Bond & equity report for Dec. 16

SUMMARY OF UPCOMING DATA 12/16/09

8:30 AM US CONSUMER PRICE INDEX (0.4%)

8:30 AM US HOUSING STARTS (575 K)

10:30 AM EIA PETROLEUM STATUS REPORT

2:15 PM FOMC MEETING ANNOUNCEMENT

DATA RESULTS 12/15/09

FOMC MEETING BEGINS

PRODUCER PRICE INDEX (1.8%/1.0%)

EMPIRE STATE MANU SURVEY (2.55/25.0)

US INDUSTRIAL PRODUCTION (0.8%/0.6%)

US HOUSING MARKET INDEX (16/17)

US DEBT REVIEW AND OUTLOOK

US TREASURIES close Tuesday’s session weaker after higher than expected PPI (Producer Price Index Data) send up warning signals that FOMC committee may undertake a more hawkish tone in the post meeting statement on Wednesday. Expectations are for the near zero interest rate policy to remain in place.

The question that traders are pondering is whether the Fed will seek to raise rates sooner than expected (mid 2010) in order to keep inflation from placing a surprise strangle on the market or will they allow the massive supply of debt already in the market place to prompt offering of US debt securities, essentially allowing the market to do the job of braking the flow of cheap capital to the economy? Will the flow of cheap capital dry up before getting to the politically loud non banking sectors? Today’s summary leaves more questions than answers- that is the way it goes sometimes.

Technically, March 30 year futures appear to be hitting a double bottom at 117-07. Expect a short covering retracement to initial resistance level of 118-09, with a break of 118-22 allowing for run to high end of range at 119-11. Daily RSI should allow for a test of 116-12.

US EQUITY REVIEW AND OUTLOOK

US EQUITIES fell on Tuesday, coming under pressure as equity markets demonstrated renewed signs of uncertainty regarding future monetary policy. A higher than expected reading on the PPI (Producer Price Index), weaker than expected manufacturing survey (last in/last out) in the New York region, and additional worries over possible debt contagion from Europe and the Middle East sidelined most equity traders ahead of the final FOMC meeting for 2009.

Financial stocks were under pressure for most of the session as the market awaits the results of nearly $50 billion of TARP payback stock coming from Citigroup and Wells Fargo. Best Buy fell despite posting better than expected quarterly profit, as a lack of high margin or hot items for the holiday season offered a conservative outlook for future revenues.

Technically, March S&P futures remain in range trade, with 1115.00 and 1088.40 setting up as support and resistance levels. A break of 1099.00 should allow for a short term trade down to 1093.00 level.

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US H0 (US 30 YRS)

117-29

118-04

117-06

117-18

-15/32NDS

SP H0 (S&P 500)

1104.50

1109.40

1100.50

1103.90

-4.70

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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