Oversold Bounce but Buyers Reluctant

An overnight global bid kept the Treasury complex in positive territory for much of the session but the buying seemed to be of a “dead cat bounce” nature; another round of auctions have supply on the minds of traders.
It was a slow news day, making Ben Bernanke’s speech the most exciting event. The Fed Chairman made it clear that “rates will remain low for an extended period”. He added that the timing of a rate tightening would be a “challenge” while hinting that inflation doesn’t seem to be an immediate factor.
The commodity and financial markets have been relying on the U.S. dollar for guidance but recent volatility in the greenback has made for highly unpredictable markets. The buck traded in a 75ish point range but settled only moderately lower on the day. Bonds and notes have been the one complex that haven’t chosen a correlation with the dollar. The mood of the markets play a large role in the perception of currency pricing and its effect on Treasuries. At times a weaker dollar is said to put U.S. securities on discount and are supportive to pricing but in less optimistic times a struggling greenback tests the nerves of those already heavily long dollar denominated assets. One big seller could change the market environment in a split second. Confusing? Yes it is….now more than ever, this is a chart reading market.
We are women and therefore are allowed to change our mind at the blink of an eye; nevertheless, the game plan for the next few months will be to maintain a bullish bias. This assumption is based on our technical and seasonal analysis as well as “gut”. Market fundamentals might not matter in the next few months, so try to avoid “marrying” a well-researched position.
On Friday we noted the chance of an oversold bounce early this week, and today fit the bill. However, as long as the 30-year bond holds below 120 we feel as though the odds favor a move to the 117 area. Similarly, notes face resistance near the mid-118’s and failure at this level should trigger selling that brings the March 10-year note futures contract near 117.
Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.
November 15 – Sell the January Bond 125 calls for 20 ticks or better.
· Our clients were recommended to cancel this order
November 30 – We recommended to sell the February Bond 128 calls for about 25 ticks (fills were reported from 24 to 25).
· December 3 – Our clients were advised to buy these back on this morning’s dip. Fills ranged from 9 to 10 ticks. A fill at 9 on the exit, yields a profit of 16 ticks ($250) for those filled at 25 on the way in before commissions and fees. If you would like to receive these recommendations and adjustments in a timely manner, open an account with DeCarley Trading.
Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.
Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
Local : 702-947-0701
*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.

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 and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. 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.

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