December Treasury Bonds are down 4/32 this morning at 119:22 as I write. The enclosed chart shows that the T-Bonds have bounced sharply the last couple of days right back into resistance where there are several downward sloping moving averages. Technically the chart shows a battle between the uptrend line coming up from the June lows and the assortment of downward sloping moving averages right in this area. Who will win the battle? The directional moving average is still pointing bearish, but barely. The ADX line is low and going lower suggesting no trend whatsoever. This looks like a market that is in no hurry to go either direction. Look for more choppy trade. With that in mind, I am content to hold on to our covered put write trade for now.

Followers of this letter should be short one December T-bond from 119:16 and short one December T-bond (119:00 strike) put option from 1 46/64. Followers should also be long one December T-bond (115:00 strike) put option from 50/64 and short 2 December T-Bond (113:00 strike) put options from 27/64 each for an overall credit of 4/64 or $62.50 gross. There are 22 days left until option expiration.

Oct. 28, 2009
David Hall