April 30th, 2009

Register for our "Talk to Series" webinar with the New York Institute of Finance!  Visit our websites for details.

Stock trade deters safe haven trade

Treasuries fell out of favor again today following another positive day on Wall Street.  Now that it seems as though the world isn't coming to an end, investors are making their way into riskier asset classes.  Given the current yields, it seems logical that money would flow away from Treasuries. 

On the economic front, the day's numbers were encouraging for the economy and discouraging for bond prices.  The Chicago PMI was reported at 40.1, much higher than the mid thirty reading that was expected.  Also, weekly jobless claims figures seem to be improving. 

The Fed's Treasury buying continues to be meager at best and with heavy supplies in the pipeline, the market is having trouble making any progress on the upside. 

If you recall, in yesterday's report we mentioned a large bank buying large quantities of out of the money call options in the 10-year note.  There is no way for us to read their minds, but this behavior is typical of a firm that is concerned about the possibility of a sizable plunge in interest rates...even if it is only temporary.

The T-bond and notes are slightly oversold in the near-term and could be susceptible e to a counter-trend rally on Friday.  However, we think that there is a good chance that the long bond will continue to closer to below 120 with 118'23 as a possible target.  If we are right, this should prove to be a great place to be a bull.  On the other hand, we see resistance in the 30-year bond near 124'21 and again at 125'27, but such levels could likely be met with heavy selling. 

Similarly, the note looks to become attractive from the long side in the mid to low 119's.  We like the 5-year note near 116; hopefully, today's low of 116'13 wasn't the extent of the downside as we wouldn't mind being positioned at slightly lower levels. 

Today we took the slow route by recommending that our clients go short the June Eurodollar near 99.045...boring but could be good for a few hundred dollars. 

* 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.

April 30 - Our clients were recommended to short the June Eurodollar near 98.045

*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.