December Treasury Bonds are up 5/32 at 120:02 this morning as I write. The enclosed chart shows that the December Bonds have rebounded back in between several moving averages just above the intermediate uptrend line. The directional movement indicators are still pointing bearish but have narrowed quite a bit. The ADX line is meandering lower suggesting a lack of trend strength. This lack of trend strength led me to recommend selling one December T-Bond (119:00 strike) put options yesterday which was filled at 1 46/64. There should be strong resistance at the 200 day exponential moving average which comes in today in the 120:17 area. By selling the put option yesterday, we now have some cushion to let the bonds work in this area without getting too nervous.

Followers of this letter should be short one December T-Bond from 119:16 and short on December T-Bond (119:00 strike) put option from 1 46/74. We will hold this position for now.

Oct. 20, 2009
David Hall