The Bond Bulletin by Carley Garner

[carleygarner]

February 2nd, 2009

See DeCarley's article on option selling in the bonus issue of Stocks & Commodities Magazine!

Treasuries on the long end of the curve traded sharply higher.

Indecisive equities and even less certainty in Washington aided a short covering bid in Treasuries. The 30-year bond and the 10-year note enjoyed a bulk of the buying while the short end of the yield curve dragged a bit. Many analysts attributed the buying to a flight to quality bid, but in my opinion, it was likely driven by technical short covering. With today's gains, the yield on the March T-Bond is nearing 3.5% and the note slipped to about 2.75%.

This morning's weak data was relatively bond friendly. The ISM manufacturing index came in at 35.6, dismal but better than the expected 32. Likewise, personal income shrunk at a slightly smaller pace that most were looking for, but a negative number is far from promising.

Trading volume remains light, as has been the case since fall of 2008. Based on my conversations with retail and floor traders it seems as though market volatility took many traders out of the game. Some ran out of money, and others ran out of nerve. Either way, it will likely take several months or even years before speculators make their way back to the markets.

According to a Wall Street Journal story, the Fed has "spent some $70 billion to buy up mortgage bonds guaranteed by the federal mortgage finance giants, but mortgage rates recently have begun to tick up again. It is a stark reminder of how intractable the problems are that markets face and highlights the limits of even the Fed's ability to restore normal conditions. Even as the central bank has pledged to buy $500 billion in mortgage bonds by June, equivalent to the year's expected new supply, the mortgage market is grappling with its increasing dependence on, and the rising complications from, the Fed's involvement in the market."

We are still looking for higher prices in interest rate products. I am expecting some follow through buying to bring the March bond to just over 132 and the 10 year note near 125. We see strong resistance in the 5-year note near 119'09, if you participated in the long recommended on this newsletter see exit strategy below.




Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

January 29 - I like selling the March 117 puts for 30 or better, if filled be sure to take a quick profit if the opportunity presents itself!
• Cancel this order

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

January 27 - Buy 1 March 5 year note at or near 118'03
• February 2 - If you are still holding this trade, place an order to sell at 119'01 to take a profit of about $937.50 before commissions and fees (some of you may have taken a quick profit on Friday).

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

January 30 - I like buying the March Eurodollar near 98.75 looking for a quick move higher. We don't expect the March contract to break out of its trading range...and it is a slow move anyway.




*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.

 

[carleygarner]

February 3rd, 2009


See DeCarley Trading quoted in the "Hot Commodities" section of this month's Futures magazine!


Fresh supply concerns reverse safe haven bid


The fed is looking to add emergency liquidity programs and has extended the expiration of currency swap lines with a range of central banks in an attempt to relieve credit market strains. As a result, trade seemed to have shifted focus back to supply concerns.

It was a slow news day; the date that was released was relatively mixed. Pending home sales were a positive surprise but auto sales were much worse that projected. GM sales were down about 50% in January and Ford sales weren't much better. The numbers were the worst since the early 1980's.

We were expecting yesterday's short covering to spill over into today's session but that wasn't the case. Accordingly, we have altered our perception of the market and now believe that prices will continue to grind lower through tomorrow's session. However, we could see a much more meaningful short covering rally as traders square positions on Thursday ahead of the employment report or perhaps even Friday morning on the announcement.

Confirming our expectations for a possible short covering rally; we feel as though the equity markets will trade weaker as the week progresses as traders remain cautious in regards to the employment market.

We see support in the March 30-year futures near 125'14 and again at 126'15. The March 10-year note should find support near 122'02 but our longer-term target remains below 121.

Hopefully you were able to take a nice profit in the Five-year note trade recommended earlier in this report. If not, it may be a good idea to liquidate as we are looking to wipe the slate clean and reassess. Those that took the Eurodollar trade should look to exit near 98.93.




Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

February 3 - Sell the March 116 puts for 25 or better, it will take weakness to get filled.

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

January 27 - Buy 1 March 5 year note at or near 118'03
• February 2 - If you are still holding this trade, place an order to sell at 119'01 to take a profit of about $937.50 before commissions and fees (some of you may have taken a quick profit on Friday).

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

January 30 - I like buying the March Eurodollar near 98.75 looking for a quick move higher. We don't expect the March contract to break out of its trading range...and it is a slow move anyway.
• Place an order to sell this position at 98.93 to take a profit of $450 before commissions and fees. Those that entered at better levels than that noted above may want to take profits a little early as this trade is against the grain of fundamentals.





*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.

 

[carleygarner]

February 4th, 2009

See DeCarley Trading quoted in the "Hot Commodities" section of this month's Futures magazine!

Heavy Treasury trade may get boost

With plenty of government fixed income issues in the cards, Treasury buying remains minimal. Additionally, the Fed is trying to get creative in their debt issues by re-introducing the 7-year note in February. They also announced that they would be selling more 30-year bonds in an attempt to raise $2.5 trillion to fund its borrowing needs in the 2009 fiscal year. In the meantime, trader's haven't forgotten about the stimulus package which now carries a price tag of $900 billion and will be a big incentive for the government to borrow even more.

On the economic front, the ISM services index was reported to be better than expected but still well within contraction territory at 42.9. The ADP projection of the governments non-farm payroll data is all but reliable; however, it seemed to add to the negative tone in Treasury trade. The ADP is calling for a loss of 522,000 jobs in January. Most analysts are expecting near 500,000 but the markets have likely accounted for 600,000.

Long maturity Treasuries have been consistently trading lower since mid-December but the tides may be turning soon. While we remain fundamentally bearish, market action isn't always driven by fundamental factors. We can't help but feel as though the 30-year bond's plunge from the low 140s to under 125 will be followed by some type of short covering rally. With that said, today's slow grind lower may indicate that yesterday's projection of 125'15 may actually give way to 125'08 and the possibility of 124'15 before a reversal.

We are beginning to like the long side in the 10-year note, but see the potential for prices to fall to 120'15 before things turn around. Five-year note traders may look to get long near 117'11 in hopes of catching a short covering rally.

Our clients were advised to exit the Eurodollar trade near 98.79 to take a small profit. We prefer to wait for better market action.




Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

February 3 - Sell the March 116 puts for 25 or better, it will take weakness to get filled.

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

February 4 - Buy the March 5-year note near 117'11 or better.

January 27 - Buy 1 March 5 year note at or near 118'03
• February 2 - If you are still holding this trade, place an order to sell at 119'01 to take a profit of about $937.50 before commissions and fees (some of you may have taken a quick profit on Friday).
• You should be out of this trade as noted in the newsletter dated February 3.

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

January 30 - I like buying the March Eurodollar near 98.75 looking for a quick move higher. We don't expect the March contract to break out of its trading range...and it is a slow move anyway.
• Place an order to sell this position at 98.93 to take a profit of $450 before commissions and fees. Those that entered at better levels than that noted above may want to take profits a little early as this trade is against the grain of fundamentals.
• Clients were advised to exit this trade near 98.79 to take a small profit. We prefer to wait for a better set up.





*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.

 

[carleygarner]

February 5th, 2009

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


Nearly unch'd ahead of employment data


Treasuries waffled near unchanged after an early morning rally was halted by equity buying. The theme of the day seemed to be position squaring ahead of tomorrow's coveted employment data. As is always the case with economic data that lures a lot of attention, the risks of being exposed to the markets is large.

The market is expecting, and has likely priced in, a draw of about a half of a million jobs last month. However, a number closer to 600,000 probably wouldn't be considered a surprise and should be taken in stride. Our chart-work suggests that the Treasuries need to trade a little lower before they can go higher. Thus, those with similar opinions may look to get long the market with option spreads, short put options, etc on a dip following Friday's data.

