Futures Market Blog

February 19th, 2009

Pick up your copy of “Commodity Options” published by FT Press in any major bookstore or online retailer!

Can China continue to buy Treasuries at this pace?

The Treasury market is struggling to find a reason for yields to fall.  Not only is the Fed issuing massive amounts of debt but the bulk of the Treasury buying has been China and many are questioning whether this is sustainable.

As you have likely heard, the Chinese have dedicated themselves to purchasing U.S. assets as a method of keeping the value of their currency at low levels.  As you can imagine, this is a challenge given the massive number of exports out of the country.  However, with the global economic weakness it seems likely that a decrease in Chinese exports may detract from the need to deflate its currency and therefore buy U.S. backed fixed income products.  Additionally, the G7 is pressuring China to appreciate its currency in order to alleviate trade imbalances.

Bond and note traders have expressed their expectations for the Fed to sell debt in order to finance the latest wave of bailouts, but beneath the scenes lawmakers are working on alternative ways to raise the capital.  In order for the new administration to keep their word in regards to income tax hikes, it may be necessary for the increases to be levied by alternative means.

It was brought to my attention today that there are may be attempts to tax traders per transaction.  I haven’t gotten the chance to fully research the matter enough to determine whether the talks are serious.  However, after seeing the manner in which everything plus the kitchen sink was included in the stimulus bill I don’t take anything for granted.  If you would like to speak out against a transaction tax charged to futures, options and stock traders visit http://www.rallycongress.com/no2tradertax/1536/tel-congres-to-block-trader-tax/  and email your opinion to our elected officials.  It seems as though Washington is of the belief that taxing speculation will “get back” at the Wall Street crew that caused the problems that we face, but in our opinion doing so will be harmful to Main Street.

The March 30 year Bond has experienced a few consecutive big ranging days, but have essentially fallen flat as option expiration approaches.  The quieter the trade, the more potential there is for a considerable breakout of the range.  We see significant support at 125′01 and resistance near 131 but aren’t comfortable speculating on a direction.  In more normal conditions, this would be a great time to be long volatility through an option strangle but option premiums are still overpriced compliments of volatility seen in late  2008.  Sidelines…

* 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.

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.

Flat

—————————-

Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
cgarner@DeCarleyTrading.com
1-866-790-TRADE
Local : 702-947-0701

www.CarleyGarnerTrading.com
www.DeCarleyTrading.com

*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.

February 18th, 2009

See DeCarley Trading’s “Trade Like a Girl” article in the March issue of Stocks Futures and Options Magazine!

Obama’s mortgage plan revives supply concerns

Bond traders were reminded of the U.S. governments massive need to borrow money by the new mortgage relief program outlined by the Obama administration.  At least for now, fundamental weakness in the economy has  been put on the back burner.

There were a handful of second tier economic reports this morning all of which outlined the dire circumstances that the U.S. economy is currently facing.  Both Housing starts and building permits were reported to be lower than expected.  This is also the case with industrial production and capacity utilization.  However, the news that fueled traders came from the speeches delivered by President Obama and Fed chair Ben Bernanke.  Despite the markets being on hold going into each of the events, neither seemed to deliver enough unaccounted for information to change impact the day’s overall sentiment.  With that said, Bernanke noted that the government’s rescue efforts seem to be improving the strained credit markets and may have contributed to some of the weakness in Treasuries.

Coincidently, the recent rally stalled at key technical resistance areas and the market appears to be waiting for guidance from equities.  I would be reluctant to risk money on the direction of Treasuries in the near term, but it if I were a more aggressive speculator I would have to play the downside in the next session or two.  This is simply because the equity markets seem to be oversold and due for at least a temporary rally ahead of its option expiration, as well as the fact that Treasuries are facing significant technical barriers.

Major resistance in the Bond remains at 130′06 and again near 133′04.  Should we see a rally to or near 133 I would feel much more comfortable being a bear.  In the case of the 10 year note, 124′26 should have marked the upside ceiling  but if the rally finds additional steam compliments of continued equity selling we could see 126 at which point I would become highly bearish.

* 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.

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.

Feb. 17 - Sell the Five-year note at 119′20

Eurodollar Futures Trading Recommendations

**There is unlimited risk in trading futures.

Feb. 17 - Buy the June Eurodollar at 98.62

————

Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
cgarner@DeCarleyTrading.com
1-866-790-TRADE
Local : 702-947-0701

www.CarleyGarnerTrading.com
www.DeCarleyTrading.com

*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.

February 17th, 2009

See DeCarley Trading’s “Trade Like a Girl” article in the March issue of Stocks Futures and Options Magazine!

Supply theme quickly moves to flight to quality.

Investors scurried for quality on the Tuesday following the President’s Day holiday as evidenced by a rally in Gold, the U.S. Dollar and Treasuries.  Suddenly the supply issues that were the focus of previous weeks have been put on the back burner as fears over the viability of the banking system run rampant.  Also fueling the Treasury bulls is the non-existent confidence in equities and the potential for a retest of the November lows.

