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February 3, 2011
Bonds could be bottoming but....
The Treasury market seems to be attempting to form an intermediate term low, but it has been in the process of doing this for months now and has made little upside progress. With speculators, both large and small, net short it feels like the market is at risk of a probing low before any sort of sustainable rally can occur.
If it weren't for persistent Fed buying, the long flush we have been patiently looking for might have already occurred. Today the Fed purchases a whopping $8.87 billion worth of Treasury securities with expiration dates ranging from 2016/2018.
Once again, the day's data suggested the recovery is on track. ISM services printed 59.4, to beat expectations of 57. Analysts were looking for a draw in factory orders but an uptick was reported instead.
Tomorrow morning the government will release the latest data on the jobs front. Analysts are expecting nonfarm payrolls to have seen an increase of about 150,000 jobs and the unemployment rate of 9.5% (a tick higher than last month). According to Ben Bernanke today, "we are seeing some encouraging job market signs." Despite the Fed's optimism, there seems to be some market jitters.
The monthly employment data often triggers pent up market volatility and can sometimes be a catalyst for a reversal. We can't help but think the market might make one more probing low (just to torture the remaining bulls) before turning around and the employment report might be the event that makes this a reality. If so, look for a plunge below 118 in the 30-year bond before or after the news for a place to be bullish. If it turns out to be a non-event...all bets are off and back to range trading we will go.
* 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 factored into current prices, any references to such does not indicate future market action.
Treasury Bond and Note Option and Futures Trading Recommendations
**There is unlimited risk in naked option selling.
Senior Analyst / Commodity Broker
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.