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

[bthomas]

Charles Cochran's Opening Comments for Monday 3/2

(06:57)_Stock markets round the globe have been heavily sold over the weekend. AIG got another cash infusion. Has to be getting close to 200B in guarantees and direct cash infusions. HSBC is shutting down all US operations and raised 17.5B in new capital. Financial stocks continue to suffer. GE lost its AAA rating, even w/a dividend cut. And Warren Buffet says the US’s economy is in a shambles, but will recover. As always, the question is when. Wonder if he has given a 2nd thought to his support of the new administration.

As long as the ES is selling the long side of the market is the side to play from. First support band comes at 124-12/16. Followed by 124-00/08. Might get some early strength in the ES that will allow us to buy at lower prices as we approach the day session opening in the ES.

 

[bthomas]

Charles Cochran's Comments for Tuesday 3/3[/b]

F2 Comments: We entered the day with a trading range call with the market’s direction to be determined by the ES’s direction. The ES basically sold and the Bond did rally to 125-27, where the buying stopped. The buying currently dries up above 125-20. The ES recovered off its intraday lows. The Bond sold hitting 124-12 before the selling was over. The selling in the ES picked up into the close and the Bond rallied back to 125-00+.

Some news to drive tomorrow’s trading: ADP Employment Index is expected at -615K; ISM Services at 41.3; API Crude inventories; and the Fed Beige Book. If ES is lower, want to buy the Bond. If the ES is higher, can sell the Bond too.

Sell zone is 125-11/19. Buy zone is 124-01/05.

 

[bthomas]

Market Sells Even After Supportive News on Wednesday

F2 Comments: The market sold today even with supportive early news. 123-10 was touched before the selling was over. The market drifted higher off the lows and closed at 123-24 in a “b” pattern. This pattern favors lower prices and/or a retest of support.

Some news tomorrow to influence the trading, but big news is on Friday. Productivity - revised is expected at 1.6%; Unit Labor Costs at 3.4%; Jobless Claims at -650K; Factory Orders at -2.1%.

If ES is sideways to higher, want to sell early strength and see if 123-10/16 can be taken out. If support holds, will cover. If ES sells OVN, will look at the long side of the market as the early news will be supportive, if as forecast. Sell zone is 124-03/07.

 

[bthomas]

NFP - Biggest Number of the Month for the Bonds

F2 Comments: The market rallied and then some today. It was a strong market to say the least and the close was strong. The market is pointed higher w/some help from tomorrow’s Unemployment news.

Tomorrow’s news: NFP is expected at -615; Unemployment at 7.9%. If the news is as forecast and the market doesn’t rally, then it was either built into the news with ensuing profit taking, or the ever increasing supply of debt is weighing on the market. Tomorrow is a news day trade. Will trade the first setback and exit, if the range isn’t extended.

 

[bthomas]

Response to NFP

F2 Comments: The market finally rallied after the short covering rally in the ES ended. The news and fundamentals remain supportive. The ever increasing debt is the big negative and has taken the bond lower. If the ES weren’t selling day to day, I think the bond would be lower than it is today.

No news to drive Monday’s trading. The direction of the ES is likely to determine the Bond’s direction Monday. If the ES is selling, want to be long the Bond at 126-26 OB. If the ES is rallying, OK to be short the Bond, especially above 127-20. Down to the ES’s direction come Monday.

 

[bthomas]

Early Sell Worked Nicely Today

F2 Comments: The analysis favored the seller today. The specific recommendation was to sell 126-27/31. The day session high was 127-01. The low was 125-15. The profile doesn’t lie. It just takes an unknown amount of time to fulfill its internal structure.

The market did recover from its low off of ES weakness. If the ES continues to sell, the Bond should find early buying tomorrow. Don’t think it can breakout though given this week’s 10 and 30Y auctions. Think the Dealer community would like to take the market a bit lower before rallying the Note back on Wednesday.

Will key off the ES. If lower, will look for a place to buy, 125-29/126-05. If ES is higher, want to sell 126-03/07. Little in the way of news to guide tomorrow’s trading.

 

[traderjeep]

Mr. T
Thank you sir for your input ...
Traderjeep

 

[bthomas]

Selling, Selling, Selling

F2 Comments: The market sold, has been selling, should continue to sell until the never ending borrowing needs of the Treasury are behind. Today’s selling was exacerbated by today’s rally in the ES. The only thing I can see that could rally the Bonds is this week’s auction. Tomorrow’s 10Y or Thursday’s 30Y auction could rally the Bond for a day or two.

Want to sell early strength and see if 124-00/08 can be taken out. If support holds, will consider the long side due to the 10Y auction. Worst case scenario for a short will be an opening close to 124-00/08. Today’s selling could have then been satisfied by the OVN session. First sell zone is 124-27/31. Back up sell is 125-03/07. Cover, if 124-00/08 then holds.

 

[bthomas]

Prep For 10 Year Note Auction

(06:55)_Auction time again today. The when and if the Dealers step in question will be primal in today’s trading. Little in the way to drive the trading. And with tomorrow’s 30Y today’s auction can be pressured too. Not an easy read given the decreases in open interest (OI) and falling prices over the last two days.

Dealers could have set up the auction by buying off the 3/04 low and are liquidating length as they work through this auction. Never perfectly clear. And there is the ES, which continued to rally in its OVN session. If ES continues to rally, it will be harder for the ZB to recover and rally today based on the 10Y auction.

Still OK to sell once to see if OVN low can be taken out. If not, will assume that yesterday’s selling structure has been satisfied for the moment and that it is OK to probe from the long side of the market. Buy zone is 124-05/13. Current sell zone is 124-23/27.

 

[bthomas]

Wild Ride in the Bonds

F2 Comments: The market sold as per the analysis hitting 124-00 in I period. The auction was at 124-05/06. The quick sell at auction time took the market to 124-00. Support held and the Note/Bond began to recover. When 124-24 came out, it was a straight shot to 126-00.

The close was strong. The market is pointed higher with some help from the early news and Dealer market manipulation into the 30Y auction.

If ES is sideways to lower, want to buy early weakness and see if 126-08/12 can be taken out. If resistance holds, will look to the short side of the market.

Tomorrow’s news: Jobless Claims is expected at -650; Retail Sales at -.4%; ex-auto at -.2%; Business Inventories at -1.1%. Buy zone is 125-09/13. Back up buy is 124-29/125-01. Exit and/or reverse, if 126-07/11.