December T-Bonds Rally on a Better-Than-Expected Jobs Report
| PREVIOUS POSITIONS | ||||
|---|---|---|---|---|
| Market |
Long/Short |
Enter | size=2 color=000000>Exit | size=2 color=000000>P/L (per contract) |
| Dec. 99 T-bonds | Short | 113-15 | 114-19 | -$1156.25 |
| Dec. 99 S&Ps | Short | 1378 | 1362 | $4000 |
| Dec. 99 Swiss franc | Long | .6550 | .6500 | -$625 |
CURRENT POSITIONS (AS OF 11/5/99) |
|||||
|---|---|---|---|---|---|
| Market | Date | Long/Short | Enter | Stop | size=2 color=000000>Target |
| Dec. 99 T-bonds | 11/05/99 | Short | 114-22 | 115-14 | 113-15 |
| Sep. 99 S&Ps | 11/05/92 | Short | 1376 | 1395 | 1362 |
| Dec. 99 Swiss franc | – | Flat | – | – | – |
Note: All price levels are approximate.
T-bond futures
| The recent rally has been incredible, but the chances of short-term continuation are diminishing |
The December T-bond [USZ9>USZ9] rallied today on a better-than-expected jobs report that showed a 310,000 increase in non-farm payrolls. But the real news, however, was the lower-than-expected .1% increase in wages, which is one of the biggest factors in inflation pressures.
Bonds rallied and we were stopped out of our short position at 114 19/32. This has changed some traders’ minds about the probability of a rate hike on November 16. Now market participants seem to be evenly split between those who expect a hike and those who don’t–quite a change from two weeks ago, when the consensus was about 70% expecting a hike.
We see this sentiment shift as too much, too fast. The last week and a half has seen an incredible rally, but the chances of continuation in the short term are diminishing. We established another short position at the 114 22/32 area, with stops in around 115 14/32 and a profit target at the 113 15/32.
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| Figure 1. December T-bond futures (USZ9), 30-minute bar. Source: Quote.com.
|
Stock index futures
| The probability of a consolidation developing here is good |
The December S&Ps [SPZ9>SPZ9] rallied on today’s friendly jobs report, but gave back much of the move later in the session. We think the market is overextended here, and we established a short at the 1376 area.
Tech stocks have fueled much of the current rally, and the probability of a consolidation developing is good. Our profit target is at the 1362 area and our stops are in at the 1395 area.
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| Figure 2. December S&P futures (SPZ9), five-minute bar. Source: Quote.com.
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Currency futures
| The market seems to be in a confirmed downtrend |
The December Swiss franc [SFZ9>SFZ9] rebounded today after yesterday’s big sell-off. The market fell after the European Central Bank raised rates by .5%. The market had anticipated this but the sell-off itself was unexpected, and we were stopped out of our position. Adding more pressure was yesterday’s stock rally. The market seems to be in a confirmed downtrend and we will be looking to get short.
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| Figure 3. December Swiss franc futures (SFZ9), 15-minute bar. Source: Quote.com.
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Next update: Monday, November 8, 1999.
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