ZB futures should bounce, and the ES soften early next week

ZB and ES futures trading newsletter

GDP surprises to the upside, but weak oil futures going into the weekend negates the benefits

Stronger WTI crude oil futures trade overnight, and the flirting of an upside breakout, had the ES buyers in full bloom. However, the crude rally was rejected by technical resistance and later in the day suffered from a smaller than expected decline in operating rigs in the U.S. Accordingly, the U.S. equity indices failed to hold overnight gains.

On a positive note, the second estimate of second quarter GDP was reported at 1%. Under normal circumstances, this would be a disappointment but in today's sluggish environment it could almost be categorized as a blockbuster report. To boot, personal spending and personal income ticked higher along with the final reading of Michigan Sentiment.

This is the first time, in quite a while, we've seen a string of positive economic data. Until now, the trend has been for good news to be followed by bad. Now that data is firming up we have a hard time believing the S&P will revisit the low 1800s any time soon. Nevertheless, the last few trading days in February are normally weak, so we could see a few days of back and filling before heading higher.

Treasury Futures

30-year bond futures

Monday is first notice day for March Treasury bond futures, so longs were liquidating in full force.

It wasn't all that surprising to see bonds and notes sell off sharply. Monday is first notice day for the March contracts, so traders long the market had to liquidate (sell) today. Yet, traders short the market are free to hold into next week if they are willing to accept the fact that liquidity will eventually become an issue. Nevertheless, with prices so lofty on the close of trade yesterday and time being of the essence, it makes sense that traders were squaring positions in haste with little regard to price.

Accordingly, we expect a temporary bounce back next week as the stock market digests recent gains, and Treasury traders look to possibly get back into the long side of the market. Keep in mind, large speculators came into the week mildly long, and have probably added to positions (although we won't know for sure until we get an updated COT report).

Treasury Futures Market Analysis

**Bond Futures Market Consensus:** We should see some buying in Treasuries early next week following first notice day.

***These figures are based on the March contract, we will begin charting June on Monday. You should be trading June going forward!**

**Technical Support:** ZB : 165'05, 159'03, 156'11, and 155'01 ZN: 130'14, 129'27, 127'17, and 125'10

**Technical Resistance:** ZB : 166'24, 168'10, and 171 ZN: 132'02, and 132'31

Stock Index Futures

e-mini S&P 500 futures analysis

1966 came and went, the ES futures will probably pull back temporarily

The upside technical target for this rally has been met for now. Historical stats, and the charts, suggest there will most likely be a bit of a pullback from here. We believe the selling will be temporary, but it could be as deep as 1910 to 1900.

Stock Index Futures Market Ideas

**e-mini S&P Futures Market Consensus:** 1966 held rather well, that is a sign the bears might have a day or two to shine. Look for a possible route to 1910 to 1900.

**Technical Support:** 1910, 1884, 1799, and 1772

**Technical Resistance:** 1974, 1986, and 2043

e-mini S&P Futures Day Trading Ideas

**These are counter-trend entry ideas, the more distant the level the more reliable but the less likely to get filled**

ES Day Trade Sell Levels: Let's see what Monday brings.

ES Day Trade Buy Levels: Let's see what Monday brings.

In other commodity futures and options markets....

November 24 - Roll long December corn into March to avoid delivery.

January 7 - Sell April crude oil 26.00 puts near 41 cents ($410).

January 14 - Sell March 10-year note 129.50 calls for about 19 ticks, or $300.

January 20 - Roll the April crude oil 26 put into the May 23 put to lower risk and margin.

January 28 - Buy back the May 23 crude oil puts to lock in profit, which went toward recouping losses on the original stab at it.

January 28 - Sell May crude oil strangles using the 25.50 puts and the 53 calls, collecting roughly $1,000.

February 3 - Buy back the March 10-year note 129.50 call, and replace it with a 2 short April 132 calls and 1 short 128 put. This spreads the risk out on both sides of the market, and slows things down.

February 3 - Buy back March ES 1600 put to lock in small profit and reduce risk ahead of payroll report.

February 9 - Buy back 53 crude oil call to lock in gain, sell 45 call to bring in more premium and give the position more balance (hedge the downside risk).

February 9 - Buy back the short ZN 128 put, replace it with 2 (double the quantity) of the 129 puts. This brings in more premium, and offers a better hedge to the upside risk.

February 11 - Roll ZN strangles higher to the 133.50/130.50 strikes to try to keep up with the rally and volatility.

February 17 - Buy back April ZN 133.50 calls to lock in a gain.

February 18 - Sell April ZN 131.50 calls for about 18 ticks to hedge the short 130.50 puts remaining from the original strangle.

(Our clients receive short option trading ideas in other markets such as gold, crude oil, corn, soybeans, Euro, Yen, and more. Email us for more information)

Carley Garner

DeCarley Trading (a division of Zaner) 
This email address is being protected from spambots. You need JavaScript enabled to view it. 
**There is substantial risk of loss in trading futures and options.** These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives. 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. 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. Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.


Follow Carley Garner on Twitter