April 2nd, 2009

Catch me on Facebook!

Is the Treasury bear back?

**Due to time constraints this report was created and distributed much later in the day than is usual.  However, our clients are provided with intra-day commentary and recommendations.  If you found yourself waiting for this post, perhaps you should consider opening a trading account with DeCarley to ensure timely access to the informaiton.

Booming equities and position squaring ahead of tomorrow's jobs data sharply reversed bonds and notes.  We had been calling for a rally to 131 over the past couple of weeks, it wasn't as "pretty" as we would have liked it to be but nonetheless the high in overnight trade was just under our target.  Had the market broken through 131 we could have seen stop running and short covering to retest the spike high near 133.  Clearly, this wasn't the case; this leaves us believing that the new path of least resistance will be lower. 

The unemployment report may complicate things and even prove our analysis wrong but we feel as though the next likely target in the long bond will be 127'24 and a close beneath this level could bring the market right back to where it began near 124. 

We were hoping for a chance to sell calls against the upswing but seem to have missed out this time around.  Perhaps on the announcement tomorrow traders will get an opportunity to execute bearish positions. 

The note on the other hand, never reached our upside target and spend much of Thursday erasing gains made in the week or so.  There seems to be respectable resistance near 123'01 and the market will have to continue to hold above such levels to avoid a sweeping sell off to 120'10.

Non-farm payrolls are expected to show a decline of about 650,000 jobs.  However, ADP's predictions of about 100,000 additional job losses and this morning's initial jobless claims figure of 669,000 it seems as though the worst is priced in.  If this is the case, the odds favor a bearish reaction from bond traders.  If you are an aggressive trader, you may want to look to sell futures on rallies above 130, with potential for a temporary rally to 130'21. 

* 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.

April 1 - Sell the 5-year note near 119'14 or better.

Eurodollar Futures Trading Recommendations

**There is unlimited risk in trading futures.

Flat

*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.