Bond & equity report for Feb. 26

SUMMARY OF UPCOMING DATA 02/26/10

· 8:30 AM US GDP (+5.7%)

· 9:45 AM CHICAGO PMI (60.0)

· 9:55 AM US CONSUMER SENTIMENT (73.7)

· 10:00 AM US EXISTING HOME SALES (5.50 M)

DATA RESULTS 02/25/10

· U.S. DURABLE GOODS ORDERS (3.0%/1.5%)

· U.S. WEEKLY JOBLESS CLAIMS (496 K/460K)

· 2ND DAY BERNANKE TESTIMONY

· EIA INVENTORY-NAT GAS (-170 BCF)

· U.S. SEVEN-YEAR NOTE AUCTION (B/C 2.98)

U.S. DEBT REVIEW AND OUTLOOK

Treasuries rebounded to test resistance levels on Thursday, after weekly jobless claims spiked higher than expected and U.S. durable goods posted an unexpected drop across all major categories except aircraft, which managed to boost the overall number. Continued uncertainty regarding the landscape of economic recovery and the ongoing erosion of confidence in the stability of sovereign debt balance sheets spurred another move to presumably safer categories of sovereign debt. Early reports of additional concerns regarding the rating and stability of Greece’s debt and economy pressured European markets early in the session. Treasuries hit their highs of the day after the reports on U.S. jobless claims and durable goods were released. The stabilization of equities later in the session appeared to strengthen resistance levels, particularly in the U.S. 30-year contract.

In a possible case of the tail wagging the dog, U.S. Treasury auction results have been led by the price action in the futures contract rather than the normal inverse relationship. Today’s record $32 billion of U.S. seven-year notes was accepted with a strong bid to cover of 2.98. A pattern may be developing where gains in Treasuries will meet an underlying pattern of resistance as the teetering of record levels of supply spur questions or whispers regarding the credit worthiness of sovereign debt (After all, many states with greater economic influence than Greece are in just as much fiscal difficulty. How long before the influence appears to pressure US debt stability?)

Technically, U.S. Treasuries were held at the expected resistance level of 118-18. The market is likely to remain choppy through the early part of March with 117-31 the initial support level for downside retracement. A break of 119-02 could be the start of a continued upside move to set a higher range trading parameter.

U.S. EQUITY REVIEW AND OUTLOOK

S&P Futures took traders on a volatile ride as early pressure from disappointing reports on U.S. durable goods and weekly employment claims placed further doubts on the sustainability of global recovery. The negative sentiment regarding risk had begun in the overnight session after renewed focus on the Greek debt crisis occurred. Moody’s announced it was considering joining rival rating agency S&P in downgrading Greece’s debt rating, which irritated an already sensitive area of investor concern. The bearish reports severed to weaken investor confidence, pushing the major market indices through near term support to their worst levels in nearly two weeks.

Equities staged a strong recovery by the end of the trading session, closing near unchanged to slightly higher. Friday’s reading on U.S. 4th quarter GDP may have convinced market participants to square up short positions ahead of the expected 6% quarterly growth rate. The rebound could also be attributed to a rebound in technologies led by Apple. The tech company announced a milestone sales level of music on its ITunes application. Another likely consideration may be that the massive snowstorm in the Northeast may have sidelined many traders that would have contributed more volume to the trading session. Financials remained under pressure though after Fed Chairman Bernanke announced an examination of Goldman Sachs’s role in creating currency default swaps for Greece (It appears the smartest guys in the room may have become a bit sloppy.)

Technically, March S&P futures broke through initial support today at 1089.00. While the market staged a strong recovery, this move does leave the contract open to test a key support level at 1082.50. Resistance based on today’s momentum should set up at 1110.00.

Technically

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US H0 (US 30 YRS)

117-24

118-19

117-21

118-13

+22/32nds

SP H0 (S&P 500)

1087.30

1103.00

1084.70

1102.30

-1.30

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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