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Horrible housing data and a "do nothing" Fed
Bonds were bid most of the day on weaker equities, turrrrible (as Charles Barkley would say) new home sales figures and stable Fed policy.
The latest data on new home sales was a huge miss of expectations. The consensus forecast was 430,000 sales but the actual number was reported to be 300,000. As ugly as the headline looks, a little digging beneath the surface suggests that the numbers are "stable" overall. Essentially, sales were borrowed in previous months from the current month (and upcoming months) as a result of the home buyer tax credit. That is not to say that the housing market isn't in shambles, but it should diminish some of the shock value that today's numbers brought with them.
As expected, the Fed pledged to keep the target overnight rate at historically low levels. Without signs of inflation, a real estate market under pressure and lagging job growth there is little incentive to adjust monetary policy.
The Euro picked up following the Fed announcement and if this continues, it should keep a cap on the rally.
The lack of volatility makes trading Treasuries very difficult; whether you prefer the long or short side of this market the tight range has likely enabled the accumulation of stop orders. Accordingly, there could be false breakouts and for those that are "suckered" into buying a bull or bear trap could experience a painful squeeze.
We have a 'feeling' that the 30-year bond could trade in the mid-126 to 127 but can't help but grow bearish at such levels. The bias is upwards but we doubt that stocks will completely break down again and that should prevent the Treasury rally from growing legs.
* 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 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.DeCarleyTrading.com
http://www.ATradersFirstBookonCommodities.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.