Today's data was borderline terrible with factory orders nearing a negative 4% and initial jobless claims reported to be 626,000, nearly 50,000 higher than what analysts were expecting.

Volumes were light, as they have consistently been since late 2008. Many insiders have come to the realization that trading volume will likely follow the economy. Until things get better on Main Street, West Jackson Blvd in downtown Chicago will suffer.

Yesterday's analysis still applies...

We can't help but feel as though the 30-year bond's plunge from the low 140s to under 125 will be followed by some type of short covering rally. With that said, today's slow grind lower may indicate that yesterday's projection of 125'15 may actually give way to 125'08 and the possibility of 124'15 before a reversal.

We are beginning to like the long side in the 10-year note, but see the potential for prices to fall to 120'15 before things turn around. Five-year note traders may look to get long near 117'11 in hopes of catching a short covering rally.





Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

February 3 - Sell the March 116 puts for 25 or better, it will take weakness to get filled.

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

February 4 - Buy the March 5-year note near 117'11 or better.

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat





*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.

 

[carleygarner]

February 6th, 2009

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

Weak employment numbers fail to phase Treasury bears.

The financial futures markets took news of one of the gloomiest jobs markets in history in stride. Or at least they didn't react in a way that you may have expected. Rather than gaining a safe haven bid, traders sold Treasuries into the news with the premise that a weaker economy would lead to even more fixed income issues by the Fed. Accordingly, supply concerns continue to be the dominant factor in the market. However, we have a sneaking suspicion that the theme will soon change...at least temporarily.

U.S. employers cut nearly 600,000 jobs in January. This was well above the expected 500,000 but when you are referring to such sizable numbers and a volatile economy, the miss was considered moderate. The unemployment rate was calculated to be 7.6%, the worst reading in at least 16 years. The dreary data seemed to be perceived as added incentive for Washington to pass the stimulus package and another bank bailout program in a timely manner.

While fixed income supply is getting all of the headlines, there is no doubt some fear of inflation. Large capital injections into the system are arguably necessary, but they aren't without consequences. Many are calling for the inflationary impact to come into play as early as late 2009. Nonetheless, William Bellamy of Thompson, Siegel & Walmsley stated, "Supply is ruling the bond market." He added, "with $67 billion in Supply coming, it's hard for yields to move lower." In the long run, we agree with Mr. Bellamy but in the short run we could see the opposite.

As the market grinds lower and volatility changes, our models are adjusting price targets. It seems as though the 30-year bond may be headed for a 124 or slightly lower before buying interest ensues. Our previous expectation was for just under 125. We are still looking for the 10-year note to dip under 121 and the five year note should see the mid 117's by early next week. At which time we begin to like the upside, in hopes of a short covering rally.



Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

February 3 - Sell the March 116 puts for 25 or better, it will take weakness to get filled.

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

February 4 - Buy the March 5-year note near 117'11 or better.

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat




*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.

 

[carleygarner]

February 9th, 2009

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

Treasury traders wait for government aid package.

The interest rate markets traded moderately lower pushing yields to fresh two month highs ahead of the stimulus package announcement. The thought of the Fed adding even more supply to the fixed income markets has kept buyers at bay. Despite economic turmoil and what seems like otherwise friendly Treasury news, there is a record amount of Treasury issues and an equal amount of uncertainty.

The U.S. government plans to sell $32 billion in 3-year notes tomorrow, $21 billion in 10-year notes on Wednesday and $14 billion of the 30-year Bonds on Thursday.

Also helping the bear camp could be optimism over the proposed stimulus package and Tim Geithner's expected announcement of the new TARP plan. Adding to an already considerable amount of event risk, Fed Chair Ben Bernanke is slated to speak on Tuesday before the House Financial Services Committee on the actions being taken to supply the nation's financial markets with liquidity.

