Bond & equity report for Sept. 24

SUMMARY OF UPCOMING DATA 09/24/09

  • 8:30 AM: US WEEKLY JOBLESS CLAIMS (550 K)
  • 10:00 AM: US EXISTING HOME SALES (5.35 M)
  • 10:30 AM: EIA NAT GAS INVENTORY REPORT

DATA RESULTS 09/23/09

  • EIA PETROLEUM REPORT (CL +2.8 M, RBOB +5.4M, HO +3.0 M)
  • US 5 YEAR NOTE AUCTION ($40B, B/C 2.40, YIELD 1.475%)
  • FOMC MEETING ANNOUNCEMENT (NO CHANGE IN RATE POLICY)

US DEBT REVIEW AND OUTLOOK

U.S. TREASURIES closed higher on Wednesday after a volatile session which saw prices swings over a full handle in the afternoon on the Fed announcement. The most dramatic price movement was a strong price spike in treasuries after the FOMC announcement on interest rate policy. Prior to the announcement, Treasuries had been flirting with the lows of the session. The catalyst for the move down was a disappointing US five-year note auction. The anemic bid to cover and high yield confirmed traders concerns regarding the ability of longer yielding debt finding buyers at perceived low levels and inflation concerns. The disappointing results pushed Treasuries down through support at 118-11.

The downside pressure reversed course after the FOMC announcement. The committee left its near zero rate target policy unchanged for the foreseeable future. In addition, the committee reaffirmed its plan to back off on the purchase of mortgage back securities. The market perceived these developments as positive for U.S. fixed income with regards to the overall inflation environment as well as a possible relief of supply pressures from U.S. Treasuries coming onto the market at a record pace. The relief may be short lived however in the wake of another auction (US seven-year note) on Thursday and returning supply concerns which may erode the post Fed meeting spike.

Technically, December 30-year futures may expand their trading range slightly, with a near term resistance at 120-02. Market appears to be set to head back lower after break of near term support today. Market should fill in gap back to 119-03 before initial consolidation. Downward target for near term remains in the 117-10 range, with upside resistance at 120-17 and 121-02.

US EQUITY REVIEW AND OUTLOOK

US EQUITIES were unable to hold onto the positive momentum caused by relatively unsurprising FOMC meeting results. The major indexes fell to their lowest levels of the session by the close after spiking through key resistance levels. The Federal Reserve kept its near zero rate policy in place, stating that while it sees economic activity pick up in the financial and housing sectors, it remains concerned with regards to the ability of the consumer to recover as the employment picture and consumer spending remain under significant pressure. The apparent need for an extended loose monetary policy took the bloom off the rose quickly, as equities fell to their lowest levels of the session, testing near term support levels before closing just off the worst levels of the session.

Energy and material stocks were among the worst performers of the session as most commodity prices moved lower. The losses were greatest in the energy sector, as crude oil continued its volatile range trading, losing nearly 5 % after weekly EIA inventory numbers showed a surprise 2.7 million barrel build. Gasoline and Distillate stocks also posted strong gains. Financial stocks also posted some of the worst numbers as concerns regarding the consumer picture brought back the precarious revenue position of financial institutions back into the light. Overall markets traded with little direction throughout the session, as the likely scenario of needing a session to digest the meaning of the FOMC statement and policies should continue as usual.

Technically, Dec S&P ranged may finally be setting up for a overdue near correction. The contract next support key level sets up at 1047.30-1048.00. A break of this level should allow the market to test 1042.00. 1032.00 could set up as a target to the downside. Wednesday’s failure should reset initial resistance at 1070.00, with 1081.00 as a possible upside target.

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US Z9 (US 30 YRS)

119-10

119-25

118-07

119-22

+17/32nds

SP Z9 (S&P 500)

1068.30

1075.50

1055.50

1058.90

-8.40

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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