Commodity TRADING SCHOOL

COMMODITY TRADING SCHOOL US FIXED INCOME REPORT 07/15/09

SUMMARY OF DATA 07/16/09

  • 8:30 AM US WEEKLY JOBLESS CLAIMS (535 K)
  • 10:00 AM PHILDELPHIA FED SURVEY (-5.0)
  • 10:30 AM EIA NATURAL GAS REPORT
  • 1:00 PM US HOUSING MKT INDEX

DATA RESULTS 07/15/09

US CPI DATA (0.7% vs.0.7%, ex #-0.2 vs. 0.1), EMPIRE STATE MFG SURVEY (-.55 vs. -4.5)

US INDUSTRIAL PRODUCTION (-0.7% vs. -0.4%, CAP UTIL RATE 68.0% vs. 67.8%)

EIA INVENTORY REPORT (CL 2.8 M, RBOB 1.5 M, DISTI 0.6 M)

FOMC MINUTES NO NEED TO INCREASE BALANCE SHEET MORE THAN BEFORE, BEGIN TO FOCUS ON POSSIBLE UNWINDING OF BALANCE SHEET

FIXED INCOME COLLAPSES TO KEY TECHNICAL SUPPORT TARGET AFTER STRONG TECH EARNINGS, INFLATION DATA, SURPRISING READ ON MANUFACTURING SURVEY.

US TREASURIES pulled a negative “hat trick” today, falling to their lowest levels in three weeks as a combination of strong earnings and bearish data pummeled fixed to head where many technicians had expected them to go (not looking to for pat on back-honest). Initial pressure began to set up after Intel and a number of companies reported better than expected earnings and guidance. This lent a strong boost to equities. Reports on the manufacturing sector within the New York region offered a surprisingly upbeat sense of potential recovery. The final nail in the fundamental outlook for fixed income today came courtesy of the minutes from the last FOMC committee meeting. Records from the meeting stated that the committee was confident in the levels of stimulus committed to repairing the economy and that the body had no intention of adding to its current record balance sheet. Forward action suggested that the body was looking to develop strategies designed to unwind the record levels of stimulus and debt allocation.

This enlightened sense of focus could result in at best a near term bottom for Treasuries, as traders could see this pullback as a buying opportunity near key support levels and investors see the potential for the Federal Reserve to lead the way for the eventual heavy handed exit of stimulus that some many feel could lead to a period of uncertainty and renewed economic concern. Optimists will be looking for a new fiscal balance between eventual pullbacks in Treasury supply matching the retreat of support from the Federal Reserve as a buyer. Anyone else becoming nervous?

TECHNICAL OUTLOOK-US 30 YEARS- US 30 years reached the target support range today near 116-080 today, with the low at 116-110. Market should find some consolidation at this level, as a significant amount of support exists between 116-080 and 116-010. Based on this, expect the market to undertake short covering which should result in a retracement to 117-130. This should be a temporary pullback, as the market could try for a downward retest to 115-140.

US 10 YEARS- US 10 year notes have slightly further downside bias and should try for a retest of 116-110. Retracement of the recent downward movement should be limited to initial resistance of 117-080. Next downward target based on MACD and RSI leads for a downward target of 115-305.

EURODOLLARS- December Eurodollars reached their first key level of support today at 99.140 before rebounding. This suggests that the market may be returning to a sideways range for the near term, with a possible move back up toward 99.220. Strategy should be to take these opportunities to sell into strength, as pullback to 99.060 should engage.

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US U9 (US 30 YRS)

118-100

118-230

116-110

116-265

-1 265/32nds

TY U9 (US 10 YRS)

117-185

117-240

116-145

116-225

-1 02/32nds

ED Z9 (EURO $)

99.190

99.210

99.140

99.160

-4.0

bond_report.JPGus_10_year.JPGeuro.JPG

Prepared by Rich Roscelli & Paul Brittain.

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. 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.