Clearly, there is concern over the fact that the massive injections of liquidity into the system that are deemed necessary to thwart a potential collapse of the financial system will eventually become an inflationary hazard. Accordingly, traders seem to be comfortable on the short side of Treasuries.

We have been calling for a temporary correction in Treasuries as short covering ensues. While we still believe that this will become a reality in the not-so-distant future, we also feel as though current price action supports an immediate continuation of the price slide. In fact, it appears as though the 30-year bond will could see prices beneath 124 before buyers will be tempted to step in. Likewise, the 10-year note will likely see the mid-120's shortly and our expectations for the 5-year note have been adjusted lower to the low 117's. Clients were advised to adjust their order to buy the March contract at 117'11 to 117'06.

In our opinion, it is too risky to sell a market that has just undergone such a massive re-pricing. The quietly lower trend could quickly become a massive short squeeze. On the other hand, buyers must be careful in that an early entry could be disastrous. Thus, we are opting to play it safe and prefer to miss the trade altogether than to be caught on the wrong side of a violent move.




Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

February 3 - Sell the March 116 puts for 25 or better, it will take weakness to get filled.

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

February 4 - Buy the March 5-year note near 117'06 or better.

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat




*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.

 

[carleygarner]

February 10th, 2009

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

Short squeeze triggered, and has room to run.

The financial markets expressed their discomfort with the lack of details provided on the restructured TARP plan and the uncertainty over the economic stimulus package. Equities seemed to slide off of the cliff, while Treasuries finally experienced the short covering rally that we have been looking for.

Trade was thin, and seemed to get thinner as the afternoon hours approached. It is apparent that many speculators weren't willing to accept the possibility of excessive volatility at the hands of our elected officials...and I can't say that I blame them.

In yesterday's report we expressed our expectations of a short covering rally in the near future but were uncertain on the timing (if only we had a crystal ball). We mentioned that we liked the upside but were cautious in regards to being bullish too early. Accordingly, we made the following statement:

Thus, we are opting to play it safe and prefer to miss the trade altogether than to be caught on the wrong side of a violent move.

That is exactly what happened. We seem to have missed the move for now but begin regretful in trading will lead to uncontrollable emotions and poor decision making. Therefore, we have no other option that to be content with our choice to be conservative. After all, this week poses a considerable amount of event risk and anything was, and still is, possible. There will always be other opportunities.

Now that the ball is rolling, we are expecting the move to continue but recommend being cautious as we have seen similar moves in recent weeks quickly fade. Nonetheless, it seems as though the path of least resistance in the 30-year bond will be higher to resistance near 130'05. The 10-year note should see short covering up to 124'01 and the 5-year note to 118'29.

* 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





*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.

 

[carleygarner]

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





*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.

 

[carleygarner]

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




*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.

 

[carleygarner]

The Stock Index Report by Carley Garner

February 13th, 2009

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

Treasuries tumble on more supply.

Anticipation and the eventual passing of the stimulus package rekindled supply concerns in the Treasury markets. Despite a shorten pit trading session, the electronic contract eventually fell in excess of 3 handles. While these types of price moves have become commonplace, they used to be rare. Nonetheless, traders and analysts seemed to take it in stride as all are looking forward to the extended President's Day weekend.

The economic calendar was thin and so was volume. My guess is that the recent rally was largely in part of position squaring ahead of the holiday. Accordingly, with many traders on the sidelines the fresh wave of selling had an exaggerated effect.

Traders are questioning whether the demand seen in recent months for government backed securities will continue to be a factor. After all, despite the fact that other asset classes are struggling there are obvious opportunities outside of Treasuries. Investor portfolio rebalancing and restructuring will likely work against bonds and notes in the long-run. Additionally, there are rumors that Chinese officials are "shopping" around for alternatives to U.S. Treasuries.

We are sticking to yesterday's overall outlook:

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.

Sorry so short, enjoy the holiday weekend!


* 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





*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.

