Bonds Bombing

• May 11, 2001
• Marc Dupee

T-bonds
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retail sales and stronger-than-expected consumer sentiment figures from the
University of Michigan. Both pieces of data are working to shift perceptions
that the Fed will cut interest rates by 50 basis points next Tuesday. With
perhaps too much of an interest rate cut already priced in, traders have sold
bonds down more than one point in today’s session.

However, T-bonds are pulling back from their lows in a
Turtle Soup reversal. This reversal strategy, revealed by Connors and Raschke in
their book Street Smarts (available at TradersGalleria.com)
uses a 20-day extreme — the April 30 low at 99 31/32 in this case — as the buy
trigger with the sell-stop-loss going at today’s session low, at 99 25/32. June
bonds are down 31/32 at 100 2/32.

Retail sales rose 0.8 percent in April, which was above expectations of a 0.1%
gain forecasted by economists. May’s University of Michigan consumer confidence
index rose to 92.6 from 88.4 in April. Forecasts were for a reading of 88.

June dollar index futures
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European Central Bank’s surprise .25% rate cut yesterday. Traders are, in part,
punishing the ECB for not better broadcasting its intentions. The dollar is also
rising as
euro FX futures
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to data from the continent showing that inflation rose in Germany, France, the
Netherlands and Spain. Weak sales figures from Germany suggested Europe’s
largest economy is slowing as prices rise. This situation may further stymie the
ECB’s decisiveness or capacity to enact simulative monetary policy. 

Trading action in the grains is mixed. July wheat
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following through on a Turtle Soup Plus One Buy Reversal triggered yesterday.
Wheat has lapped open for the past two sessions, indicating upside pressure in
this contract at a low. 

Soymeal
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of its range and in a multiple pattern setup. SMN1 is a cup and handle, a
bullish flag, a W-at-a-low, and is just below its Pullback From Highs
trigger. Meal is up 1.4 at 155.9.

 

Soybean oil
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setup. An Off The Blocks short entry is triggered in contracts from the
Implosion-5 List and also from the
New 10-Day Lows List as they can show nascent downside momentum. Bean oil
lapped higher, meaning that a short entry was not triggered until the contract
surpassed the prior day’s and today’s early intraday low.