T-bonds Get Exciting Waiting For Fed
| CURRENT POSITIONS (as of 5/14/99) | ||||
|---|---|---|---|---|
| Market | Long/Short | Entry | Stop | Target |
| June T-bonds | Flat | – | – | – |
| June S&Ps | Short | 1380 | – | – |
| June Swiss franc | Flat | – | – | – |
Note: All price levels are approximate.
S&P 500 futures
We managed to get short yesterday (as indicated Wednesday) at the 1380 level in the June contract [SPM9>SPM9]. We will try to cover Monday because we believe the market is still in a trading range environment. We’re looking for a further sell-off, after which we’ll move to the sidelines. The bonds continued to be a major influence on stocks today, but we feel even if the Fed raises rates on Tuesday we will get a rally in both markets.
Figure 1. June S&P futures (USM9), 15-minute bar. Source: Quote.com.
Currency futures
The June Swiss franc [SFM9>SFM9] and Euro [ECM9>ECM9] fell slightly today after the Consumer Price Index (CPI) report was released this morning. The fact that they dropped at the same time the U.S. stock market was plunging was surprising. Normally, European currencies would rally as money moved out of U.S. stock market (the largest in the world) and back into Europe. But the Kosovo crisis has had a major bearish effect on the currencies, and today is just another sign of it. We’re still flat.
T-bond futures
The June futures [USM9>USM9] plunged today on the CPI’s confirmation of inflation fears. The core rate, which excludes food and energy, came in at twice the expected level (.4% vs. .2%).
The short end of the T-bond market is actually pricing in a rate increase by the Fed on May 18. This environment is great for trading. If the Fed doesn’t hike rates we should see a rally if the market remains at current levels. Stay tuned–this type of market action happens only once or twice a year.
Next scheduled update: Monday, May 17, 1999
(Check “Today’s Schedule” every day on our home page to find out about additional updates.)