February 25, 2011
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Ceiling in Treasury futures could get punctured!
As mentioned in yesterday's newsletter, stocks and bonds can travel higher together as asset prices of all types are being inflated by the Treasuries cash injections. In today's session, that was exactly what occurred...although the buying in each market is being attributed to different factors and were at differing paces.
The buying pressure across bonds and notes was moderate at best, but in the face of a sharp equity rally it suggests the bias in the near-term will be higher regardless of action in other markets and maybe even the technical resistance overhead.
In today's news, the government's second estimate of fourth quarter growth was reported to be 2.8%. Most were expecting a figure closer to the previous reading of 3.2%. Not a bombshell, but a reason to keep fixed-income products in a portfolio. On the other hand, the final reading of the Michigan Sentiment consumer confidence index landed at a better than expected 77.5.
Seasonal tendencies in Treasuries suggest there could be a temporary rally, but the month of March tends to be a weak one. Therefore, we are looking for a place to be a bearish but feel like there will be better opportunities...especially on the short end of the curve.
First notice day is Monday, so you should be out of all of the March futures by now and into June. We see resistance in the June 30-year bond futures from 120 to 120'15ish but it "feels" like stops could be run. If so, we can't rule out a quick run to the mid to high 123's. In the 10-year note, we see resistance near 120 but we think closer to 121 is probable.
* 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.