The day’s gains were despite growing supplies of fixed income securities.  Global debt issuance has been at unprecedented levels and is expected to grow.  Additionally, cash strapped corporations are also selling a considerable number of bonds.

The latest TIC (Treasury International Capital) data was released today; however, because the data lags by 2 months it doesn’t typically attract a lot of attention from active traders.  Even so, foreign buying ticked higher suggesting that despite the turmoil the demand for U.S. securities remains relevant.

Trading volume during the session was extremely light.  Perhaps many stretched the President’s Day into a four-day weekend.  As a result of the light volume the day’s trade seems to have been exaggerated.

After seeing today’s action, it seems as though Friday’s weakness may have primarily been the consequence of position squaring ahead of the holiday.  we were right to assume that last week’s rally would fizzle, but we didn’t account for the sharp buying in today’s session.  Accordingly, we are going to take a step back in our analysis.

Treasuries are currently at a crossroads that could determine their overall direction in the coming weeks.  We see major resistance in the 30-year bond near 133 and support at 123.  At either end of the spectrum we may be interested in selling premium against the move but recommend being on the sidelines for now.

* 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.

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.

Feb. 17 - Sell the Five-year note at 119′25

Eurodollar Futures Trading Recommendations

**There is unlimited risk in trading futures.

Feb. 17 - Buy the June Eurodollar at 98.62

———-

Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
cgarner@DeCarleyTrading.com
1-866-790-TRADE
Local : 702-947-0701

www.CarleyGarnerTrading.com
www.DeCarleyTrading.com

*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.

February 12th, 2009

See DeCarley Trading’s “Trade Like a Girl” article in the March issue of Stocks Futures and Options Magazine!

The long end of the curve reverses, drags short end.

It was a relatively hectic day, so I will keep today’s commentary short and sweet.

After a handful of consecutive days of short covering gains, Treasuries quickly reversed lower going into what turned out to be a poor 30-year bond auction.  The Fed dished $14 billion in T-Bonds, but buyers weren’t as excited as they were hoping for.  However, the flight to quality bid picked up as the session progressed.

Aside from the auction, there was little for the market to chew on.  Retail sales were reported slightly better than expected and much better than the previous reading.  Similarly, business inventories were much lower than estimates.  However, deep discounting was likely the explanation.  Also adding to the confusion over the day’s data, the weekly initial jobless claims exceeded expectations.  The mixed bag of nuts left traders uncertain, and prices mixed.

What happens in Treasuries in the coming sessions is highly dependent on equities.  However, our expectations are for some type of temporary low in stocks and subsequent weakness in U.S. backed bonds and notes.  With that said, there is room for temporary equity weakness in early trade on Friday which should keep Treasury bears on their toes.

Although a move to 130′05 is certainly possible at some point tomorrow, I can’t help but feel that this rally will fizzle.  Look for a counter-trend Friday theme.  The T-Bond may be headed for 123 over the next several weeks.  Likewise, if the note turns as we expect we could see 120′25 by March.

* 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.

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.

Flat

———————-

Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
cgarner@DeCarleyTrading.com
1-866-790-TRADE
Local : 702-947-0701

www.CarleyGarnerTrading.com
www.DeCarleyTrading.com

*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.

February 11th, 2009

See DeCarley Trading’s “Trade Like a Girl” article in the March issue of Stocks Futures and Options Magazine!

Bonds and note climb despite $21 billion 10-year Treasury auction.

The Treasury complex enjoyed another round of buying as short traders look to cover their positions.  Uncertainty over the future of the floundering banks, tumbling equities and fading confidence in Treasury Secretary Timothy Geithner’s rescue plan kept fresh selling on the sidelines.

Also helping keep Treasuries bid, were reminders of the Fed’s option to purchase long-term Treasuries as a means of influencing interest rates.  Chicago Federal Reserve President Charles Evans commented on the Feds remaining bullets and claims that he would prefer to see how other programs play out before making the decision to purchase its own debt instruments.

We have made a lot of progress in the last few days but the charts are telling me that there are rough waters ahead.  I expect that the 30-year T-Bond futures could see prices near 130 in the next session or two but am doubting its ability to progress above such levels.  The 10-year note has significant resistance near 124 and may have a hard time closing above this level.  Five-year note futures will likely run out of steam near 119, if they haven’t already.

Our technical projections above are complicated by events in Washington and the equity market reactions to news.  We believe that equities will continue to struggle in the immediate term but expect some type of temporary low to be made  late Thursday or even Friday.  This assumption is based on the premise that the indices tend to make a low at the end of the week preceding option expiration.  With that said, if equities make a probing low at sometime tomorrow or Friday before reversing higher, Treasuries may overshoot our targets.

* 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.

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.

Flat

—————–

Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
cgarner@DeCarleyTrading.com
1-866-790-TRADE
Local : 702-947-0701

www.CarleyGarnerTrading.com
www.DeCarleyTrading.com

*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.