The Fed put kicks in.

The Federal Reserve has gotten into the corporate bond game.

Earlier in 2020, the Fed took an unprecedented path into corporate bond investing via ETFs (exchange-traded funds). This move, along with other stimulus measures, stopped the bear market in stocks (and corporate debt) in its tracks. Similarly, the Fed announced today it would be venturing into individual corporate bonds. Not only are these moves market stabilizing in that they mitigate overzealous/panicked selling they also promote investor confidence in the system.

Many argue the moves the Fed makes today is simply building a house of cards in and the piper will eventually need to be paid, but I recall hearing those arguments in 2008 and 2009 as well. So these schemes can be successful for quite some time, even if the flaws do eventually come to light it could be decades down the road.

The quip, "don't fight the Fed" comes to mind. The Fed has made it clear they are willing to use tools beyond conventional monetary policy to keep the markets and the economy afloat in the midst of the largest threat to stability in our lifetimes. Whether you agree with the Fed's actions or not, the die is cast.

Treasury Futures Markets


30-year Treasury Bond Futures

Treasuries give up overnight gains.

The US Treasury futures market caught a bid overnight as coronavirus concerns and soft data out of China sparked selling in the stock indices. However, in light of the pace and breadth of stock market selling seen since late last week, the bond and note bulls had to be disappointed in the modest gains. Further, the fact that Treasuries held trendline resistance and closed slightly negative for the session is telling.

Any gains in Treasuries from here will be hard-fought and will likely require help from negative headlines and panicked trading in stocks. We doubt the bond bulls will get what they want. Instead, it feels like Treasuries are trying to put in a long-term top. Of course, we live in an uncertain world so any bearish positions should be hedged or protected from the unforeseen.

Treasury futures market consensus:

We've been looking for a re-pricing in Treasuries, but time is running out on that idea. Seasonal strength is due at the end of the month.

Technical Support: ZB: 171'26, 169'08, 165'19 ZN: 136'17, 134'28, and 133'24

Technical Resistance: ZB: 178'09, 181'14, 184'12, and 189'18 ZN: 139'14 and 140'06


Stock Index Futures



Will the economy see a V-shaped recovery?

According to Larry Kudlow, the Trump admin is expecting a V-shaped recovery. Despite the stock market's success at such, this would be a tall order for an economy in which the middle class has been gutted. Nevertheless, we are seeing signs of consumer willingness to jump back in the saddle far before most had expected them to.

Here in Las Vegas, which probably isn't an accurate barometer for the country, we are seeing the Strip, local casinos, and small businesses spring back to life (with social distancing measures in place). It will take some time, but knowing markets are forward-looking and the government has injected cash into the economy that will be looking for a home, it is hard to side with the bears as cities across the nation are flipping the "on" switch.

Ironically, we are seeing and hearing of some Robinhood app type of traders using their government stimulus checks to buy stocks!!

Stock index futures market consensus:

Although it was messy, the 3,000 area seems to have held nicely. This should pave the way for new all-time highs.

Technical Support: 3000, 2935, 2780, 2750, 2700, 2650, 2370, and 2250

Technical Resistance: 3250/3270, 3398, and 3567


E-mini S&P Futures Day Trading Ideas
These are counter-trend entry ideas, the more distant the level the more reliable but the less likely to get filled

ES Day Trade Sell Levels: 3090, 3146, 3211, 3241 and 3250

ES Day Trade Buy Levels: 3000, 2950, 2906, 2870


In other commodity futures and options markets...

February 25 - Sell June ZN 134 call and buy the April 136 call as insurance.

March 2 - Roll BCI into June.

March 4 - Go short the September eurodollar near 99.37 and buy the 99.50 call option. Total risk is roughly $600 depending on fills (prior to transaction costs).

March 25 - Roll April 10-year note 136 call into a May 137.50 call.

March 27 - Roll long April 136 call into May 137.50 call in the 10-year note.

April 8 - Buy July sugar 11.25 calls for about 27 ticks.

April 16 - Buy July soybean meal call spreads using the 300/315 strikes.

April 16 - Buy June hog call spreads using the 50/55 strikes.

April 20 - June oil call butterflies using the 27/30/33 strikes for about $380.

April 22 - Bull call spread in December corn using the 350/400 strikes for about 11.5 cents.

April 27 - Buy the August oil butterfly using the 30/35/40 strikes.

April 29 - Go long July mini corn OR go long full-sized corn and buy a June 3.05 put.

April 29 - Exit hog call spread for a quick profit.

April 30 - God long a mini corn, or go long a full-sized corn and buy a June $3.05 put to hedge.

May 1 - Go long July natural gas (mini or full)near $2.11.

May 5 - Exit natural gas future near 2.30 to lock in a quick gain.

May 8 - November soybean bull call spread using the 9.00 and 10.00 strikes (about 15.5 cents)

May 14 - Go long August NG futures (mini contract for most, or higher).

May 19 - Exit August oil butterfly to lock in quick gain of about $800 before considering transaction costs.

May 20 - November nat gas call butterfly using the $2.50/$3.00/$3.50 strikes.

May 21 - Exit July sugar 11.25 call to lock in small gain.

May 27 - Buy the August hog 60/65 call spread.

May 28 - Go long October sugar 11.75 call.

June 8 - Exit July corn.



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.

Seasonality is already factored into current prices, any references to such does not indicate future market action.

**There is substantial risk of loss in trading futures and options.** 
These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives. 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. 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. Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.