December 16th, 2009
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Shorts cover ahead of FED
Bond bears looked to be taking profits ahead of the FOMC's interest rate decision but I am sure that there were a few sellers that were late to the party and were pushed out. Although the early buying was likely on short covering, we think that there is much more of this to come.
Yesterday's hot PPI data turned out to be a temporary shock as today's CPI reading eased some of the immediate concerns over inflation. That said, it is clear that at some point in the future the current policies will come back to haunt us in the form of upward pricing pressures.
The headline CPI figure was reported at a 0.4%, perfectly in line with expectations and a mere tick above last month's reading. The Core CPI (ex-food and energy) showed a tamer than expected goose egg; the previous was .2%. According to the data, producers are absorbing the burden of higher production costs but eventually it will have to be passed on.
In other economic news, building permits increased to 584,000 from 551,000 to beat most analyst estimates.
As expected, the Fed left interest rates relatively unchanged and stuck with their pledge to leave rates low for an extended period of time. The lack of surprise, left the 30-year near unchanged in post-Fed trade and might have discouraged some of bulls.
We maintain a buy on dips mentality but admit that the rally might not be immediate. If you have bullish positions (with reasonable position size), we recommend trying to stick it through. The lack of follow through buying might lead to a retest of the lows and maybe even slightly new lows but seasonality and light volume should keep selling at a minimum.
Look for support near 116'25, then again near 116'05 in the long bond. Note traders should look for support near 116'27 then again at 116'07.
* 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.
