Bond & equity report for Sept. 4

SUMMARY OF UPCOMING DATA 09/04/09

  • 8:30 AM AUG US NONFARM PAYROLLS (-200,000), UNEMPLOYMENT RATE 9.6%

DATA RESULTS 09/03/09

US WEEKLY JOBLESS CLAIMS (570 K VS. 560K), ISM NON MFG INDEX (48.4 VS. 48.8), EIA INVENTORY BUILD NAT GAS (65 BCF) US TREASURY AUCTION ANNOUNCEMENTS (US 3 YEAR-$38 B, US 10 YEAR-$20 B, US 30 YEAR-$12 B)

U.S. DEBT REVIEW AND OUTLOOK

U.S. TREASURIES pulled back on Thursday. Pressure from covering of recent long positions, announcements of next week’s Treasury auctions and an apparent stabilization of equity prices ahead of Friday’s reports on U.S. payrolls prompted many with long positions to cover ahead of the long weekend. Overall, the covering was relatively small in nature. Yields on most U.S. Treasury debt remain at their lowest levels in nearly seven weeks. The demand for secure, government debt continues to be driven by sentiment regarding a longer and fragile economic recovery period. Concerns regarding corporate debt defaults are also lending support to Treasury prices for the time being.

Losses in Treasuries were pared even as the government announced $70 billion of three-, 10- and 30-year debt that will be coming to auction next week. Bid to cover and yield, particularly on the longer end of the yield curve will be of particular importance to observers that have been calling for a possible drying up of buying interest from foreign parties at these low yields and pressure on the underlying currency.

Technically, December U.S. 30-year futures should maintain their near term support and resistance levels. Upward target remains at 121-30. Chart continues to show setup for pullback to support at 119-28.

U.S. EQUITY REVIEW AND OUTLOOK

U.S. EQUITIES recovered some ground on Friday. Gains were driven primarily by better than expected reports from retailers as well as position squaring ahead of Friday’s employment data and the long holiday weekend. A number of chain store retailers, including Costco and The Gap, reported better than expected sales numbers for August on better than expected overseas revenue.

Mining and metals stocks also led the indices higher after precious metals staged their largest two-session rally as season demand as well as interest from alternative investments pushed metals prices to their highest levels since January 2009.

Overall, equities seemed to gain on the inability to break through some strong technical support levels. Economic data released on Thursday failed to offer support. Weekly jobless claims rose more than expected and the ISM services index came in under consensus.

Additional support from equities came from overseas news as the Chinese government (no surprise here) offered supportive remarks regarding its mission to promote a “stable and healthy” financial market. This response came in the wake of price action early in the week which led analysts to declare that China’s equity market had met the criteria to be considered a “bear market”.

Equities will be looking for some short term trading opportunities based on Friday’s number. A key element that could have some further influence beyond the first 30 minutes of the announcement will be any significant divergence between the nonfarm payroll number and the unemployment rate. While the payroll number may have more of an initial shock effect, the unemployment number should offer more of a telling sign on sentiment regarding a foundation for economic recovery, at least until the end of the year.

Technically, Sept S&P futures tried and failed again to significantly breech the 992.00 level. The contract should find near term support at 986.50. Resistance remains at 1006.00 with a break above setting up for test of 1013.00, though should expected some difficulty moving through 1009.00. Overall, market may be in midst of range trading for near term with no significant breakouts.

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US Z9 (US 30 YRS)

121-02

121-04

120-10

120-22

-15/32nds

SP U9 (S&P 500)

998.20

1003.00

991.40

1001.70

+7.50

Prepared by Rich Roscelli & Paul Brittain.

PLEASE EMAIL QUESTIONS OR COMMENTS TO RICH@BINVSTGRP.COM

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Commodity Trading School, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

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