Bond & equity report for Jan. 7

SUMMARY OF UPCOMING DATA 01/07/10

8:30 AM US WKY JOBLESS CLAIMS (450 K)

10:30 AM EIA NAT GAS INVENTORY

11:00 AM US 3, 10, 10 YR TIPS, 30 YEAR DEBT AUCTION ANNOUNCEMENTS

DATA RESULTS 01/06/10

ADP EMPLOYMENT REPORT (EST -84 K)

ISM NON MANUFACTURING INDEX (50.1/50.4)

EIA INVENTORY REPORT (CL =1.3/-1.5 M, RBOB 3.7M/DISTIL -300K/1.9M)

FOMC MEETING MINUTES: POLICY MAKERS CONSIDER FURTHER ASSET PURCHASES

US DEBT REVIEW AND OUTLOOK

US 30 YEAR FUTURES fell for the first time in three sessions, after the ADP report showed the US economy lost the least amount of jobs since 2008. However the losses were still greater than most analysts had forecast. In addition, the long end of the yield curve contended with renewed supply concerns ahead of the Treasury’s announcement of US 3,10, 10 year TIPS (Treasury Inflation Protection Securities).

US Treasuries were also in competition with the largest one day offering of corporate debt in nearly a year on Tuesday. The higher yielding, more attractive balance sheets of many corporate issuers came into the markets strong as many issuers and traders expect the general interest rate environment to rise, increasing the costs of borrowing. 2009 offered a near record return for corporate debt, as buyers sold Treasuries and took advantage of record yields on quality paper prior to the record levels of stimulus and credit support.

Bond trading giant PIMCO also announced that they would be scaling back on their US Treasury holdings in an effort to remain flexible and sector pick in a “developing economic environment.”

Markets are likely to remain choppy ahead of Friday’s employment data release.

Technically, 30 year Treasury futures continue to expand range levels Daily RSI readings should allow for continued upside for a test of 116-17, with 116-23 setting up as a strong resistance point. This level could shift down due to today’s break of downside support of 115-09. In fact, look for some resistance at 115-28. Next downside target 114-20, with 114-07 setting up as strong support

US EQUITY REVIEW AND OUTLOOK

US EQUITIES continued to trade without any real direction, as most traders continue to remain sidelined with their capital ahead of the December US employment data being released on Friday. Data releases continue to offer a mixed picture of recovery, particularly as to the question of sustainability and future revenue growth if and when the government begins to implement an exit strategy. The day may come later than expected based on commentary from the FOMC meeting minutes which were released today. The committee discussed the possibility of renewing its asset purchasing strategies.

Energy and material stocks continued to offer some positive bias to equities after precious metals rallied and crude rebounded from a bearish inventory report to close at their highest levels since 2008.

Technically, little has changed for March S&P futures. The contract continues to 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)

115-27

115-28

114-29

115-10

-23/32nds

SP H0 (S&P 500)

1130.70

1135.50

1129.70

1133.00

+0.70

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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