Bond & equity report for Oct. 28

COMMODITY TRADING SCHOOL FUTURES MARKET SUMMARY 10/27/09

SUMMARY OF UPCOMING DATA 10/28/09

8:30 AM US DURABLE GOODS ORDERS (1.5%)

10:00 AM US NEW HOME SALES (440K)

10:30 AM EIA INVENTORY NUMBERS (PETROLEUM)

1:00 PM US 5 YEAR NOTE AUCTION ($41 B)

DATA RESULTS 10/26/09

S&P HOME PRICE INDEX (157.93 VS. 155.95)

CONSUMER CONFIDENCE (47.0 VS.54.0)

US 2 YEAR AUCTION ($44 B)

US DEBT REVIEW AND OUTLOOK

US TREASURIES move higher by mid-session on short covering and anticipation of what will likely be a strong auction for US 2 year notes, as the short end of the yield curve is expected to maintain steady demand based on the expected timeline for global economic recovery and the toll that potential inflation pressures will have on longer yielding maturities. Treasuries rallied to their highs of the session, with 30 year futures moving back above 119-00 as the markets digested the ongoing strong demand for US debt fueled another round of short covering and new long positions as equities broke down near lows of the session in the afternoon.

Treasuries were also boosted by a worse than expected reading on US consumer confidence. The reading of 47 was influenced by ongoing concerns regarding the employment picture. The number took precedence over an early report showing that US home prices had risen for the 3rd straight month. Recovery in Treasuries remains below resistance levels prior to 2 year auction results.

Auction results for the US 2 years were very strong. Bid to cover on the record $44 billion of new debt was 3.63, compared to average B/C of 2.77. Indirect bidders-the category which includes foreign central banks purchased over 44 % of the debt as compared to average of 42%.

Technically, Tuesday’s rebound in 30 year futures broke through initial resistance at 118-24. The market remains range bound for the time being though. Significant upward momentum through 119-24 would offer a significant challenge to current bear view on Treasuries. Looking for market to pull back to near term support at 118-16. Downside target resets higher to 117-07. Short positions should be closely monitored this week as auction results will likely offer increased volatility and could skew chart setups.

US EQUITY REVIEW AND OUTLOOK

US EQUITY FUTURES traded with a slightly bearish tone on Tuesday, as the weak reading on consumer confidence held back attempted rallies led by a recovery in energy prices. The release of the consumer confidence put pressure on financials, technology and consumer driven stocks. S&P futures tested a key level of support at 1057.00 before rebounding to slight lower by mid- session.

The weaker consumer confidence reading, fueled by lingering concerns regarding the employment outlook, is driving sentiment this session as a life raft offered to equities in the form of IBM announcing a step up in its stock buyback program failed to rally the technology sector and the overall market. A rebound in energy prices and the corresponding sectors was also unable to pull the major indices out of positive territory, as was a stronger than expected reading on US home prices. Equities appear to be on a path of correction from recent gains as market outlook continues to be cautious regarding sustainability of global “jobless” recovery that will have to contend with a wary consumer asking the question “Do I really need this?”-This is a scary prospect, especially for the US consumer. Will the supposed pent up demand for goods appear in time? Stay tuned.

Technically, Dec S&P futures tested the first level of support called for at the 1057.00 range. While the support level held, enough downside momentum remains for there to be a likely test of 1053.00, with 1048.00 and a significant support level at 1037.00 lining up. Near term resistance sets up at 1068.00 and 1076.00

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US Z9 (US 30 YRS)

117-29

119-11

117-27

119-04

+1-02/32nds

SP Z9 (S&P 500)

1065.50

1069.00

1057.10

1060.40

-6.00

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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