SUMMARY OF DATA 08/27/09
8:30 AM: US GDP -1.5%, US WEEKLY JOBLESS CLAIMS (565 K).
10:30 AM EIA INVENTORY REPORT (NATURAL GAS)
1:00 PM US 7 YEAR NOTE AUCTION
DATA RESULTS 08/26/09
US DURABLE GOODS ORDERS (4.9 % VS. 2.5%), (NEW HOME SALES 433 K VS 390 K)
EIA INVENTORY NUMBERS (CL 0.2M BARRELS, RBOB -1.7 M, DISTIL 0.8 M CAPACITY UTILIZATION 84.1)
US 5 YEAR NOTE AUCTION (BID TO COVER 2.51, YIELD 2.494%)
US DEBT REVIEW AND OUTLOOK
US Treasuries ended today’s session higher, supported by a subdued equity session and a rebound in the US dollar. Demand for a record tying $39 billion of US 5 year notes was relatively neutral, marked by a strong bid to cover ratio that came with a sacrifice of higher than expected yield. Inflation concerns continued to remain somewhat muted, while the underlying support of the market could begin to dry up as bids from the mortgage market pull back as housing purchases scale back from normal summer rallies and the prospect of the Federal Reserve completing its $300 billion debt purchase program comes to an end,
Support for Treasuries may continue though as inflation pressures appear to remain muted and the lagging employment situation gives the indication of a global economy that is showing signs of improvement- but remains fragile. Treasury market seems poised to offer little in the way of direction, with security bids driving the market to levels where selling into strength, particularly in the far end of the curve, may begin to look like a profitable strategy.
Technically, Sept US 30 year futures look as if their recent gains may be nearing a top out point. Significant resistance has set up at 121-20. The chart pattern appears to be setting up for a move back down before that resistance could be tested. Market could look to retrace back to an initial support level of 119-31. Look for a key level of support at 119-170 to determine if a move down here could have some significant breakout potential from the trading range from the last two weeks.
US EQUITY REVIEW AND OUTLOOK
US equities posted another relatively lackluster session despite better than expected reports on new home sales and durable goods orders. Traders and investors failed to find anything in these reports to spark a further rally, as sentiment appears to be turning cautious as the historically bearish period of September/October approaches. Market participants appear to be developing strategies to contend with what is felt as being an overdue correction in the equity markets. Option interest was strong today in a number of out of the money S&P put option spreads. Activity in spreads rather than outright purchases could suggest that the equity markets are searching for a return to normal patterns of direction. Few seem likely to believe that the volatility factor will decrease though, so the level of option premium in the equity markets is likely to remain high during as the economy approaches the ¾ turn of uncertainty regarding the sustainability of the recovery and the shape of potential changes in fiscal and monetary policy.
If this summary can offer any insight, it would be to remain flexible regarding trading strategies and commitment of capital as volatility is likely to upswing as the markets perceive expectations of payback in 2010 of a return on the historic investment of resources designed to abate the collapse of the financial system. It would not be surprising for many equity position holders to take a look at their current gains (provided they have been in the markets throughout 2009) look to bank a significant portion of their gains in the near future. It may hard to find a new leadership sector than will be strong enough to abate this seemingly inevitable conclusion. Of course the one defense against this notion is the fact that so many appear to be betting on this outcome, that it could offer another victory for the contrarian view (such a fun game, is it not.)
Technically, Sept S&P futures appear trapped in a near term range which could continue into early September. Looking for the market to correct back to the 1010.00 1012.00 range, where support should likely be found at 1008.00 in the near term. Resistance in near term has set up at 1033.75. A break of this level could set the market up for a move higher to test 1043.00.
|
US DEBT FUTURES |
OPEN |
HIGH |
LOW |
CLOSE |
CHANGE |
|
US U9 (US 30 YRS) |
120-165 |
120-315 |
120-070 |
120-265 |
+26/32nds |
|
SP U9 (S&P 500) |
1023.70 |
1031.50 |
1020.30 |
1026.80 |
+.70 |
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