February 20th, 2009

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Chop, chop...TGIF

Safety buying in Treasuries and gold was in full fledge over renewed concerns over financials and a possible government action over the weekend.  Chris Dodd, and others, are leaving the possibility of nationalized banks open for discussion and the financial markets spent the day reacting and positioning ahead of such a move. 

Keep in mind that in the past, preferred stock in banks was considered to be a relatively conservative holding due to the dividends provided to share holders.  With nationalization, the value of stock and preferred stock issued by the financial institutions in question (and indirectly all of the others) is essentially eliminated.  Fear of such an event kept Treasuries in favor.

The Dollar rally came to a dramatic halt, but the Treasury market seemed to shrug it off.  However, should the weekend turn out to be uneventful on the political front (banking nationalization) we could see traders pay more attention.  

We continue to refrain from picking a direction from here.  Trade has been extremely choppy in recent weeks, those with a little more aggression and much better timing that I stood to have done well...however, we recommend sitting out until things look a little clearer. 

The 30-year bond futures should find resistance near 131 with support at 125, note traders should look for resistance at 125 and support remains at 121'15.

* 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.

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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.

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*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.