Bond and equity report for Dec. 22

SUMMARY OF UPCOMING DATA 12/22/09

  • 8:30 AM US GDP-FINAL 3RD QUARTER (2.7%)
  • 10:00 AM US EXISTING HOME SALES (6.25 M)
  • 10:00 AM FHFA HOUSE PRICE INDEX

DATA RESULTS 12/21/09

NO MAJOR ECONOMIC RELEASES

U.S. DEBT REVIEW AND OUTLOOK

U.S. 30-YEAR FUTURES broke through the 117-00 handle on Monday, closing at their lowest levels in over a month, as a record steepening of the yield curve (difference in basis points between the U.S. two-, 10-, 30-years) weaken investor appetite for the long end of the U.S. yield curve. The growing belief that the global economies are positioning for an upturn gave inflation bugs further reason to become unsettled. Treasury markets also adopted the standard pattern of selling off into the announcement of next week’s two-, five- and seven-year note auctions. A global uptick in sentiment on equities magnified emerged from Japan and was supported by strong earnings and M&A prospects, creating in essence a "perfect storm" of downside pressure on the U.S. Treasury complex today.

A shortened trading week and security positioning should prompt covering of short positions ahead of Wednesday’s announcement.

Technically, there appears to be little to stand in the way of the market testing our downside target of 116-12 on the March 30-year. Upside resistance for a retracement rally should be found initially at 117-13, with 117-26 setting up as a significant barrier. A break of 116-12 should set up momentum for next target level of 115-23. Downward trend remains in place.

U.S. EQUITY REVIEW AND OUTLOOK

U.S. EQUITIES began the Christmas shortened trading week stronger on positive sentiment from Asian markets and stabilization of the U.S. dollar which appeared to confirm the notion that a turning point has arrived with regards to the direction of equities and the greenback. This seemed to quell uncertainty in the markets, allowing for better than expected earnings from Walgreens and ConAgra, as well as renewed M&A activity, to join the global positive sentiment for stocks.

Japan enacted a surprisingly progressive strategy for attracting global investment by cutting taxes on earnings from bondholders outside of the country.

Markets appeared to run out of steam by midsession, after energy stocks gave up much of their gains on a retreat in crude oil prices. The energy sector appears to be pricing in no surprises from the final OPEC meeting of 2009. Failure to break through resistance suggests that dwindling holiday volumes may cap the high end of gains for the rest of the year, though a surprise breakout could still set up a possible test of 1125.00 in March S&P.

Technically, S&P should continue to range trade, with 1118.00 as initial breakout point. Support for the range continues to hold at 1094.00.

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US H0 (US 30 YRS)

118-10

118-14

116-21

116-28

-1 12/32nds

SP H0 (S&P 500)

1103.30

1113.20

1103.30

1108.20

+10.50

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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