Bond & equity report for Oct. 29

SUMMARY OF UPCOMING DATA 10/29/09

8:30 AM US GDP (3RD Q 09) 3.0%

WEEKLY JOBLESS CLAIMS (525 K)

9:30 AM TRES SECR GEITNER SPEAKS

10:30 AM EIA INVENTORY (NAT GAS)

1:00 PM 7 YEAR NOTE AUCTION

DATA RESULTS 10/28/09

US DURABLE GOODS ORDERS (1.0% VS.1.5%)

US NEW HOME SALES (402 K VS. 440K)

EIA INVENTORY NUMBERS CL 800K, RBOB 1.7 M, DISTIL -2.1 M, REFIN 81.8%

US 5 YEAR NOTE AUCTION ($41 B) BID TO COVER 2.63, YIELD 2.388%

US DEBT REVIEW AND OUTLOOK

US TREASURIES rallied for a third session, as a well received, though not stellar, auction of 5 year notes failed to deter today’s flight to security. Treasuries were boosted by a disappointing reading on new home sales, a downgrade by Goldman Sachs of 3rd quarter GDP (2.7% vs. 3.0%), and weaker earnings from energy giant Conoco. All of these elements continue to feed negative sentiment regarding the sustainability of global economic recovery. These headwinds are combining with expectations of an ongoing low interest rate policy going well into next year, which continues to offer support for Treasuries, at least for the near term.

Gains in Treasuries may be limited, as the long end of the yield curve is likely to be targeted as vulnerable to competition from higher yielding debt, particularly if the US Dollar breaks from its recent reprieve and resumes its downward trend, eroding the value of fixed income products, particularly for foreign holders of debt.

Technically, US 30 year futures moved through resistance at 119-24. The contract’s hold over this level is questionable given the range bound nature of Treasury futures. Look for upside target of 120-11, while support sets up at 119-00.

US EQUITY REVIEW AND OUTLOOK

US EQUTIES fell again, as financials, energies, and technologies led the drop to major support levels in all of the major indices. S&P futures have fallen for the fourth straight session, giving up nearly all of their gains for October. Belief in the sustainability of the recovery was dealt additional blows today after a report on October new home sales came in weaker than expected. Earnings releases also failed to offer support, Goodyear, Conoco Philips, and International Paper all posted weaker revenues and guidance. A falloff in commodity prices, fueled by a rebound in the US dollar pressured energy and the materials sector.

From a technical perspective, S&P futures have reached a key support range at 1038.00. This level should hold for near term with retracement back up to 1044.00, with resistance forming at 1060.00. The next downside target level should set up at1032.00, with 1025.00 as the next level of significant support.

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US Z9 (US 30 YRS)

119-06

120-02

119-00

119-26

+22/32nds

SP Z9 (S&P 500)

1056.50

1060.10

1038.00

1038.60

-21.80

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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