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

Market Focused on 10 Year Auction

F2 Comments: The market rallied as per the analysis. Monday’s structure and market activity favored higher prices. The early news was supportive from an inflation standpoint. 3 Y auctions are generally good ones and today’s auction was no exception. The market rallied and closed strong awaiting tomorrow’s news and 10Y auction.

Wednesday’s news, Trade Deficit, is expected at -28.5B, but shouldn’t be much of a factor. The direction of the ES and the 10Y auction should be the market’s focus.

Want to buy into early weakness and see if 116-10/20 can be taken out. If not, will exit the trade and begin to think short. First buy zone is 115-29/116-01.

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Opening Comments in Advance of 10 Year Auction

(06:23)_The market was a bit higher OVN as players continued to press the long side of the market. Weakness in the ES was supportive. When the European markets turned positive, the financials caught some selling. Have this morning’s news to navigate then the focus shifts to the 10Y auction. The norm is to use the intermediate term auction to set up the longest maturity. This should lead to some selling today. The question is when. Have seen it both ways of late—before and after the actual auction. Early strength in the ES suggests that it could come before the 10Y auction. Weakness in the ES could put it after the auction. Will have to see how it develops. Still like the long side of the market. Will keep the buy zone the same at 115-29/116-01 for now.
 
30 Year Auction on Thursday

F2 Comments: It is auction week and this usually yields a trading range market until the completion of such, when the market moves out of the trading range based on current fundamentals. We will be looking for a new move to start from 116-10 post tomorrow’s 30Y auction. They ran the market up today. Expect them to run it lower tomorrow to set up the 30Y auction.

Some news to navigate tomorrow. The focus should be the ES’s reaction to the Retail Sales numbers. Tomorrow’s news: Exp. Prices/Imp. Prices---no estimates: Retail Sales at +.7%; ex-auto at +.1%; Jobless Claims at -545K; Business Inventories at -.9.

Want to trade from the edges tomorrow. Can sell failure at 116-12/16. Can buy weakness at 115-21/25.

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F2 Comments: The market was set to trade higher into the 30 Y auction Thursday and that is what it did. The early news showed economic contraction and not growth and the financials took off higher. This buying sustained the 30Y auction too. The close was strong. The market activity analysis favors higher price with some help from the news and the direction of the stock markets.

The news is expected at: CPI at Unch’d; Core CPI at +.1%; Capacity Utilization at 68.4%; Industrial Production at +.4%; Michigan Sentiment at 69.0.

Want to buy early weakness and see if 117-06/08 can be taken out. If not, will begin to look to the short side of the market.

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Charles Cochran's Opening Comments for Friday 8/14

(06:41)_OVN held yesterday’s gains, but didn’t extend them. Have some news this morning that could move the markets, especially if Capacity Utilization and Industrial Production show more growth than forecast.

The ES is at resistance and ignoring negative news too. So something has to give this morning. After the ES’s reaction to the early news EOW profit taking/long liquidation is the dynamic we will have to face. If the rally doesn’t continue this morning, some long liquidation/profit taking is likely.

Still like the long side first this morning. Last night’s first buy zone at 116-21/25 was just touched with the OVN low of 116-25. Preferred buy zone is now 116-25/29. May take 117-01’s to get into the market from the long side. News at 0830 EDT.
 
F2 Comments: The market did trade higher as per the analysis and made it to a LV # at 117-26. It held as per Rule#1. The rest of the day was left to profit taking by longs as they booked profits after 4 days of a higher market. The questions for Monday is will the rally continue or will near support be tested. Don’t know for sure at this time. But there has been enough buying this week to almost insure a retest of resistance at 117-20/26.

Some news to influence Monday’s trading: Empire Index is expected at +2.20; Net Long term TIC Flows at 17.5B.

Want to buy early weakness and see if 117-20/26 can be taken out. If resistance holds, will move to the short side of the market and plan on a trading range market.

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F2 Comments: The market did trade higher today as per the analysis, but did lose considerable upside momentum. The volume distribution and price action suggests a retest of today’s highs and/or higher prices Tuesday.

Some news to negotiate tomorrow. Housing Permits is expected at 576K; Starts at 598K, PPI at -.2%; and Core PPI at +.1%.

The ES’s reaction to this news should tell the tale of the tape. Want to buy early weakness at 117-21 OB and see if 118-00/08 can be taken out. If not, will exit the trade.

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Tuesday Morning Opening Comments from Charles Cochran

(06:50)_Market caught some selling OVN as the stock markets began to recover from yesterday’s selling in the ES. The ES’s reaction to the day’s news is likely to tell the tale of today’s tape. The OVN selling has taken the Note and the Bond back into yesterday’s support band from the previous day’s OVN session.

If the Note can hold the 117-08/12 area this morning, it can rally back with some help from the indexes. First buy zone is 117-17/21. Back up buy is 117-13 OB. Exit and/or reverse, if 117-24/28 is then rejected. News on the half hour. ES’s reaction to the news should be the market’s focus post early news.

(06:55)_First sell band will be 117-23/27 followed by 117-31 OB, if the news isn't supportive. We are at resistance and the market needs to trade higher this morning or day trade shorts are likely
 
Notes Stall at 117.28

F2 Comments: The market did try to rally, but the buyers lost interest at 17-28. Two more attempts to take out 117-28 failed and the sellers then entered the market taking prices to the lows of the day for the day session close. The analysis favors lower prices tomorrow.

No scheduled news to drive the trading. The focus should be the direction of the ES. Want to sell early strength, if the ES is sideways to higher, and see if 117-04/12 can be taken out. If not, will cover and start to look to the long side of the market.

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F2 Comments: The analysis favored higher prices Wednesday morning and when the ES sold off OVN buyers poured into the Note. The Note hit 118-145 as the ES was bottoming. Buyers entered the ES and the high was in for the Note. Support was tested at 117-16/20 and the close was in the middle.

The market can trade either way Thursday given the OVN news and direction of the ES. Thursday’s news: Jobless Claims is expected at -553K; LEI at +.6%; Philly Fed at -2.0.

Will fade the ES’s direction. Can be a buyer at 117-25/29 and a seller at 118-07 OB.

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