand, it could prevent some of the existing Treasury holders from liquidating.
Today's trade was thin, but that isn't out of the ordinary during this time of year. Accordingly, we feel like the reaction to recent supply and economic news has been a bit exaggerated. As dramatic as this pullback has been, it might not be the fundamental game changer that the chart suggests.
The long bond insisted on testing our lower support levels in the mid-117's and then 117ish but a majority of the selling is likely out of the way for now. Things have moved a little to far a little too fast and this should spark a short covering rally that extends to the 120 area in the March 30-year futures. The 10-year note didn't quite reach our 117 mark, but the long bond has been the leader we aren't going to read into this too much. A bounce in the note could see a move to the mid-118's.
If you are following our short put recommendation, clients with ample margin and tolerance for risk were advised to add on to their short put positions by selling the Feb bond 113 puts for 34. A handful were filled, many orders went unable.
Be careful during holiday markets! Check out this video from our friends on the CME floor http://clicks.aweber.com/y/ct/?l=6K1iZ&m=1dm7Q76R6aigzm&b=bd5QIkXQy2uHAcIT9.HS4Q
* 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.
December 10 - Our clients were recommended to sell the Feb bond 113 puts for 24.
- December 11 - Clients with available margin and willingness to accept more risk were advised to add on to this position by selling the Feb 113 puts at 34 or better. A handful were filled at this price, many went unable.
Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.
Flat
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.
