Commodity TRADING SCHOOL
COMMODITY TRADING SCHOOL FUTURES MARKET SUMMARY 12/01/09
SUMMARY OF UPCOMING DATA 12/02/09
8:15 AM ADP EMPLOYMENT REPORT
10:30 AM EIA INVENTORY REPORT
2:00 PM BEIGE BOOK
DATA RESULTS 12/01/09
ISM MFG INDX (53.6 vs.55.0)
US CONSTR SPEND (0.0 -0.4%)
PENDING HOME SALES INDEX (114.0 vs. 109.5)
US DEBT REVIEW AND OUTLOOK
US TREASURIES retreated on Tuesday, as the long end of the yield curve came under the bulk of selling pressure. Risk tolerance returned to the global markets with an apparent cheer today as the uncertainty of Dubai World securities default continues to wane. Worries regarding the regions debt subsided after a report by the Wall Street Journal stated that Dubai World was close to reaching terms of renegotiation of approximately $26 billion of its debt tied primarily to its regional commercial real estate holdings.
The lack of a “fire sale” mentality (so far) with regards to Dubai’s financial difficulties prompted traders to rebound from risk hesitancy. This fueled a rotation to higher yielding investments which put renewed pressure on the US dollar, which fell to its 2009 low. Additional steepening of the yield curve was supported by the Australian Central Bank raising interest rates for a third consecutive month and a report that the euro zone unemployment rate remained high (9.5%), but steady. Both of these developments seemed to support sentiment of global recovery, lessening the appeal of low yielding government debt.
Holders of long positions also looked to profit take ahead of this week’s US employment data. Expectations are for the lowest amount of jobs lost for 2009 to be reported (-120,000). Assuming the traditional theory that employment recovery is the lagging indicator of a recession/recovery cycle- expectation of a slowdown in job losses would be just the incentive that holders of Treasuries would need to pullback on long positions. While sentiment remains negative for Treasuries due to the historic supply and hampering of returns due to the weak dollar, the employment picture could create a “sell the rumor, buy the fact” rebound in Treasuries as they continue to range trade going into the end of 2009.
March 30 Year futures are the lead month. Technically, the contract appears to be setting up for a continuation to the downside. Ranges should remain tight for the week, with a likely retracement back to 121-28, with 122-08 setting up as resistance. This should be followed up by continued downside movement to initial support level of 121-05. Key support level sets up at 120-24, with a break of this creating a path to test 120-00.
US EQUITY REVIEW AND OUTLOOK
US EQUITIES continued the pre Christmas rally on Tuesday, as higher risk/reward instruments continue to shrug off the apparent speed bump of the Dubai World default. Markets continue to breathe short term sighs of relief as the amount of debt being renegotiated was less than speculated ($26 billion). In addition, reports surfaced that the negotiations were proceeding well and rescheduling of the debt payment plan should be forthcoming.
Overall market sentiment was strong today, with the major indices closing near their highs of the session. Technology, material, and media stocks were among some of the strongest gainers. Equity bellwether General Electric was at the center of a major deal today. The company announced an agreement to buy the needed stake of NBC Universal from Vivendi to facilitate the sale of 51% of the media group to Comcast. This deal was viewed as a positive step toward GE achieving the desired goal of consolidating its business dealings.
Overall upbeat forecasts in beleaguered sectors such as homebuilding and retail helped drive the US dollar near its lowest levels of 2009, fueling additional appetite for risk.
One element of today’s equity jump appears to be playing devil’s advocate. The financial sector lagged behind most gainers today. This element could suggest that the elements of recovery remain fragile in the outlook for traders and investors. The question (or lessening) of market volatility is not likely to be answered anytime before the middle of 2010, so traders should expect significant volatility and its contribution to choppy equity markets, with price floors dropping out quickly for the remainder of the year. Traders should seek to employ the corresponding tools and strategies to protect and/or take advantage of underlying caution and uncertainty.
Technically, Dec S&P futures appear to be forming a triple top. Initial Resistance should form at 1113.50, with a break of this level possibly setting up a test of 1121.50. Downside support for the market sets up at 1093.00 with 1083.00 and 1066.00 likely downside targets if this level is pierced.
Regarding the determination of an end of year target- Not high on priority list, futures allow by trading benefits from upside & downside movement after all. Will try to come with something in the next day or two.
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US DEBT FUTURES |
OPEN |
HIGH |
LOW |
CLOSE |
CHANGE |
|
US H0 (US 30 YRS) |
122-21 |
122-21 |
121-15 |
121-20 |
-1 03/32nds |
|
SP Z9 (S&P 500) |
1104.00 |
1111.70 |
1102.70 |
1108.40 |
+13.60 |
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Prepared by Rich Roscelli & Paul Brittain.
PLEASE EMAIL QUESTIONS OR COMMENTS TO RICH@BINVSTGRP.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. Commodity Trading School, 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.
