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Long-term bearish Treasuries, but short-term uncertain

September 15, 2011


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Long-term bearish Treasuries, but short-term uncertain


There are plenty of reasons as to why traders should be bearish Treasuries but the most glaring being nearly non-existent interest rates and stabilizing currency and equity markets.  Nonetheless, Treasury seasonals suggest the market could avoid any large selling until much later this fall.  Also, although recent economic data has been better than the previous month's it is still generally below expectations and quite frankly, poor. 


Similarly, it sounds as if a much larger than expected Greek tax hike could trigger another round of riots and protests.  In the past, visions of Greeks in gas masks violently destroying property in Athens has been perpetually bullish for Treasuries.  The thought process is that the unrest (and more importantly debt issues) will be contagious throughout Europe.  In a world in which U.S. markets have been celebrating each positive headline out of Europe, a negative one such as this could quickly change the climate.  For this reason, among others, we are taking a neutral stance over the next few sessions


For those of you that aren't aware, I spent a few weeks in Greece over the summer (ironically during the now infamous riots) and it is certainly vulnerable to some unrest.  Without judging their culture or circumstances (which are challenged), I can' comment on facts.  A majority of the Greek citizens don't pay, or pay very little, taxes, and many businesses practice aggressive tax avoidance techniques (such as cash only transactions under the table).  On the other hand, entitlement programs are plentiful and so are governmental employee strikes (and yes this includes utilities and many forms of transportation).  The point I am trying to make is the transition into austerity will not be an easy one and there could easily be negative headlines coming around the corner that could temporarily spook investors.    


Yesterday we were looking for a move to 138'06 in the long bond and the mid 129's, for the most part we got it.  However, tomorrow we see some risk of counter-trend Friday buying.  Accordingly, we feel like the bears should lighten the load in hopes of "reloading" at better prices at some point in the near future. 



* 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.  



**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.


September 2 - Clients were recommended to sell the November bond 151 call for about 27 ticks


September 15 - Clients were advised to take a profit on their short 151 call, fills were coming in near 11 and 12 ticks.  Assuming an entry of 27, this is about $250 per contract before commissions and fees. 


In other markets....



September 9 - Clients were advised to sell the October Euro 129 puts for about 38 (an alternative position is to purchase an E-micro Euro future with the intention of scaling into a larger position).

September 15 - Clients were advised to exit this position on this morning's rally.  Fills were coming in near 18 to lock in a profit of about $250 per contract before commission and fees. 


(Our clients receive short option trading ideas in other markets such as gold, crude oil, corn, soybeans, Euro, Yen, and more.  Email us for more information)



Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading


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.