*All rights reserved.  Reproduction or distribution of this newsletter without prior consent is strictly prohibited.

September 17th, 2010

$9.99 e-book Deal of the Week "A Trader's First Book on Commodities" http://digs.by/c1z3hB

Treasuries struggle to gain footing

Bonds and notes entered the session with what seemed to be odds of a bullish day.  After all, Friday's are known for counter-trend trade, the market was slightly technically oversold and facing "good' support and the economic news was overall Treasury friendly.  However, it just wasn't meant to be.

The latest CPI numbers were ridiculously benign; the headline was reported at .3% and the core a goose egg.  Also, the Michigan Sentiment was a much weaker than expected 66.6.  Each of these could have easily been translated into a healthy bond rally...but weren't.

Another Federal Reserve Open market committee meeting is upon us; on Tuesday we will hear whether or not the Fed will be taking any action in monetary policy.  Consensus estimates are calling for a non-event, but as usual the commentary that goes with the non-decision will be key. 

Next week's calendar is a busy one and we have a feeling that the prolonged streak of good data might hit a bit of a lull.  This, along with seasonal tendencies leaves us leaning to the upside in Treasuries but Friday's lackluster conviction raises a red flag and opens the door to a "flush".  In other words, the market might go for the sell stops lingering below before being able to make an intermediate-term low.  If so, it could be a good place to be a bull.

Look for support in the 30-year bond just under 129 and in the 10-year note this translates into 122'13.

**Seasonality is already factored into current prices, any references to such does not indicate future market action.

Treasury Bond and Note Option Trading Recommendations

**There is unlimited risk in naked option selling.

8-10-10 Clients were advised to sell the October 135 calls for 24/27

8-25-10 Clients were advised to roll their short 135 calls into short October 130/139 strangles with a short November 142 call.  If volatility declines, the current lopsided strangle should benefit. 

8-26-10 Clients were advised to purchase October 5-year note 120 calls and sell futures this afternoon for a total risk of under $600 (before considering transaction costs).  This gives traders 30 days in the market with unlimited profit potential, capped risk and the ability to quickly adjust or take profits (futures face much tighter spreads than options).

9-3-10 In regards to the bond strangle noted above, clients were recommended to buy back the October 139 calls yesterday for about 14 and to buy back the November 142 calls for about the same price.  After the futures retraced from the lows, we decided it would be prudent to roll the October 130 puts into November 125/138 strangles at a small credit. 

9-9-10 Clients were encouraged to buy back their 5-year note futures at a profit near 119'06 to lock in a nice profit.  They are now holding long 120 calls hoping for a rebound to recoup some of the premium. 

9-14-10 Most exited the long 120 calls at 20 to recoup some of the premium paid to insure this trade. 

Treasury Bond and Note 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

http://www.DeCarleyTrading.com

http://www.ATradersFirstBookonCommodities.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.