Bond & equity report for Dec. 4

SUMMARY OF UPCOMING DATA 12/04/09

  • 8:30 AM US NONFARM PAYROLL (-100K), UNEMPLOYMENT (10.2%)
  • 10:00 US FACTORY ORDERS (0.2%)

DATA RESULTS 12/02/09

  • US WEEK JOB CLAIMS (457 K/485 K), PRODUCTIVITY (8.1%-8.6%), UNIT LABOR COSTS (-2.5/-4.2%)
  • ISM NON MFG INDX (48.7/52.0)
  • AM EIA NAT GAS REPORT (2 BCF)
  • US 3 ($40B), 10($21B), 30($13B) YEAR TREASURY ANNOUNCEMENTS

US DEBT REVIEW AND OUTLOOK

US TREASURIES retreat, with March 30-year futures dropping over a full basis point at their worst levels of the session. The downside movement on Treasuries today appeared driven to profit taking from last week’s gains, as trading volume slowed dramatically at an earlier point than usual-even before the monthly payrolls are released. Optimism regarding the employment picture received a second boost as weekly jobless claims came in lower by over 30,000. The positive outlook for this reading is relative though, as the shortened Thanksgiving week was expected to contribute to a lower reading.

Supply concerns also returned to the market, as the Treasury posted its announcement of $74 billion of 3-, 10-, and 30-year debt coming to market next week. The final reading of employment for the week is scheduled for Friday, with nonfarm payrolls expected to decline by a 2009 low of 100,000. The release may be the completion of the “sell the rumor, buy the fact” scenario which seemed to drive trader sentiment this week, which could result in some early volatility and some rebound in prices on Friday.

From a technical perspective, March 30-year futures are close to testing support at 119-28. Volatility on Friday could drive prices to spike down to 119-16. However a likely scenario will be a retracement back to the 120-27 level. If this level holds, market should trade in a range with a downward bias that should find downside target of 119-10. Break of resistance could set up for test of 121-14.

US EQUITY REVIEW AND OUTLOOK

U.S. EQUITIES traded in narrow range, with mixed to slightly negative sentiment throughout most of the session. Focus of data was somewhat limited as most traders remained sidelined ahead of Friday’s release of U.S. nonfarm payrolls and unemployment figures for November. Expectations are for a continued slowing of job losses, with the unemployment rate remaining relatively steady.

Overnight sentiment in equities began on a positive note after Bank of America announced it would be repaying $45 billion of TARP funds. This combined with supportive rhetoric from the ECB pushed equities to new highs overnight. The ECB kept interest rates unchanged and eluded to possible exit strategies for its emergency monetary policies.

Gains fell back after a weaker than expected reading on the U.S. service sector. The ISM non manufacturing index posted an unexpected reading below 50-the balance figure between expansion and contraction. Financials remain under pressure due to uncertainty regarding future revenue streams and the outlook for global recovery. Technology stocks were once again the best performing sector, prompted by the General Electric sale of NBC.

Stocks closed near their worst levels of the session. Technically S&P futures have hit a double top in the 1113.00 range. Market appears ready to test downside of range at 1093.00, with 1084.50 setting up as a support. A break of this level could lead market further down the Fibonacci path to 1073.00. Resistance remains near 1113.00, as there has been no significant hold above this level. Should this level give way, upside targets for the contract set up at 1118.50 and 1122.50.

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US H0 (US 30 YRS)

121-11

121-12

119-26

120-07

-1.01/32nds

SP Z9 (S&P 500)

1110.50

1116.80

1097.50

1098.00

-9.90

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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