Short Opportunities Look Good In T-bonds
| CURRENT POSITIONS (as of 5/19/99) | ||||
|---|---|---|---|---|
| Market | Long/Short | Entry | Stop | Target |
| June T-bonds | Short | 118 5/32 | 119 10/32 | 117 5/32 |
| June S&Ps | Short | 1348 | 1366 | 1335 |
| June Swiss franc | Flat | – | – | – |
Note: All price levels are approximate.
S&P 500 futures
The June contract [SPM9>SPM9] rallied moderately today. Our indicators suggest the market is in a trading range environment. We went short today at the 1348 level with a stop at the 1366 level; we will try to cover around 1335.
Now that higher interest rates are back on investors’ minds we should see more violent sell-offs like last Friday’s as the market reacts to inflationary data. Volatility is providing good trading opportunities.
Figure 1. June S&P futures (USM9), 15-minute bar. Source: Quote.com.
T-bond futures
Like the bonds, the June futures [USM9>USM9] gained moderately today. We never got our chance to buy yesterday and actually went short today at the 118 05/32 level. Our stop is in at the 119 10/32 level and we will try to cover around 117 05/32.
The market got a boost today from bargain hunters and the fact that there are no reports due out for a while. As expected, the Fed left rates alone but warned it could raise them in the future. There is a high probability the market will be range bound for the next couple of sessions (thus our short position).
Figure 3. June T-bond futures (SFM9), 30-minute bar. Source: Quote.com.
Currency futures
The June Swiss franc [SFM9>SFM9] and Euro [ECM9>ECM9] fell slightly today after recent gains (they rallied yesterday after the Fed made no move on interest rates but adopted a tightening bias). We would expect they would have dropped as prospects for higher rates in the U.S. made dollars look more attractive to investors than European currencies. But the market was already expecting this and the franc and the Euro rallied on short covering. We remain on the sidelines.
Next scheduled update: Friday, May 21, 1999
(Check “Today’s Schedule” every day on our home page to find out about additional updates.)