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

Important News on Wednesday

F2 Comments: The market found buyers just below the OVN session’s lows. The 0830 EDT time news was better than forecast for the Bonds, the market broke out hitting 127-315 before the buying was over. The close was strong.

The market activity analysis favors higher prices Wednesday. Wednesday’s news can impact the prices: CPI is expected to be +.2%; core CPI at .1%; Empire Index at -35.0; Net LT TIC Flows at ??? (last month’s # was 43.0 Byn); Capacity Utilization at 69.7%; Industrial Production at -.9%; crude inventories; Fed Beige Book.

If the news is positive, want to be long. Aggressive buy zone 127-17/21. Back up buy is 127-09 OB. Exit/and/or reverse, if 128-00/04 is rejected.

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Extra Insight Prior to Wednesday's Open

(06:51)_Mkt is at a level where the buying has to continue. We are at resistance. Today's news is forecast to be supportive, but is expected. Follow through buying or lack there of will be our clue.

There was some profit taking in Note calls yesterday too. Lots of news on tap this morning followed by Beige Book, which shouldn't hold any surprises.

Still like the long side of the market until we get a retest failure at resistance. Aggressive buy zone has moved ot 127-25/29. Back up buy is now 127-17/21.
 
Thursday Recap

F2 Comments: It was a trading range day when it was all said and done. There was volume at 127-00 and 127-20, which contained the day session until late in the session. The profile was balanced with a weak close. Resistance held and the market is pointed lower tomorrow.

Little in the way of news to drive the trading. Want to sell early strength and see if 126-20/24 can be broken. If not, will cover. Sell zone is 126-31/127-07. Cover, if 126-20/24 hold.

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Potential for More Banking Support Rallies Bonds

F2 Comments: The buying started in the OVN session after the financial press reiterated recession fears and the potential for more banking support. These stories pointed out that this was not just in the US . Recession/deflation stories and the potential for such will continue to rally the financials.

The market closed strong. It is pointed higher tomorrow w/some help from the ES.

Want to buy early weakness and see if 126-24/127-00 can be taken out. If not, will start to look at the short side of the market.

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F2 Comments: The analysis favored lower prices and the market did trade lower after a brief run into overhead resistance at 125-28/126-00. Resistance held, the market reversed and sold and this selling was present into the financials close. The close was weak. The market activity analysis favors lower prices Thursday without news.

Thursday’s news: Jobless Claims is expected at -650K and Existing Home Sales at 4.65M. the Existing Home Sales number could be better than forecast due to current lower interest rates.

If the ES hasn’t broken down after its sharp reversal this afternoon, I want to sell early strength and see if 124-00/08 can be taken out. If support holds, will cover and consider a long.

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Friday's Closing Comments by Charles Cochran

F2 Comments: The market opened lower and traded lower as per the analysis. And the selling was present into the close too. The market is set to trade lower on Monday w/out news. And there is no scheduled news.

The 2Y Note auction is the biggest event on tap for Monday. The supply of notes continues and prices continue to head lower.

Want to sell into early strength and see if 123-28/00 can be taken out. If not, will cover. First sell zone is 124-11/15. Back up sell is 124-19/23. Cover, if 123-28/00 then holds.

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What are the factors behind CC view of the market going lower on Monday?

I can see the weak close and the normal variation day down. The 'time clock of the market' to borrow a Steidlmayer concept appears to indicate the down move is stopping and the fact we are reaching a significant long-term support level would support this view.

I attach a chart of the merged profiles of the last 3 days (the complete profile unit) the TPO count at the POC is now 23, which according to the Steidlmayer distribution means the directional move has been contained and will develop around this price before moving lower or reversing.

I am not trying to undermine what you are saying, in fact i do not know. I am just trying to understand how your interpretation of profile may differ.
 

Attachments

Resopnse to MJUK

I went right to the source for an answer MJUK. Here is Charles' response.

Our approach is better stated as the first trade of the day, confirmed by the OVN session. My call was made from the shape of the distribution, the weak close, the fact we are at major support. I think that we have a chance to take out major support. Best situation for us would be for the OVN session to trade higher find resistance at 125-00+/- and then begin to sell
Monday morning and take out the OVN low in the day session . And it is a major auction week. Always easier to sell a higher coupon. If they don't break it early w/the 2Y auction up on Monday, my guess is that Tues's 5Y will be the weak one. Mkt is short. Put protection has been taken. So we will see what happens.

His comments about being at strong support is right. What held us up on Friday was option expiration, IMO. Now we can trade lower for a couple of reasons. If we don't break it Monday, see a rally due to the auction, with the next best selling window on Wednesday noon till Thursday morning's day session.

We will see. Perhaps more accurate to say want to sell early strength to see if major support can be taken out. If not, will cover and look to the long side of the mkt.

I hope this answers your question. He sent it to me at 9:00 Saturday night. I guess we're all traders 24/7.
 
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