Higher stocks and better than expected existing home sales were too much for the Treasury market bulls. Despite an overnight attempt at a rally, counter-trend Friday ensued and it seems as though the near-term trend may have reversed its course. We are looking for continued weakness in bonds and notes over the next few trading sessions.
Traders have been tabbing the housing market for clues into the recovery simply because that seems to be the source of the economic misery. Accordingly, news of the existing home sales figure coming in at 5.24 million was enough to stop the bond bulls in their tracks. Consensus estimates were looking for 5.00 million and the previous reading was 4.89. Naturally, the number doesn't account for the fact that many sales are the result of heavy discounting. Nonetheless, inventory is moving and that is a positive.
The Fed bought $5.605 billion of the $11.209 agency debt offered by dealers on the day but the big news coming out of the Fed was Bernanke's speech in Jackson Hole Wyoming. According to the Fed Chair, the global economy is starting to emerge from recession and the "fears of financial collapse" have receded substantially. Nonetheless, he expects the recovery to be "slow at first".
Coming into Friday, we were looking for one more extension of the rally slightly above 121 in the long bond and 119ish in the notes. The overnight rally didn't quite reach our targets, but it was close enough for the market. I believe that the 30 year bond will likely correct to the mid-117's in the coming sessions. If I am right about the bond, the note should see the mid-116's. The five-year note could find support near 115.
Unfortunately, we missed our opportunity to sell calls this time around. We have been working orders to sell the October 126 calls for 23 over the last three days, but it wasn't meant to be. We will wait for another opportunity to do so.
* 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
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.
Traders have been tabbing the housing market for clues into the recovery simply because that seems to be the source of the economic misery. Accordingly, news of the existing home sales figure coming in at 5.24 million was enough to stop the bond bulls in their tracks. Consensus estimates were looking for 5.00 million and the previous reading was 4.89. Naturally, the number doesn't account for the fact that many sales are the result of heavy discounting. Nonetheless, inventory is moving and that is a positive.
The Fed bought $5.605 billion of the $11.209 agency debt offered by dealers on the day but the big news coming out of the Fed was Bernanke's speech in Jackson Hole Wyoming. According to the Fed Chair, the global economy is starting to emerge from recession and the "fears of financial collapse" have receded substantially. Nonetheless, he expects the recovery to be "slow at first".
Coming into Friday, we were looking for one more extension of the rally slightly above 121 in the long bond and 119ish in the notes. The overnight rally didn't quite reach our targets, but it was close enough for the market. I believe that the 30 year bond will likely correct to the mid-117's in the coming sessions. If I am right about the bond, the note should see the mid-116's. The five-year note could find support near 115.
Unfortunately, we missed our opportunity to sell calls this time around. We have been working orders to sell the October 126 calls for 23 over the last three days, but it wasn't meant to be. We will wait for another opportunity to do so.
* 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
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.
