Bonds rally on risk-off trading after FOMC minutes

Financials: Mar. Bonds are currently 26 higher at 143’29 and the 10 Yr. Note 11.5 higher at 131’26.5. Yesterday the market broke to the 142’17 level, close to our stated support of 142’08, before rallying as the dollar strengthened and metals and equities crashed in the face of hedge fund liquidation and margin call selling. The bonds once again became a safety net in what the industry now likes to call a “risk-off” trade. If you were more aggressive than I and bought the break, take the money. Yesterday’s release of the minutes from the latest FOMC meeting showed that several Fed officials are now willing to have at the least a conversation about the continuation or altering of Fed policy regarding quantitative easing and the continued purchasing of $85B worth of 6-30 yr. Bonds, Notes and Mortgage Backed Securities on a monthly basis. My bias remains long-term negative and I will now be looking to the short side of the market above the 144’06 level on JUNE Bonds.

Grains: Mar. Corn is currently 2’0 lower at 698’4, Mar. beans 1’6 higher at 1484’4, Mar. Wheat 3’4 lower at 735’0 and Dec. Wheat 5’5 lower at 763’0. We remain long out-of-the-money call spreads in Dec. Wheat. I will be a buyer in Mar. Corn below the 685’0 level and/or a buyer in July Corn in the mid 650’s if the market allows.

Cattle: Apr. LC are currently 52 higher at 128.75 and Mar. FC 67 higher at 141.40. If you went long Apr. LC at 127.50 (yesterday’s low 127.37) either take profits or use a protective sell stop at 127.95.

Silver: Mar. Silver is currently $0.02 lower at $28.60 and Apr. Gold is $8.00 lower at $1,570.00. We will continue to hold a small long position in Silver. I also suggest rolling current Mar. Silver positions into the May contract. Gold has broken through to the downside below the $1,580.00 support and tested the next level of support at $1,560.00 with an overnight low of $1,554.00. I now feel that Gold can be traded from the long side on breaks with a protective sell stop just below the $1,550.00 level.

S&Ps: Mar. S&Ps are currently 2.50 lower at 1504.50. My bias remains negative. For those of you keeping track, I liquidated my short futures/short put position yesterday for a loss. Now to deal with the present. Yesterday the market made a technical “key reversal” (a new contract high and a close below the previous day’s low). This is a classic sell signal. I am a seller on rallies with a protective buy stop above the contract high of 1530.00. For the moment near term support is 1503.00 and resistance 1515.25 (Tuesday’s low of the day).

Currencies: As of this writing the Mar. Euro is currently 86 lower at 1.3200, the Swiss 34 lower at 1.0743, the Yen 74 higher at 1.0743 and the Pound 11 higher at 1.5253. If you remain short the Euro either take profits or lower your protective buy stop from 1.3450 to the 1.3280 level.

About the Author
Marc Nemenoff

Mr. Nemenoff is a 40-year veteran of the futures industry. While attending graduate school at the Illinois Institute of Technology, Marc took a job as a clerk on the trading floor of the Chicago Mercantile Exchange. Over the years he grew to become an independent member of the exchange and spent many years as a trader, market maker, lecturer, and committee member. Since 2004 Marc has been a senior broker and analyst handling customer accounts for both speculators and hedgers in addition to institutional traders. Marc is also the author of The Nemenoff Report, a daily overview of the markets that includes his own perspective on market direction. Mr. Nemenoff describes his approach to the market as 75% technical and 25% fundamental and is also a firm believer in the use of option strategies as a way of using leverage and minimizing risk when one has a long-term market strategy. You can contact Marc by phone at (888) 908-4310 or by email at mnemenoff@pricegroup.com. Learn even more on our website at www.pricegroup.com.

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.

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