October 30th, 2008

See me in the latest issue of "Technical Analyst", Trading Volatility with the VIX

Equities and GDP optimism weighs on Treasuries.

Interest rate products suffered at the hands of a less than devastating Gross Domestic Product report and "stable" equities.  Although the major stock indices looked to have closed at or near "make or break" levels; Treasuries seemed to be decisively looking lower.  However, the near term path will most definitely be tied to the ultimate direction of stocks. 

This morning's data wasn't good, but it wasn't signaling the end of the world as we know it either.  According to the Commerce Department, the U.S. economy contracted at an annual rate of .3%.  This is a far cry from the previous 2.8% reading but better than expectations. 

Another bearish factor pressuring bonds is the two day mega-slide in the U.S. dollar.  As the greenback soared there was a floor under bond trade but the safety net has since been pulled.  As a result, bond prices should slide to the recent lows.  If you are a 30 year Treasury futures trader this would mean levels as low as 112'14.  However, I see potential for 111'23 in the near future. 

Failure for the 10 year note to hold support levels, leads me to believe that we are destined for 110'27.  The 5 year note doesn't seem to be as weak as longer maturities but failure to close above 113'06 going into the weekend could lead to selling pressure all the way down to 111'16. 

Sorry so short, we were short on time.  Contact me for further insight. 

Treasury Bond Option Trading Recommendations

**There is unlimited risk in naked option selling.

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Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

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Eurodollar Futures Trading Recommendations

**There is unlimited risk in trading futures.

October 29 - Sell 1 December Eurodollar at 97.79

There is substantial risk of loss in trading futures and options.