US Debt Review and Outlook
US TREASURIES gained as traders sought shelter from the storm as equities posted their worst one day drop since October 2009. US dollar strength, benign inflation data (PPI excluding food and energy prices posted lower than expected), and a weaker than expected reading on US housing starts set up a foundation, while the flight from risk on the back of disappointing earnings results from BOA (How will the revenues sustain when no one wants to borrow?) prompted a flight to security.
US Treasuries were also buoyed by China’s implementing additional tightening of bank lending standards. The Euro zone contributed little in the way of calming influences as Greece had to step up and publicly deny rumors that it might be seeking to exit the European community as a means of addressing its monetary crisis. Look like cracks in the European community may continue to surface (Note how each country essentially took an “everyman for himself attitude with regards to the initial dealings of the global financial crisis- are not events such as this the type of challenge that the European community was supposed to step up and confront as an entity of strength?) The Euro plummeted along with most commodity based currencies as the sector took a major hit in the wake of China’s perceived slowdown.
As a result, the US Treasury market appeared to be the belle of the ball today. This may change on Thursday, when the complex gets a reminder of its own shortcomings-supply, supply, supply- as the announcements for next week’s 2, 5, and 7 year note auctions come out on Thursday.
Technical Outlook – US 30 year March contract managed to rally above resistance at 117-30. Upside movement looks to be getting tired and could result in pullback to 117-19. Still expect strong resistance to be found at 117-19, while near term support sets up at 117-00.
US Equity Review and Outlook
The major stock indices reversed from yesterday’s rise as banking shares, already a suspect sector, posted earnings that failed to overcome the global sentiment that recovery is set to face some significant challenges with regards to stability and sustainability. The major indices briefly moved through technical support as housing starts came in weaker than expected. The market took its early cues from BOA, as the bank took a great than expected hit from its payback of tarp funds. Most of the sector recovered to finish in positive territory by late session, lifting stocks off their lows as technology and material sectors fell on profit taking and renewed concern regarding China’s reigning in of credit to forestall excessive, unsustainable growth. The influence of these actions may begin to wane in their influence as well.
Technical Outlook – March S&P futures briefly broke through target support at 1126.00, before rebounding to close above bottom end of range at 1132.00. Expecting the market to continue range trading, with possible upside top at 1152.00. Initial resistance at 1142.00. Support for the support shifts slightly lower to 1124.00, with 1122.00 and 1118.60 as downside target levels
Prepared by Rich Roscelli & Paul Brittain. Contact rich@binvstgrp.com
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