 

[carleygarner]

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






*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.

 

[carleygarner]

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





*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.

 

[carleygarner]

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 Tell Congress to Block the Trader Tax | NA | NA 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





*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.

 

[carleygarner]

February 23rd, 2009

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

Treasury Yields nearly flat despite volatility.

Intra-day volatility in the Treasury market has been incredibly high, yet daily volatility has been consistently diminishing. Clearly, confusion is at an extreme due to unprecedented Fed debt issues and credit market turmoil. Political and corporate policy remains questionable at best, and the outcomes of their actions are even less uncertain. Accordingly, it is very difficult to be a directional trader in the near term.

I have been repeatedly asked where I think the March 30-year bond is going, and the only answer that I can come up with is "I don't know". Rather than making a prediction and crossing my fingers, I prefer to simply wait and see what unfolds. If you are the type of trader that feels as though you must always be in the markets, you are fighting the odds in these market conditions. The long bond has spent weeks trading in a range between 130 and 125 and although seemingly comfortable now, they won't be for long.

Supply concerns will be confirmed with the auction of $40 billion in 2-year notes, $32 billion if 5-year notes and the $22 billion in 7-year notes which were last issued in April of 1993. That said, as demand for the issues continues Treasury traders may look to equities and economic data for primary guidance.

The 30-year bond futures should find resistance near 131 with support at 125, note traders should look for resistance at 125 and support remains at 121'15. Once again, I prefer the sidelines over trying to pick a near term direction. Let's see what happens from here.

* 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





*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.

 

[carleygarner]

February 24th, 2009

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


Big Day but small trading range


Treasury bonds continue their path of nonexistent progress. As mentioned yesterday, large intra-day ranges haven't resulted in yield changes. It has been a big rally followed by sharp selling. The only thing that we can say for sure is that this can't last. It is a tough call as to which direction the market may break out but we believe that the initial move may be higher. Here is why.

If you follow seasonal patterns in the financial markets as I do, you are likely aware that the long bond tends to move moderately higher from now throughout the first and second week of March. Going beyond mid-March, the market should resume their downtrend.

Along with seasonal support, Treasury prices may find solace in the fact that the market has attempted to price in a majority of the bearish news. For example, the expected inflation pressures arising from the massive injections of capital into the system have already been somewhat accounted for in the December/January decline. Given that the implications are months or years away, the market may have priced in what it can for now. Also, government debt issues of mass proportion have kept pressure on Bonds and notes but the situation is known and the markets have adjusted accordingly. That said, large supplies have been mitigated by strong demand for safe haven assets.

From my conversations with followers, insiders, etc.; I have concluded that the average retail trader is highly bearish. In a longer term time-frame I must say that I agree. However, it seems as though the path of least resistance may be temporarily higher.

I see resistance at 130'15 and support near 125 in the March 30-year bond futures. Note futures traders should look for support near 121'14 and resistance near 124'24. I like buying the five-year note near 117'14 but would be a seller near 119'14.

* 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





*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.

 

[carleygarner]

February 25th, 2009

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


Treasury yields tick higher


The only economic news to speak of was existing home sales which were reported to be weaker than originally expected. However, today was relatively eventful given the Bernanke testimony and last night's Presidential address.

Ironically, Treasuries sold off on word of the deeper than anticipated housing slump. Traders are clearly seeing negative news as a hint toward more economic stimulus programs and thus U.S. backed debt issues and seem to be seeing supply issues as a priority. However, as mentioned in yesterday's newsletter this theme may temporarily fade.

Volume was dramatically light as traders see the lack of direction and event risk a potential recipe for disaster. However, the economic data will be picking up in the last couple of days and should lure, at least some, traders back to the markets.

Some of the day's losses were temporarily pared following the 5-year note auction. Despite low yields, buying interest continues to show up as investors flock to safety. Eventually, it seems as though trade will consider this into the equation and find at least temporary strength. However, over half of the issued Treasury debt is being held by foreign institutions.

