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

Pre-Opening Comments for Monday, 4/27

(05:52)_Pre-Opening Comments Left the market on Friday wanting to sell early strength based on an ES that was sideways to higher. The ES sold over the weekend and looks to open soft this morning. A lower ES, no news and a 2Y auction supports a sideways to higher market. The 2Y auctions are usually well accepted.

If the ES continues to sell, Friday’s analysis is suspect. Will be OK to get short once against resistance at 125-00 to see if 124-12/16 can be taken out. If not, will cover and look to trade the early range from either side.

And it is Monday which usually starts off a bit confused as the players figure out which side of the market the paper favors.
 
Monday 4/27 Comments

F2 Comments: The market showed a trading range today. I think that the market will probe higher, but find sellers above 125-00. This selling should take the market back to 124-08/16. Short term the market needs volume from 124-08 to 124-28. If the market does continue its rally from the 2Y auction at noon today, then the selling should emerge again in the 125-20 area.

Some news tomorrow: consumer confidence is expected at 28.8 and Shiller Case Index at -18.5.

The 5Y auction at noon CDT, should be the market’s focus. Usually the Dealers run a good auction/bad auction strategy. I am guessing that the 5Y auction will be the bad auction. If not, the market will continues its rally tomorrow off the day session’s opening.

Can sell failure at 125-00/04 or 125-20. Or buy w/signs of support at 124-08 OB.

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FOMC Announcement on Wednesday

F2 Comments: The market traded higher off the day session opening from the weakness in the ES. The Bond rallied to 125-23, into our recommended sell zone at 125-19/23, and then reversed to sell for the rest of the day. The market closed weak.

The market activity analysis favors selling early strength. If 123-00 or the OVN low isn’t taken out, will cover and think about getting long. The 7Y auction could bring in buying as the Dealers support this auction.

Wednesday’s news: Adv GDP is expected at -49%; Deflator at 1.7%: API inventories; FOMC announcement.

First sell band is 124-03/07. Back up sell is 124-11/15. Cover, if 123-16 holds.

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Wednesday Pre-Market Comments from Charles Cochran

(06:21)_Today’s trading would be rather straight forward w/out today’s 7Y auction. Open interest increased 31.8K in the Note. Looks like Dealers sold again yesterday giving them at least 30K net short contracts over the last 3 days to support the auction, if deemed necessary.

Yesterday’s auction wasn’t very good. This usually leads to a better auction the next day. Big news today w/Adv. GDP expected at -4.7% (range -2 to -8). 4th Qtr 2008 is forecast at -6.3%.

Short covering took the market to 124-08 post yesterday’s day session market. The OVN held at 123-26. Would look for some short covering before the 0830 news followed by a retest of support. Failure to take out 123-08/12 should lead to more short covering and some day trade longs entering the market. If the selling does continue this morning, then the next short covering window will be 1130/1230 EDT.

First sell zone is 123-25/29. Back up sell is 124-03/07. Cover, if 123-08/12 then holds. Selling has to get started early to stay and hold shorts due to today's auction.
 
FOMC Announcement Sinks Bonds

F2 Comments: The market opened and did manage a rally almost to Tuesday’s auction prices. Resistance held and the market began to drift lower. The auction was weak. The market was stuck in a range w/sellers above 124-00. Then the FOMC spoke and said there were signs of economic bottoming in some sectors. Recovering economy, no more recession/depression, sell bonds. And this is what happened, IMO.

Some news on Thursday, but not of the market changing kind: Jobless Claims is expected at -640K, Personal Income at -2%; Personal Spending at -.1%; Employment Cost Index at .5%; and Chicago PMI at 34.0.

Want to sell early strength and see if 122-08/12 can be taken out. If support holds, will cover.

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F2 Comments: The market opened soft, rallied back into our aggressive sell zone and then reversed hitting 122-00 before the selling was over. The ES topped in E period and the Bond reversed.

By the day’s end the market formed a P. This could take the market higher in the OVN session. The analysis is split w/the short term favoring a retest of resistance and the longer term lower. I can trade from either side on Friday, but favor the short side, if the ES hasn’t cratered.

Some news Friday: Michigan Sentiment is expected at 61.5; Factory Orders at -.7%; ISM IND. At 38.0; and auto and truck sales.

Aggressive sell zone is 122-23/27. Back up sell is 123-03/07. Think we have a shot at selling close to the “buck” w/some help from the ES.

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Friday's Wrap-Up by Charles Cochran

F2 Comments: The market opened lower and traded lower and stops were pulled below the recent low at 121-25. The local mindset was in control. After the stops were pulled the market returned to the HV area at 122-04.

The distribution is a P. The market should retry resistance before it can sell on Monday. Think we will see another trading range market on Monday.

Some news, but not the market moving type of news: Construction Spending at -1.4%; Pending Home Sales at unchanged.

Want to sell at 122-20 OB and can be a buyer at 121-24 OB.

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Pre Market Comments for Monday 5/4

Charles Cochran: (06:49)_Monday will open w/both indexes and financials higher. Probably won’t be this way by day’s end. The UK is on holiday and Europe is back. The UK component of the market is big, as they are the largest money center after NYC. This should dampen the volatility today and make the markets tend towards a trading range.

Still like the 122-20+/- area for a short w/sign of buyers abandoning the long side of the market. The buy zone has moved up from 121-20 to 121-28/00 for now.

Monday’s can start slow as the players come in and try to figure out which way the paper will play the session. May not be until 1100 EDT for the direction of the market to become clear. Will plan on a trading range day and work the edges mentioned above until proven otherwise.
 
Monday's Market Was A Bracket

F2 Comments: The market was set to trade in a bracket today. The UK was on holiday. Unemployment numbers are on deck this Friday. And there is a 3, 10 and 30Y auction this week. The real action starts tomorrow, IMO.

Tuesday’s news : ISM Services is expected at 42.0.

The ES took out 900 late in its session today. This normally would pressure the financials. If the financials sell off on the late strength in the ES, want to sell the Bond, especially above 122-16. If the strength in the ES doesn’t break the ZB/ZN OVN and the financials open weak, but don’t break 122-00/04, can trade from the long side to retest OVH resistance.

If resistance holds the 2nd time, want to get short off the idea that this week’s auctions will push bond prices lower. Sell zone is 122-19/23 or 122-27/31. Buy zone is 122-01/05 OB.

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