August 8th, 2008

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Quiet trade but bias seems to be pointing slightly higher...In the face of an incredible equity rally and weaker energy prices, the Treasury complex settled relatively mixed.  Perhaps the saving grace for bonds was an unstoppable rally in the Dollar Index.  Today's trade saw an increase in excess of 100 points in the greenback to leave the index above 76 and at levels not seen since February. 

Failure of the interest rate complex to trade lower in light of action in other markets suggests that the path of least resistance remains higher in the near term.  After all, we were coming off of a large one day rally in Thursday's session and could have easily experienced a digestive correction. 

Rumor has it that hedge funds were big buyers of the 10 year in today's session which helped to keep a floor in prices.  Also, the market likely benefited from recent auction activity which proved that Treasuries are still in demand.  Traders were provided with a few second tier reports but most are already looking to the inflation data due to be released next week along with the well anticipated retail sales data.   Volume was said to be relatively healthy in early trade, but diminished as time wore on and essentially became next to nothing. 

I would still like to see a rally to 117'01 in the 30 year and am searching for short call opportunities.  Unfortunately, implied volatility is relatively low so I don't recommend jumping the gun.  Accordingly, I have my eyes on the September 119 calls for about 15 ticks, this will only get filled on a rally and expires on the 22nd of this month.  If you don't like the time frame, you may want to look to the October 120 calls (which trade against the December futures) for about 25 ticks (about $390).  Strike prices and premium may need to  be adjusted on Monday, keep in touch. 

Have a great weekend! 

Option Recommendations

**There is unlimited risk in naked option selling. 

August 7th - I like selling the September 119 call for 15 ticks.  It will take an up-move to get filled, but could happen depending on equity trade. 

August 8th - Look to sell the October 120 calls for 25 or better, they trade against the December futures  and will only get filled on an up-move.  

Futures Recommendations

**There is unlimited risk in trading futures. 

August 7th - Aggressive traders may look to sell the note at 116'01 or better looking for a temporary correction.     

Carley Garner

CEO/Senior Analyst/Broker

DeCarley Trading 

cgarner@DeCarleyTrading.com

1-866-790-TRADE

Local : 702-947-0701 

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