Bond spread opportunities lie in flight to safety

Financials: June Bonds are currently 19 higher at 144’11 and the June 10 Yr. Note 6 higher at 132’22.0. Yesterday Bonds rallied sharply as equities and the EuroFX broke sharply on concerns over the Italian elections. Conventional wisdom at the moment fears that Italy will not live up to austerity programs without a stable coalition and once again throw the Eurozone into a period of chaos. Those of you who are regular readers of my “Report” will recognize that I am always looking for the “chink in conventional wisdom.” That being said, my bias remains long-term negative and I am looking to take advantage of this flight to safety to once again start trading from the short side. I’m using rallies as selling opportunities but recommend keeping the positions small. Are you risk adverse? Consider buying puts and/or put spreads. Or another alternative, do the long 10-year Notes/short 30-year Bonds spread or long the 5-year Note/short the 10-year Note spread.

Grains: May corn is currently 2’2 higher at 687’4, May Beans 6’6 lower at 1428’4, May Wheat 2’0 lower at 703’2 and Dec. Wheat 2’0 lower at 731’4. We remain long out of the money call spreads in Dec. Wheat. I will be a buyer in May Corn below the 675’0 level and/or July Corn below 655’0.

Cattle: Apr. LC are currently 15 lower at 128.27 and Mar. FC 50 lower at 140.30. As expected nearby contracts of LC gained on deferred contracts yesterday as a result of Friday afternoons Cattle on Feed Report. Feeder Cattle on the other hand had just the opposite reaction with nearby contracts losing ground to the deferred contract. Overnight Mar. FC traded below the 140.00 level coming close to testing support in the 139.00 area. Speculative and hedge short positions might consider starting to cover positions.

Silver: May Silver is currently $0.07 lower at $27.98 and Apr. Gold is $10.00 higher at $1,596.00. We continue to hold a small long position in Silver. If you remain long Gold, either take profits or raise your protective sell stop from the $1,582.00 level to $1,592.00. Gold is currently in resistance.

S&Ps: Mar. S&Ps are currently7.25 higher at 1494.50. Yesterday the market broke sharply mid-session as concerns mounted over the current Italian elections. If you remain short either take profits on breaks or use a protective buy stop at 1503.00. If the market trades below the 1487.00 level lower your stop to 1497.00. Near term support is currently 1472.00 and resistance 1497.00.

Currencies: As of this writing the Mar. Euro is currently 15 lower at 1.3107, the Swiss 2 higher at 1.0750, the Yen 70 higher at 1.0868 and the Pound 10 lower at 1.5177. The Euro is currently too volatile for me to trade as it rallies or breaks 100 points on the latest news from Italy (the range over the last 24 hours is 1.3020-1.3321). The Yen is starting to look interesting once again as it rallies to near resistance in the 1.1100-1.1200 area (yesterday’s high 1.1009). I will be a seller above the 1.1140 level if the market allows.

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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