The 3-2-1 Approach: A Simplified Method for Trading Any Market

[bthomas]

Bonds React Negatively to Administration Spending

F2 Comments: The day session opened at resistance at 130-08/12. 130-125 was the OVN session’s high. The Bond was sold off its opening and didn’t find buyers until 129-16±. 130-00 then proved to be resistance and when the heavy selling in the ES stopped, the Bond began to sell and this selling was present into the close. The White House hinted at another stimulus package. Krugman has been successful at selling the idea that Roosevelt would have successfully combated the Depression, if only he had spent more money. Needless to say the current administration is on board with that idea. Sell Bonds. The selling was present into the close.

The analysis favors lower prices tomorrow with some help from the ES and news. Tomorrow’s news: PPI is expected at .2%; Core PPI at .1%; Jobless Claims at 615K, LEI at 0.0%; and Philly Fed at -25.0. Want to sell early strength and see if 127-20/128-00 can be taken out. If it holds, will cover.

 

[bthomas]

Foreign & US Market Weakness Supports Bonds

F2 Comments: The market traded higher but option expiration was not a factor. Stock market weakness was. The market hit 129-02 before the buying was over. It was a range trade w/a lower bias as longs took profits before the weekend. A bird in the hand is always a tempting proposition. While the close was weak, the volume was skewed to the high side.

If the ES is sideways to lower, I think the Bond will trade sideways w/buyers below 127-12 and a seller above 128-12. Will look to buy/sell in these price areas.

 

[bigbiscuit]

Quote from ZAL:

A market that contains a 50% hedging component and a 50% speculative component is a better market for a trader to participate in.

this is from the first page... can anyone elaborate why?

 

[bthomas]

Fed Chairman Bernanke Testifies Today

F2 Comments: Bottom of current trading range held and market traded higher today, primarily from the weakness in the ES. The selling in the ES was present into the close. If the selling continues in the ES, the Bond should trade higher. Tomorrow’s news and testimony from Bernanke is likely to be supportive, as is the 2Y auction. And tomorrow night’s speech by Obama may also impact the trading. Lots of forces to keep things stirred up tomorrow.

If ES is lower, want to be long the market. If the ES is higher, then the short side will become more attractive. The buy zone is 127-17/21. The sell zone is 128-11/19. Will adjust for the OVN market’s OVN activity.

 

[bthomas]

Hedging Market

A market with a higher percentage of hedgers is more orderly and better defined at the edges. In essence, it is more predictable.

 

[bthomas]

5 Year Note Auction on Wednesday

F2 Comments: The market did rally as per the analysis hitting 129-12 before the buying was over. Supportive news, a weak ES and the 2 Y Note auction all combined to produce the rally. Bernanke’s comments started the buying in the ES. The Bond began its retreat. The 2Y Note auction hit the market, the Bond sold some more. When the ES broke out, the selling increased in the Bond w/127-22 touched into the close.

Tomorrow’s news: Existing Home Sales is expected at 4.81M; the 5Y Note auction at 1300 EST; and the ES’s reaction to the Obama speech can all influence the trading.

If the ES is higher, want to sell early strength and see if 127-16/20 an be taken out. If not, will cover. If the ES is sold OVN, can trade from the long side of the market too.

 

[bthomas]

Recap for Wednesday 2/25

F2 Comments: The sellers ruled today. While the market did rally just past our recommended sell zone at 127-31/128-03 with a high of 128-075, it did sell and then some. Obama’s speech signaled more debt for as far as the market can see. More supply almost always means lower prices and the Bonds are no different. The 5Y Note auction wasn’t well received either. The bond hit 125-295 before closing at 126-06.

Some news tomorrow: Durable Goods is expected at -2.0; ex transportation at -2.0%; Jobless Claims at -625K; and New Home Sales at 329K. If ES is sideways to higher, want to sell early strength and see if 125-16/20 can be taken out. If not, will cover. Sell 126-11/15 or 125-19/23. Cover if 125-20/295 then holds.

 

[bthomas]

F2 Comments for Thursday

The market found sellers OVN and never retested the OVN session high. Volume is low in the distribution too. The structure was mixed for today’s day session based on skewing. Based on the value area’s movement, the market is pointed lower.

Some news to move the markets tomorrow. GDP is expected at -5.4%; Deflator at -.1%, Chicago PMI at 34.0; and Michigan Sentiment Rev. at 56.5. If as forecast, this news will be supportive. If the ES is lower w/some momentum, will trade from the long side. If not, will sell into early strength.

 

[bthomas]

Early Comments for Friday 2/27 from Charles Cochran

(06:56)_The Bond found buyers lat night off of the weakness in the ES. The inverse relationship continues. If ES takes out 739, I would assume that the Bond will trade higher. If not, sideways to lower. Longer term supply should keep the Bond on its current downward course. Only thing that can change that will be the sentiment changes from a recession w/a recovery sometime this year to a depression/deflation scenario.

First buy zone is 12521/25. Back up buy is 125-17 OB. Trading the ES in the Bond pit as we get started. Big news at 0830 EST. GDP is forecast at -5.4%. that is a big drop in output.

 

[bthomas]

F2 Comments for Friday 2/27

The Bond rallied off the much better than expected GDP numbers hitting 126-24 before the selling in the ES stopped. Stability in the ES brought sellers into the financials and the Bond was still being sold into its close. The close was weak. The market is pointed lower without help from the news.

Monday’s news: Personal Income is expected at -.3%; Per. Spending at .3%; Core PCE at .1%; Construction Spending at -1.5%; ISM Index at 34.0.

If the ES is sideways/higher, want to sell into early strength and see if 124-00 can be broken. If not, will cover. First sell band is 124-31/125-03. Back up sell is 125-11/15. Cover and/or reverse, if 124-00 then holds.