One has to wonder how long they will be able to continue buying at this pace. Just recently, China's central bank said "External demand is shrinking, some sectors have overcapacity, and urban unemployment is rising. Downward pressure on economic growth is increasing. There exists a bid risk of deflation."

As you can infer from the recent commentary, we are on the fence in terms of an immediate directly but are slightly leaning higher due to fundamental pressures noted in yesterday's newsletter. In the long bond we see support near 126 and again just above 125. At this point, we expect this general area to hold. Resistance remains at 130. The 10-year note looks to be headed toward 121'13 at which time we like being cautiously bullish.

* 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




*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.

 

[carleygarner]

February 26th, 2009


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


Horrible data and technical support may trigger rally


Bonds and notes spent the day paring early morning losses. The Federal Reserve issued $22 billion in 7-year notes for the first time since 1993 and found a decent amount of demand for the security. Additional price support was found as rumors that Chinese officials seemed to imply that buying fixed income assets would still be a large part of their operations despite their shrinking budget.

Perhaps now that the record $94 billion weekly supply issuance has been accounted for, Treasuries will find reason to make their way modestly higher.
Despite the fact that bonds traded underwater throughout the entire session, there were some glimmers of hope for the bulls. The day's economic data, although expected, was grim at best. Durable goods dropped 5.2% and the initial jobless claims jumped to an astronomical 667,000. Adding pressure, new home sales were reported to be a 309,000, well below expectations for 324,000.

Seasonal tendencies for the Treasury market suggest that would could see near term strength. Additionally, major technical support levels held in Thursday's session and Friday's are known for seeing counter-trend trade. Accordingly, we are leaning higher going into tomorrow. Our clients were recommended to buy Five-year note futures near 117'10 and are looking for about 118'06 but will be willing to take an early profit if the opportunity presents itself.

We pointed out that buying would probably come in near 125'06 in the 30-year bond, and that proved to be relatively accurate. From here, we see the potential for the market to rally to 127'10 and possibly even 129'20. The 10-year note could see 121'20 in the coming days.

* 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.

February 26 - Our clients were recommended to buy the March 5-year note near 117'10.


Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat






*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.

 

[carleygarner]

February 27th, 2009


Option traders, if "Commodity Options" can save you one tick...you will recoup most of your investment. Get it now through Amazon.com or Borders.com!

Negative correlation with equities drive Treasury products

Bond and notes enjoyed a healthy bid in early trade as another wave of poor economic data hit the airwaves. However, recovering equities eliminated the safe-haven bid and forced Treasuries into negative territory.

The University of Michigan's consumer sentiment index was weak, but in line with expectations; the same can be said for the Chicago PMI. However, the actual (as opposed to the preliminary) Gross Domestic Product coming in at a negative 6.2% surpassed even the pessimistic estimates. Consensus was set at a draw of 5.4% but the prior estimate was -3.8%. Any way that you look at it, the data was bond friendly.

Trading volume was light, but that is to be expected on a Friday. However, I do find it interesting that the selling pressure witnessed in the previous sessions started out with a considerable amount of volume but it has consistently diminished since Tuesday.

The oversold bounce from the 125 area in the March 30-year that I had been looking for seems to have already occurred by the time that many of you turned on your computers. The Friday morning rally extended to 126'23 before quickly fizzling. A new low near 124 leaves us a little on edge; and the near term direction will be highly dependent on equities and of course trader's willingness to stick with the negative correlation theme. We would like to have the opportunity to sell option premium against further weakness on Monday. I will have to see how things look, but the April 110's and 111's look attractive for an attempt to catch a quick oversold bounce. If you are interested in option trading, option selling or option spread trading pick up a copy of my book "Commodity Options". It is currently being discounted at Amazon for a limited time. The book covers several option strategies in detail in financial futures and commodities... and if it saves you 1 tick in the markets you have recouped your investment.

