As the financial and commodity markets seem to be in the midst of a global meltdown there is one complex that is benefiting ; Treasuries. Plummeting equities are promoting flight to quality Treasury buying but sliding commodities is providing fuel to the fire in the form of deflationary pressures in the marketplace.
There weren't any economic releases, leaving all of the focus on inter-market relationships. I give Treasury traders credit for keeping relatively cool heads in light of the massive confusion and volatility surrounding. The complex traded drastically higher on the session, but the daily progress seemed rather orderly given the circumstances.
Under normal circumstances, I would be delighted at the bearish opportunity that current market valuations provide. However, just as many seem to have lost confidence in the financial system I have grown overly cautious regarding trading models and typical market behaviors. The vast number of uncertainties and the fact that we are dealing with a magnitude of issues not seen in my lifetime keeps me on the defensive.
In previous reports, I noted the potential for the long bond to reach 122. Today's high was just over 122 and ended up being an opportunistic sell for those that had the guts to participate. However, I have since adjusted my target upward. It seems like 122'24 is a realistic expectation and at this level it may be seen as a great place to begin implementing a bearish strategy. With that said, don't forget about the Sept. 16 high of 123'27.5. Markets have a way of sniffing out all of the stops and light-handed traders. If you chose to play the short side at 122'24 I recommend that you approach the trade with the intention of taking a quick profit if possible. The current climate doesn't seem conducive for position trading.
You may want to try to sell the November 133 calls for 25 or better. It will take additional strength to get this filled.
Treasury Option Trading Recommendations
**There is unlimited risk in naked option selling.
Oct. 6 - Sell the November T-Bond 133 call for 25 ticks or better. Be careful with this one...
Treasury Futures Trading Recommendations
**There is unlimited risk in trading futures.
Oct. 6 - Sell 1 Five Year note at 115'13 OB
Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
www.DeCarleyTrading.com
