Monday, February 8, 2010

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Back and filling but waiting for auctions

It was a surprisingly tame session following a wild end to last week’s trading.  In fact, the Treasuries traded in a painfully tight range with very little really volume passing through.

Today was a slow news week, but things pick up a little in the next few days.  Traders are awaiting another round of record Treasury auctions as well as Wednesday’s Bernanke testimony on “exit strategies”.  The Fed has made it clear that they will slowly reduce their accommodative policy in regards to lower interest rates before actually hiking the Fed Funds target.

The U.S. dollar ran into some selling pressure and that worked against the Treasury bulls.  It seems as though the positive correlation between the domestic currency and government backed fixed income securities is becoming a little more obvious.  Although there is some room for error, we are looking for the near-term direction in both assets to be lower.

Bulls and bears will battle tomorrow over the significance of market supply and safe haven buying and the auction results could be the deciding factor.  We are approaching the week with a “sell on rallies” mentality but caution that the absolute highs might not be in.  We see some risk (based on the week’s events) of a run in the long bond to the 120 area but at such levels we would be bears.  In the meantime, support in the March T-bond lies at 118.  If you are trading the 10-year note, look for resistance at 119 and then again at 119′20.  However, we favor a pullback to support near 117′20.

The five year note could see 117′18 should things get out of hand in equities, but if these levels are seen they should be a good place to  be bearish.

* 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.

Flat

Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

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Carley Garner

Senior Analyst / Commodity Broker
DeCarley Trading
cgarner@DeCarleyTrading.com
1-866-790-TRADE
Local : 702-947-0701

*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.