Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
With the bond markets closed due to a US holiday and nothing in the way of US economic reports due out today because of the holiday, the Treasury trade will be left to the electronic action. The market did see a decent auction result yesterday for the 10 year notes and that helped the markets forge another trading session just above critical support on the charts. The Treasury market could have been undermined by comments from the Fed, which were generally indicative of an economy in recovery, as that could begin to foster talk of when the Fed might be inclined to extract some easing from the equation. We suspect that firm equity prices and generally up beat macro economic psychology from international readings overnight is set to give the bear camp a slight edge in an extremely thin market condition today. With the UK overnight predicting that inflation would probably remain under control for the near future, that in turn might diffuse some of the light downward pressure on prices that is presenting in the early going today. We continue to see the 118-00 level as a key technical support zone in December bonds but since the market has temporarily violated that level 5 times in the last three weeks of trade, we can’t rule out a temporary slide down to 117-22, which is a recent key low. In addition to the up beat Fed dialogue, the IEA was also out yesterday with suggestions that massive amounts of oil investment were going to be needed in the coming years, just to offset a natural decline in global oil output and that could become a factor that serves to send oil prices soaring.
In the end, we see a weak downward bias today, especially if the equity market manages to extend the early pulse up move. On the other hand, we doubt that the market has the near term capacity to forge a noted downside breakout on the charts below what has become fairly significant consolidation support. We suspect that the Fed is ok with a very slow grinding rise in market perceptions toward interest rates but that they will probably step in to provide support if it appears that sentiment is forcing rates up too quickly. In the end expect a really tight trading range ahead.
