May 7th, 2008
**Read my monthly column "Futures for You" in Stocks and Commodities!!
After a shaky open, the Bond market ended the day with a slight bid. Most of the mid-day buying was sparked by equity weakness but a decent showing in a 10 year auction helped entice short covering. Skyrocketing crude oil prices are wreaking havoc in the bond pits as traders are trying to prioritize between slow growth and inflation. Naturally, higher energy prices will be an obstacle for economic activity but on the other hand it will have a direct impact on price pressures. In recent weeks, inflation has come out on top but that assumption may temporarily put on hold depending on the upcoming data.
I am recommending that my clients remain flat at this point. I see resistance at 116'30 and heavy support at 114'18, and the market is conveniently in the center of these two points.
Pending home sales was reported in line with expectations at a decline of 1%. There were a handful of other seemingly irrelevant reports but nothing capable of moving prices despite light volume. The remainder of the week will be much of the same. The weekly initial claims data and wholesale inventories will be announced tomorrow and the trade balance on Friday. Given the light calendar, we will likely see Treasury trade highly dependent on action in equities and energies. With that said the major stock indices may be on trendline support while crude futures seem to be at an extreme in which the market may not be able to sustain itself in the near-term.
If you follow this report, or are a client of mine, you know that we previously recommended to sell June bond 112 puts and later recommended to take profits. Should we see additional weakness (to the mid 114's) I may be looking to resell puts...perhaps the same month and strike price but it all depends on the time frame in which the market reaches this level (if it does).
Option Recommendations
**There is unlimited risk in naked option selling.
Flat
Futures Recommendations
**There is unlimited risk in trading futures.
Flat
Carley Garner
Alaron Research Team
800.935.6492
cgarner@alaron.com
www.CommodityTradingSchool.com
There is substantial risk of loss in trading futures and options.
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