Bond & equity report for Jan. 14

SUMMARY OF UPCOMING DATA 01/14/10

8:30 AM-US RETAIL SALES (0.4%, EX AUTOS 0.2%)

8:30 AM US JOBLESS CLAIMS (437 K)

10:00 AM US BUSINESS INVENTORIES (0.2%)

10:30 AM EIA INVENTORY (NAT GAS)

1:00 PM US 30 YEAR AUCTION ($19B)

DATA RESULTS 01/13/10

EIA PETROLEUM INVENTORY REPORT (CL 3.7 M, RBOB 3.8 M, HO 1.4 M) CAP UTIL 81.3

US 10 YEAR NOTE AUCTION ($21 B) BID TO COVER 3.00, YIELD 3.754%

BEIGE BOOK RELEASE

US DEBT REVIEW AND OUTLOOK

US 30 YEAR FUTURES lost ground on Wednesday, as the backlash from China’s tightening of lending standards to reign in growth and speculation subsided and the Beige Book report demonstrated economic growth in all measured districts. Sentiment suggests however that that growth will continue to require extensive amounts of stimulus from the debt complex. As higher interest rates seem just over the horizon, even a better than expected reception on today’s near record 10 year note auction failed to impress buyers.

Bid to cover was better than expected at 3.00 (average for recent auctions has been 2.68) and the yield awarded was slightly lower than expected. Participants failed to gain inspiration as the level of indirect buyers (the category which includes foreign central banks) was significantly lower than usual. In summary, it appears that buyers who needed to participate in today’s auction were present. The remaining categories of buyers appear driven by the notion that there is no immediacy to purchase US Treasuries at this time-there will be plenty floating around and opportunities for deals may be found.

Technically, 30 year futures should remain in a narrowing range pattern, with 116-17 and 115-14 as near term support and resistance. Look for breakout levels on the upside at 117-15 and 114-15 on the downside.

US EQUITY REVIEW AND OUTLOOK

US EQUITIES staged a rebound, with March S&P futures closing back above 1140.00< A sense of value buying and putting money to work fuel recovery in a number of sectors which came under pressure this week. Most sectors staged recoveries from early lows. Technologies rebounded from early pressure and profit taking on the back of news that Google may pull its operations and service out of China. The overall sector managed to pull itself back from this early pressure on value buying.

Financials and healthcare stocks were the greatest contributing sectors to today’s gains. Banks regained strength as today’s Capital Hill testimony by the heads of several major financial institutions failed to shake investor confidence in the sector. Energy stocks has been a early loser as crude oil prices fell below support levels as the “frost premium” abated in the wake of a 2nd week of bearish US inventory numbers. The recovery in the stock appeared driven by the curve of opinion which ranges from energy prices will continue to climb to a pullback of prices will allow the markets to find a price range where market psychology will perceive a balance of manageable demand growth that will spur exploration on revenue returns for the energy sector. Because of its large amounts of cash, this sector is a significant foundation for the recovery in equities.

Technically, March S&P futures should remain within recent ranges for the week. The market could drift between 1147.00 and 1132.00 without any major catalyst. Test of the downside of the market still expected at 1126.00, with follow through to 1117.00. 1152.50 sets up as price level of interest.

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US H0 (US 30 YRS)

116-28

117-02

115-24

115-30

-28/32nds

SP H0 (S&P 500)

1135.00

1145.00

1129.30

1141.60

+7.70

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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