August 1st, 2008

It was a volatile session in the  bond pits but that comes as no surprise given the current environment and this morning's non-farm payrolls data.  As usual, the unemployment report received a considerable amount of attention.  Based on the knee-jerk reaction witnessed on the announcement bond traders continue to have a "recession bias".  A

ccording to the government, the U.S. lost about 51,000 jobs in the last month to beat analyst estimates.  On the contrary, the unemployment rate was slightly higher than the street was looking for at 5.7%.  Despite a temporary plunge in Treasury prices, bond bulls took the opportunity to get long the market at better levels.  Keep in mind that the  bond market has a habit of over exaggerating the weakness in the economy and that may be what we are seeing now. 

In other economic news, a quickly forgotten about ISM Index was reported to be at 50, the exact midpoint between growth and contraction. 

In previous newsletters, I pointed out resistance at 117'21 in the long bond and this remains my target.  However, a temporary pullback to 115'14 could be in the works as the market makes its way higher.  Note traders may look for similar trade with an upside target of 115'29 and the possibility of a correction to 114'13.  Weaker equities and end of the week position adjustments likely added to the bullish bias in today's session.  However, it is simply that time of year to be looking for higher bond prices and lower yields.  While the overall seasonal tendency for interest rate products points higher, a late August dip is somewhat common. 

I like the idea of selling calls against a strong rally but urge you to be patient.  It is better to miss a trade than to be early and suffer unnecessarily. 

Have a great weekend!

Option Recommendations

**There is unlimited risk in naked option selling.

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Futures Recommendations

**There is unlimited risk in trading futures

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Carley Garner
Market Analyst

info@carleygarnertrading.com

www.CarleyGarnerTrading.com  

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.