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Money Movement Good for Bond Market

  • October 15, 1999
  • Manuel Ochoa








PREVIOUS POSITIONS
Market

Long/Short

Enter
 size=2 color=000000>Exit size=2 color=000000>P/L (per contract)
Dec. 99 T-bonds Long 113-10 113-17 $218.75
Dec. 99 S&Ps Long 1340 1350 $2500
Dec. 99 Swiss franc Long .6705 .6800 $1187.50






CURRENT POSITIONS (AS OF 10/15/99)
Market Date Long/Short Enter Stop size=2 color=000000>Target
Dec. 99 T-bonds 10/13/99 Long 111-25 110-20 112-16
Sep. 99 S&Ps – Flat – – –
Dec. 99 Swiss franc 10/15/99 Short .6900 .7000 .6810



Note: All price levels are approximate.

T-bond futures

There is a good probability the stock market sell-off will continue
The December futures [USZ9>USZ9] initially sold off this morning on the Producer Price Index (PPI) report, which revealed price on the producer level rose 1.1% in September–much higher than the market anticipated.

Our stops were not hit and the market rebounded as money moved out of the stock market for the safe bond market. We still have a 112 16/21 target for our longs. There is a good probability the stock market sell-off will continue, driving the bond to our target. On Tuesday (Oct. 19) the Consumer Price Index (CPI) comes out, which could provide an opportunity.

Stock index futures

Patience is a requirement of a good trader
The December S&P [SPZ9>SPZ9] made new lows today after Greenspan made comments last night about the current level of stock prices and the risk they carry. The move did not surprise us, but the inability to find a good entry point did. We are still on the sidelines as volatility now is too high to put on a position.

During times like this it is better not to initiate positions as our stops would have to be extremely large. It has been over two weeks since we have traded this market, but patience is a requirement of a good trader.

Currency futures

Many funds were buying, establishing new long positions based on breakouts to new highs
The December Swiss franc [SFZ9>SFZ9] and Euro [ECZ9>ECZ9] rallied today on a weak U.S. stock market. Money left the stock market and moved back to Europe as fears continued to dominate investors.

Many funds were also buying this market, establishing new long positions based on breakouts to new highs on the charts. We think the market is overextended at the moment, and we established a short position in the franc at the .6900 area, with stops in at the .7000 level and a profit target around 6810.



Figure 1. December Swiss franc futures (SFZ9), 5-minute bar. Source: Quote.com.

Next update: Monday, October 18, 1999.

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