Spu/Bonds… has been the game since 12/19/11. It’s been a one way ticket. This spread still has more to go.
With the Downside breakout, of the 30 Yr. Bond Futures of a 5 month trading range yesterday, we’re seeing the follow through today. 138.11 is the 200 Day in March. This should be an oversold level the first time down. The full swing count and first significant Fibs come into play in the 135 handle.
Gold…has a weekly double top pattern. Closing under the 200 day yesterday is leading to profit taking and new short selling. 1650 is a weekly support level followed by 1644 on the daily charts. Rising rates in the U.S., Lower 30 yr. Futures, should have the same effect on the Gold as the Dollar. Investors are looking for yield right now, not safety.
General Comments…
June Bonds trade @ over a point discount to March, Extrapolate your levels…March pricing leads.
As long as the Bonds are weak, the dollar should maintain a bid tone.
Model Trading Portfolio…Current Holdings
……………… Stop Close Profit Points
Short EUR/USD 134.10 130.00
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.
We’re going to be eyeballing a “possible” Long over the next couple of weeks via either the 30 Yr. Futures of the TLT ETF. We will be monitoring the Spu/Bond spread to confirm a trad able level. While the markets could certainly turn at month end, the week after could provide the better opportunity. Since we only trade what is in front of us,we’ll wait for a proper setup to initiate.
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.