Bond & equity report for Dec. 10

SUMMARY OF UPCOMING DATA 12/10/09

  • 8:30 AM US INTERNATIONAL TRADE -$36.4 B
  • WEEKLY JOBLESS CLAIMS (460 K)
  • 10:30 AM EIA INVENTORY #: NAT GAS.
  • 1:00 PM US 30 YEAR BOND AUCTION ($13B)

DATA RESULTS 12/09/09

  • US WHOLESALE TRADE +0.3
  • EIA PETROLEUM REPORT CL +3.1, RBOB +2.2 M, DISTIL +1.6 M
  • US 10 YEAR NOTE AUCTION ($21 B) BID TO COVER 2.62

US DEBT REVIEW AND OUTLOOK

U.S. TREASURIES fell in a choppy session, after Wednesday’s auction of $23 billion of 10-year notes posted a disappointing bid to cover (2.62 vs. average of 2.63) Indirect bidders- the category of buyers that includes foreign banks-stayed away from auction bidding, which saw the lowest participation rate by this sector since June. Traders remain committed to security rather than yield as evidenced by the strong demand of Tuesday’s four-week bill auction, which yielded 0%.

The flight to quality sentiment supported by recent downgrades of Spain and Greece’s sovereign debt appears to be finding some challenge as the reality of government balance sheets test the belief of the triple AAA rating of countries such as the United States and the Euro zone. Spain’s debt was downgraded today by S&P to a negative outlook due to runaway deficit and balance of payment problems.

Technically, March 30-year futures closed below near term support at 119-09. Market appears to be forming a near term triple bottom with 118-24 holding as a key support level. The rebound off support should allow for some continued upside to 119-19, with 120-03 setting up as next level of resistance. Still expecting further downside for 30-year, with 118-24 level giving way to test 118-04.

US EQUITY REVIEW AND OUTLOOK

US EQUITIES recovered on short covering after support levels held, closing in positive territory after buyers shook off concerns (temporarily at least) of sovereign debt from the euro zone and weaker earnings to bargain hunt and short cover among sectors that have been beaten down this week.

Energy stocks recovered from early pressures after crude oil dropped to a two month low. The drop was spurred by a bearish inventory report which shows greater than expected builds in gasoline and distillates.

Financials traded mixed after Citigroup announced it would seek to repay its TARP funds through a new equity offering of between $10 and $20 billion. Retail stocks came under pressure as holiday sales remained weak and showed little signs of improving, particularly as expected poor weather through most of the United States would likely keep shoppers out of the stores this weekend.

Gains in steelmakers and technologies, in addition to a pullback in the US dollar prompted a late session turnaround across the major indices. It would appear that there will be some defense of equities going into the close of the year, with at least some attempts to defend upward momentum of equities into the close of 2009.

Technically, December S&P futures rallied back above new short term resistance level of 1093.00, after testing downside of range. Market should continue to trade in tight range, with 1082.00 setting up as a downside target. The first level of significant resistance sets up at 1103.00, with a break of this level possibly prompting a retest of 1113.00

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US H0 (US 30 YRS)

119-21

119-27

118-20

119-09

-12/32nds

SP Z9 (S&P 500)

1090.70

1096.70

1085.50

1095.60

+5.60

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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