January 8th, 2009
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Much ado about nothing
Traders spent all week analyzing and anticipating one of the most significant employment reports of the season, but it was a complete non-event. Accordingly, Treasuries traded near unchanged for most of the session on anemic afternoon volume.
The unemployment rate was reported identical to last month and in-line with expectations at 10%. This is a bit of a psychological defeat but wasn't too surprising so received little reaction. The non-farm payrolls numbers were a bit worse than expected, about 50,000 to be precise, and came with downward revisions in the previous month. A few years ago, this would have been a significant miscalculation and likely would have garnered some volatility...but today it was just another sign that things are improving but still horrible and definitely not fool proof. In other news, hourly pay rates ticked higher, the average work week stood still and consumer credit tapered off.
The recent lack of volatility appears to be the calm before the storm; choppy but quiet trade is often the precursor to a large move. The large sell-off and subsequent bearish chatter in popular chat rooms and on television leads me to believe that the Treasury market will be finding a firm bottom in the coming sessions. However, today's lack of follow through buying on moderately bullish news leaves the market vulnerable to at least one more flushing move to elect the remaining sell stops.
We favor the upside but recommend a small position as there will likely be opportunities to get in at better prices. If not...at least you are in. Support in the 30-year bond is just below 114 and it lies in the mid 114's for the T-note.
* 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 28 - Our clients were recommended to sell the March Bond 110 puts for 23 or better.
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.
- December 17 - Our clients were advised to take profits today on the rally. Fills were coming back at 9 and 10 ticks, so assuming an entry price of 24 and exit of 9 the trade was profitable by about $235 per contract before commissions and fees.
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.decarleytrading.com/
http://www.commodityoptionsthebook.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.
