Bond and equity report for Jan. 28

SUMMARY OF UPCOMING DATA 01/27/10

  • 8:30 AM US DURABLE GOODS ORDERS (1.6%)
  • 8:30 AM US WEEKLY JOBLESS CLAIMS (440 K)
  • 10:30 AM EIA INVENTORY NAT GAS
  • 1:00 PM U.S. SEVEN-YEAR NOTE AUCTION

DATA RESULTS 01/26/10

  • U.S. NEW HOME SALES (342 K /370 K)
  • EIA INVENTORY (CL -3.9 M, RBOB 2.0 M, DISTIL 0.4M, CAP UTIL 78.4-VERY LOW
  • U.S. FIVE-YEAR NOTE AUCTION (2.8 BID TO COV, YIELD 2.370%)

FOMC MEETING ANNOUNCEMENT MEETING (NO INTEREST RATE CHANGE, EXTENDING PROMISE TO KEEP RATES LOW, NO PLANS TO EXTEND BUYBACK OF SECURITIES PROGRAM, DESENTING VOTE ON INTEREST RATE POLICY

U.S. DEBT REVIEW AND OUTLOOK

U.S. TREASURIES continued to range trade between recent support and resistance levels. The complex is continuing in its same pattern of overnight/early session gains with a late session retracement back to the low end of the recent range. Early support for Treasuries from a worse than expected report on new homes sales (Is there any other type of housing report for this time of year) and initial tension from the inquiry of the U.S. Treasury Secretary gave way to a rebound in equities after the FOMC meeting reaffirmed its intention to keep the near zero interest rate policy intact and to end its purchase programs of mortgage backed securities in March. As with equities, Treasuries were inclined to move to a neutral position ahead of the State of the Union address in congress with the normal 24 hour digestion of the FOMC meeting results.

Again the short end of the yield curve was the beneficiary of a solid five-year Treasury auction, with the bid to cover ratio coming in slightly over the average (2.80), with the yields coming in lower than expected.

Technically, very little has changed with regard to support and resistance levels. Test of support at 117-30 remains likely. A break of this level could result in a test of 117-19. Expect this level to hold as support while the market continues to attempt the formation of tighter ranges. Resistance continues to set in at 118-29. A break of 119-14 should be viewed as a possible upside breakout, while a break of 117-04 should be considered as a significant downside breakout.

U.S. EQUITY REVIEW AND OUTLOOK

Stocks staged a strong rebound after teetering on the brink of a major punch through key support levels on many of the major equity indices (March S&P futures were teetering close to the downside of its 200 day moving average). Early pressure on stocks occurred after a weaker than expected reading on new home sales and the uncertainty abated with regard to the testimony of Treasury Secretary Geithner and the AIG bailout. The real turnaround occurred after the release of the FOMC meeting results. As expected, the committee left interest rate policy unchanged while reaffirming commitment to end the purchase of mortgage backed assets by the end of March.

Financial stocks led the late day turnaround as the prospect of continued cheap money supported a rebound in the sector. Technology stocks found pockets of support after the introduction of the Apple I Pad was well received, especially since the price of the unit would be far below what most had been expecting ($499.00). It was good to see that the Apple marketing team spent more research on finding out what consumers really wanted (low price introduction). The focus now look toward the policy strategy to be outlined in tonight’s State of the Union address. Will the President find his way back to the middle of the road with regards to economic policy? Stay tuned for this as well as the result of the 24-hour digestion on volatility pickup which usually follows the FOMC meeting.

TECHNICAL OUTLOOK- March S&P futures need to find momentum to push above 1103.00 in order to find some level of recovery. The market should range trade with another punch back up toward the 1098.00 level. The recovery should be limited to an initial push up to 1108.00. Support levels appear to be trying to hold at 1079.00. However the downside targets of 1072.00 and 1060.00 remain a strong possibility if the market fails to break and hold above 1103.00.

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US H0 (US 30 YRS)

118-12

119-06

118-06

118-09

-1/32nds

SP H0 (S&P 500)

1088.00

1100.00

1085.50

1087.20

-5.40

Prepared by Rich Roscelli & Paul Brittain. PLEASE VOICE YOUR MARKET OPINIONS, THOUGHTS, AND QUESTIONS. EMAIL TO RICH@BINVSTGRP.COM. Additional Information can be found at WWW.WHITEHALLVEGAS.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. Whitehall Investment Management, 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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