September 15th, 2009

See DeCarley Trading in this September issue of Equities Magazine!

Strong retail sales and hints of inflation grease the Treasury decline

Bonds and notes entered the session at a disadvantage in that the short-term trend has been down, equities continue to hold their own and trading volume hasn’t come back to the markets following the holiday.  However, once the news began to filter into the markets the selling pressure accelerated.

Retail sales data triggered the first wave of selling.  Last month’s figures suggest that the consumer is showing slight glimmers of hope.  The headline number was reported at an increase of 2.7%, much better than the 1.9% expected and the previous draw of .2%.  Sales were expected to show an improvement thanks to the “Cash for Clunkers” program, but even stripping auto-sales we say an increase of 1.1% versus the prior negative .5%.

Adding to the bear case, the Producer Price Index jumped up 1.7% and was the first sign of inflation in several months.  Prior to the announcement, analysts were looking for an increase of just .8%.  There’s more…the Empire Manufacturing index was reported at 18.88, much higher than the previous 12.08.

Is the economy turning the corner?  Maybe, but that doesn’t mean that there isn’t some turmoil to be seen.  Warren Buffet announced that he believes that the economy has stabilized but he seems to lack faith in the overall recovery in the near-term.  I can’t help but feel as though the Treasury rally will find a way to revive itself at some point.  For now, we remain overall neutral but note support in the 10-year note near 117, which seems to be holding.  Also, our support in the long bond near 119′09 has been penetrated but the market seems to be attracted to it like a magnet.  If we can get a close above this level in tomorrow’s session, we might be in store for another run at the highs.  If this fails to materialize, bulls may get an opportunity to get long with futures or options at better levels.  First support is in the mid-117’s.

If you are following our short bond call recommendation (below), we recommended that our clients buy them back today at 6 (rather than the noted 5) and fills were reported in late session trade.  Assuming the noted entry and exit prices the trade netted $187.50 per contract prior to commissions and fees.  Not a homerun, but not bad for a few days.  If you want to know more about the risks and rewards of short option trading, check our websites and my book “Commodity Options” available in all major book stores.

* 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.

September 11- Our clients were recommended to sell the November 128 calls for 18 or better, we are now trying to buy them back for 5 or better to lock in a quick profit of about $200 per contract before commissions and fees.

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

Eurodollar Futures Trading Recommendations

**There is unlimited risk in trading futures.

June 29 – Our clients were recommended to sell September Eurodollar futures while buying a 9937.5 call as insurance.  The calls were getting filled near 7 ticks, and the futures near 9933.  This makes the total risk on the trade at expiration $287.50 before commissions and fees.

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Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading

cgarner@DeCarleyTrading.com

1-866-790-TRADE

Local : 702-947-0701

www.CarleyGarnerTrading.com

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.