Our clients were recommended to sell their long 5-year note positions near 117'24 to lock in approximately $450 before commissions and fees (see recommendation below). However, we may be looking to re-establish the position near 117'05 next week. Stay tuned.

* 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.

February 26 - Our clients were recommended to buy the March 5-year note near 117'10.
• We recommended to sell this position on this morning's rally near 117'24 to lock in a profit of about $450 minus commissions and fees. We may look to put this trade back on next week.


Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat





*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.

 

[carleygarner]

March 2nd, 2009


Option traders, if "Commodity Options" can save you one tick...you will recoup most of your investment. Get it now through Amazon.com or Borders.com!


Treasuries rally as equities melt


Bond and note traders were finally able to put supply concerns behind them and look to other fundamentals for guidance. Today's driving force behind Treasury prices was a flight to quality bid on the heels of a global equity market plunge.

A slightly better than anticipated ISM number didn't seem to deter bond buying and was likely offset by equally as weak news in construction spending. Both personal spending and income figures were reported to be better than expected.

The most influential news of the day wasn't necessarily Treasury related. News of AIG's staggering $61.7 billion quarterly loss renewed banking fears and pushed the Dow below 7,000 for the first time since '97. Suddenly, Treasury traders are ignoring the implication of such news that could suggest more Fed Treasury issues. We have been expecting this day to come.

You should be trading the June contract by now! We see the first area of resistance in the June 30-year bond near 125'29 and again at 128'10 in the 10-year note near 124'16.

Depending on action in equities, we may be looking to sell the June 5-year note just under 123.

Late last week we were interested in selling puts, but missed the trade. However, if the rally continues we could get an opportunity to sell calls. If you are interested in option trading, option selling or option spread trading pick up a copy of my book "Commodity Options". It is currently being discounted at Amazon for a limited time. The book covers several option strategies in detail in financial futures and commodities...and if it saves you 1 tick in the markets you have recouped your investment.
Sorry so short, we are a little behind. Feel free to contact us if there is anything that we can do for you.


* 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.

February 26 - Our clients were recommended to buy the March 5-year note near 117'10.
• We recommended to sell this position on this morning's rally near 117'24 to lock in a profit of about $450 minus commissions and fees. We may look to put this trade back on next week.


Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat





*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.

 

[carleygarner]

March 3rd, 2009



Option traders, if "Commodity Options" can save you one tick...you will recoup most of your investment. Get it now through Amazon.com or Borders.com!


High flying bonds, low yields


Treasury futures failed to react to another batch of negative housing data but did seem to be in tune with testimony out of Washington. Early morning weakness was exacerbated by a comment made by Federal Reserve Chairman Ben Bernanke claiming that the increase in government debit issuance was unwelcome but failure to act with financial and economic rescues would be even more costly. Bond and note traders took the comments as a "warning" of further issues to come. However, it was a subsequent statement by Bernanke insinuating that the appetite for debt will remain high that sparked buying in bond and note futures.



Some insiders noted that many Treasury traders preferred the short side of the futures market in anticipation of a stock market rally. When early attempts at an equity rally failed, those positioned on the short side of bonds and notes began to cover positions to force prices higher.



Although the negative correlation between stocks and bonds has been magnified lately, it seems as though they may be poised to go up together. Seasonal tendencies should keep a floor under T-bond and T-note futures while short covering could bring the major indices considerably higher in the coming week or so. That said, I prefer waiting for higher prices to be a bear.



We see significant resistance in the June long bond near 125'25 but feel as though technical levels will give way to a rally above 128. Note trade should find support near 120'27 in the June contract with our upside projection at 122'16. If we are wrong about the direction, the next area of support is near 119'05. A "safer" bet may be looking to sell the June 5-year note near 127'27.





* 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.



· March 3 - Sell the June 5-year note at 118'09 (we may have to adjust this lower as we go).



Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.



Flat







*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.