30 Yr. Bonds…We currently have a double top and a double bottom on the Monthly Bond Chart. 140.22 (H) Futures is the bottom level currently in play. Closing below this level, coupled with sustained price action below 140.22, would have us looking for the 136 handle in the Futures. So yes, it’s a big level to hold for the 30 Yr. to remain range bound.
SPH/USH..I started putting pen to hand when the spread was trading around 9550 yesterday. When and if this spread starts closing above 9600, we’re looking for a move to close to 10000. This is a level, once penetrated last July, led this spread collapsing to 7800. Now depending upon the depth of this profit taking, a retest of the 200 day around 9260 ish is a distinct possibility.
I mention the spread because the Bonds have been a far better short term trading vehicle than the S&P 500 Futures over the past couple of weeks. The spread itself has just kept on working. The daily 30 Yr. Bond levels have been a great tell for the S&P 500.
TBT..is a little more difficult. It looks as though you need a close over 20.25, with sustained action above, to tgt. 22+…then 25 ish.
keep it on your radar and be aware of what can unfold if the we break out of this Bond range. By remaining within the range, contra-trend pressure release price action ( Retraces & Consolidation) in the S&P and the Bonds will be the order of the day.
AUD/JPY….. The stops in AUD/JPY are just below 8278. we’ll monitor this level to determine how far the the Aussie can sell off. We’re looking to buy the Aussie in the mid to low 105’s again.
USD/CAD …needs new strength under 99 USD/CAD (over 100.90 ish H Futures) to lead on the crosses. 100.35 is the level we’ll monitor today in the cash ( app 99.55 futures) for further price action.
Utilization Note…
When we write a level, it’s just that, a static area that does not change. It’s a macro level of particular significance which we feel will effect the behavior of other related instruments until convincingly violated. So if we speak about it one day and not the next, it’s still relevant.
There is always another number or level, however we only write the ones we believe will have an impact on the rest of the board. Meaning, it’s an area which has a very high probability of price rejection the first time in.
Model Trading Portfolio…Current Holdings
We were stopped out of COP on the close yesterday
Note we’ve adjusted our stops…
………………Stop Close Profit Points
Long XLE 71.60 80
Long OXY 102.40 110/117
Long DE 85.90
Long CAD/JPY 78.39 1st level
Short Term View
Location ,Location,Location….if you have a good trad able pattern “Good Risk reward!” You just have to seize the opportunity and see what develops!
Trade to Make Money!
Medium Term View…
30 Yr. Bonds …147 is the all time high in the front month futures. We will watch price action off this level for any potential surrogate moves in the currencies or stock indices. 144.20 ish now becomes our macro pivot. All new closing strength over 145.20 would have us looking for more upside in the Bonds. Closing above this level would be short term positive the Bonds and negative the Equities.
Equities…We will continue to strategically buy hard breaks in Etf’s and individual instruments we feel have the best risk profiles going into the end of the first qtr.
Currencies…Our view is the Aussie Dollar remains a most attractive investment. The Bonds are high yielding making this currency desirable on breaks. It also has the benefit of the underlying commodity and Asian growth story to support buying the dips.
The Aussie typically mirrors the S&P 500 which also makes it an easy surrogate to trade, whether Risk On or Risk off. It’s liquidity makes it easy to hedge currency risk if you’ve the underlying Bonds, which makes you Long Aussie by default.