Bond & equity report for Jan. 6

SUMMARY OF UPCOMING DATA 01/06/10

  • 8:15 AM ADP EMPLOYMENT REPORT
  • 10:00 AM ISM NON MANUFACTURING INDEX (50.4)
  • 10:30 AM EIA INVENTORY REPORT (PETROLEUM PRODUCTS)
  • 2:00 PM FOMC MEETING MINUTES

DATA RESULTS 01/05/10

  • US FACTORY ORDERS (1.1%)
  • PENDING HOME SALES (-16.0 %)

U.S. DEBT REVIEW AND OUTLOOK

U.S. 30 YEAR FUTURES continued to rebound Tuesday after a mixed data picture, which included a worse than expected reading on pending home sales, heighten value sentiment and spurred traders and investors to take advantage of the highest monthly jump in Treasury yields in six years. The National Association of Realtors reported a 16% drop in pending home sales (measure of signed contracts). While a drop was expected due to buyers rushing to buy ahead of the original deadline for a U.S. first time home buyer tax credit, the reading was significantly higher than economist forecasts. Investors sought to take advantage of the relatively high Treasury yield as risk tolerance subsided in the wake of this element of the recovery which may have difficulty maintaining momentum in the coming year. At the very least, headwinds may show the fickle nature of investor commitment. The recovery in Treasuries was also supported by squaring up of positions ahead of Friday’s employment numbers as well as the release of the most recent FOMC meeting minutes.

Technically, 30 year Treasury futures have further upside potential. Daily RSI readings should allow for continued upside for a test of 116-17, with 116-23 setting up as a strong resistance point. Market could be setting up for new range, with 115-09 setting up as downside support target.

U.S. EQUITY REVIEW AND OUTLOOK

U.S. EQUITIES were under pressure for most of the session, with energy and technology stocks coming under pressure after sentiment choose to focus on the negative housing figures rather than better than expected readings on U.S. factory orders and continued recovery in the automotive and airline sectors.

Technology stocks were hit by profit taking after the official introduction of the Google cell phone and uncertainty regarding the outcome of the US CES (Consumer Electronic Show) in Las Vegas. Based on the lack of activity at the airport on Monday night-we are based in Las Vegas and I flew in last night- the attitude appears to be more of a “need to be here” mentality rather than the event status which the show has garnered in previous years. Energy stocks retreated on profit taking after crude oil prices came under pressure for most of the session.

The markets closed mixed near their best levels of the session. Dow futures as the “January money train” of portfolio managers continue to try and put money to work in equities to gain yield and combat inflation.

Technically, March S&P futures have the potential to set up for a test of 1142.00. This should hold as a initial resistance point, with 1150.00 as a breakout to the upside. Support for the contract sets up at 1117.00, which is a significant support target and should be tested within the next two weeks.

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US H0 (US 30 YRS)

115-08

116-05

115-04

116-01

+29/32nds

SP H0 (S&P 500)

1128.30

1132.80

1125.20

1132.30

+3.50

Prepared by Rich Roscelli & Paul Brittain. PLEASE VOICE YOUR MARKET, OPTIONS, THOUGHTS, AND QUESTIONS. EMAIL 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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