March 12th, 2009

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Successful auction and another big rally but will it last?

Treasury futures enjoyed another session of significant gains despite a similarly impressive rally in equities.  Economic data was mixed, but at least there was some guidance. 

Retail sales were reported to be a negative .1%, better than the expected -.5%.  An upward revision to last month's figure was also a slightly positive indicator.  Jobless claims inched up from last month while business inventories declined by 1.1%.

Reopenings sometimes see limited interest, but that wasn't the case this time. The Fed reopened $11 billion in 30-year bonds with surprising success.  The good news excited the market and gave traders a reason to bid prices closer to the upper realm of the trading range as buyers were lured into the market and buy stops were elected. 

Bonds and notes have approached major resistance levels but seem to have some room to move on the upside.  Equities have just posted their first three day winning streak in months and may be due for some back and filling and this should keep a floor under pricing.  The long bond should begin to run into trouble near 128 and possibly 129.  However, from a seasonal and technical standpoint this seems like a great place to be a bear.  That said, caution is warranted simply because a break above resistance could mean a large short covering run as stop orders are triggered.  The note, on the other hand, will find resistance just under 123 the same bearish opportunity exists but shorts should be aware of the possibility of an artificial breakout. 

Sorry so short! 

* 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.

Eurodollar Futures Trading Recommendations

**There is unlimited risk in trading futures.

March 9 - Buy the June Eurodollar near 98.46.  We aren't recommending stops or insurance with options at this point in time. 

·         March 11 - If you are holding the June Eurodollar trade, we recommended to those trading with us to take profits this morning near 95.60.  However, our target remains a little higher and there may be an opportunity to get out at the original projection of 98.65 or a bit higher...I will leave the exit up to you.

*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.