The interest rate futures rallied this week amidst lighter volume as a result of the Thanksgiving holiday. The interest rate markets rallied overall as a result of weak US economic numbers released earlier in the week and the possibility that inflationary threats are weakening.
The biggest surprise to the market was significantly lower mortgage applications of 623.6 versus 647.5 previously. Can the decline be attributed solely to a weaker housing market or is it a result of seasonal weakness? In my opinion, it is likely a combination of the two.
Retail sales are down slightly this week at +.2% versus +.3% expected. The strength of the holiday shopping season will be closely watched as it is every year.
Although the economic numbers came out slightly weaker than expected this week, the Fed has continued to make comments that they are concerned with the long term core inflation. At this point, the Fed will likely leave the rates unchanged at the December 12th meeting unless there are some major surprises in the upcoming economic reports. With the long term trend maintaining a lower posture according to the chart below, I would need to see a rally above 110-00 to enter the market on the long side for a long term position play.
*March becomes the front month in the Ten-Year notes and US Bonds on Thursday, November 30th.
March Ten Year Note Technical Levels:
As a result of the rollover, I have attached a weekly Ten Year Chart that shows a much more clear picture of the long term trend.
Trend Direction: Long term Trend Lower, Short Term Trend is higher.
Resistance: 108-23.5; 109-21.0; 110-02.0
Support: 108-02.0; 107-20.5, 106-20.5
Chart Copyright CQG, Inc.
Financial Reports for the week of November 27th - December 1st:
Tuesday: Advanced Durable Goods - 7:30 am CST
Consumer Confidence - 9:00 am CST
Existing Home Sales - 9:00 am CST
Wednesday: GDP - Q3 Revised - 7:30 am CST
New Home Sales - 9:00 am CST
API/EIA Energy Stocks - 9:30 am CST
Thursday: Jobless Claims - 7:30 am CST
Personal Income- 7:30 am CST
EIA Gas Storage - 9:30 am CST
Friday: Construction Spending - 9:00 am CST
ISM Manufacturing Index - 9:00 am CST
