December Treasury Bonds are trading down 8/32 at 118:25 this morning as I write. The enclosed chart shows that T-Bonds have equaled the 118:20 lows made a week and a half ago. If the 118:20 area comes out, then look for the next support level to come in around 118:00 which is the major uptrend line coming up from the June price lows. The directional movement indicators are bearish but the ADX line is meandering at a low level sideways. This tells me that there is no momentum behind this move so far. The Bond market is still confused on what to do but the evidence continues to look bleaker for prices. We will continue to hold our current positions 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 25 days left until option expiration.

Oct. 26, 2009
David Hall

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December Crude Oil is up 10 cents this morning at $81.29 as I write. The enclosed chart shows that December Crude Oil has broken out to a strong up trend. The directional movement indicators are bullish and the ADX line is rising. The longer term weekly charts which I sent out yesterday, shows that crude oil is in the process of a major move to the upside even though it seems as if fundamentals are bearish. The only problem with that idea is that fundamentals seem bearish in the US, but you have to also remember that countries like China just reported an 8.9% growth in their GDP! China just announced car sales there of 1,000,000. Somebody is using fuel, it may not be us, but overseas they are. The weekly chart break out measures up to $120 within a year. We have a growing profit in the $74.50/$80.00 call spread and I will be watching for signs to take profits. The $82.00/$87.00 ratio call spread is waking up as well.

Followers of this letter should have the following positions:

Long one December Crude Oil from $72.30

Short one December Crude Oil ($73.00 strike) call option from $4.25

Long one December Crude Oil ($74.50 strike) call option from $4.18

Short one December Crude Oil ($80.00 strike) call option from $2.08

Long one December Crude Oil ($82.00 strike) call option from $2.49

Short 2 December Crude Oil ($87.00 strike) call options from $1.32 each.

Long one December Crude Oil ($62.00 strike) put option from $2.11

Short 2 December Crude Oil ($58.00 strike) put options from $1.23 each.

There are 25 days left until option expiration.

Oct. 23, 2009
David Hall

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December Treasury Bonds are down 13/32 at 119:07 this morning as I write. The enclosed chart shows directional movement indicator that keeps flipping back and forth from bearish to bullish and back to bearish again as of yesterday’s close. One problem is that the ADX line is dropping at a low level suggesting a lack of trend. The good news for the bears is that all my other indicators are pointing bearish. The price is trading within a boundary between some intermediate up trend lines and the 90 day exponential moving average on the bottom, and the 200 day exponential moving average on the top side. The overall trend since June is up, but the recent price action suggests at least an intermediate top is forming. The bonds have that rounded top look, and a intermediate term head and shoulders top forming. If this is a valid head and shoulders top, the neckline is in the 118:20 area. If prices close below the 118:20 area, then the downside measured target would be 113:20 which coincidentally is right near the August lows. I recommend holding our current positions for now. I would be a lot more aggressive on the downside if the ADX line showed some life.

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 28 days left until option expiration.

Oct. 23, 2009
David Hall

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December Treasury Bonds are trading up 6/32 at 119:31 this morning as I write. The enclosed chart shows that the December T-bonds seem to be consolidating sideways between the 40 day and 200 day exponential moving averages. The directional movement indicators are slightly in bullish territory and the ADX line is dropping at low levels. All this suggest a non-trending market. The chart shows that the bonds made a near term peak two weeks ago from its rally that commenced in June. This latest bounce over the past week could be the beginning signs of a slope over top if prices can’t follow through to the upside soon. Then if T-Bond prices begin closing below all of the moving averages and intermediate trend lines, a larger down move could occur. This may take more time to develop. If the bonds begin giving more sell signals, I may want to add to this position.

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 29 days left until option expiration.

Oct. 22, 2009
David Hall

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December Treasury Bonds are down 19/32 at 120:02 this morning as I write. The enclosed chart shows that the directional movement indicators flipped back to the bull side as of yesterday’s close. The problem is that none of my other indicators that I follow are bullish at all. As a matter of fact, they are all bearish. This includes the Bollinger Bands, the Weekly chart, the oscillators, divergence and the moving averages just to name a few. They are all pointing bearish. Notice also that the T-bonds traded above the 200 day moving average but closed right on top of that level. It is also interesting to note that yesterday’s intraday price high at 121:02 was right at the 50% correction level of the latest down move from the October 2nd high and the October 15th low.

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.

We will continue to hold these trades for now. I may look to add on to this trade if the market sets up right, over the next few days.

Oct. 21, 2009
David Hall

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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

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December Treasury Bonds are unchanged this morning at 119:18 as I write. The enclosed chart shows that the directional movement indicators are bearish with a flat to declining ADX line. That suggests that there is now robust trend at the moment. The chart also shows that an intermediate term uptrend line was broken last week along with several moving averages. Now, those moving averages have become resistance overhead which include some that I follow such as the 5 day exponential average which is currently at 119:22, the 40 day exponential moving average which is currently at 119:28 and the 200 day exponential moving average which is currently at 120:18.

Followers of this letter should be short one December T-Bond from 119:16. Followers should also be long one December T-Bond (115 strike) put option from 50/64 and short 2 December T-Bond (113 strike) put options from 27/64 for a combined credit of 4/64 or $62.50 gross. The trend is down, but because the indicators are not showing a solid down trending attitude in the bonds, I recommend selling the December T-Bond (119:00 strike) put option at the market right now. You should be able to get a fill around the 1 46/64 area. This will turn this trade into a covered put write strategy. The December Bond options expire in 32 days. If the bonds close below 119:00 in 32 days then we will make 16/32 plus 1 46/64 profit, which is $2218.75 gross. Otherwise, we have 1 46/64 of protection from our sales price which is 121:07 as our breakeven at expiration. So, we will make money on this position at expiration in 32 days if prices are anywhere below 121:07.

In the mean time, if the bonds begin to turn from bearish to bullish on the indicators, we will possibly need to either liquidate or adjust our position within those 32 days.

Oct. 19, 2009
David Hall

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The December Euro is down 64 ticks at 1.4862 this morning as I write. The enclosed chart shows that the December Euro is still involved in a strong up trend despite today’s weakness. The directional movement indicators are bullish and the ADX line is rising confirming the strength of the trend. I would expect corrections all along this bull run, so I will be looking for a place to add to our bull position. Followers of this letter should be long one December Euro (158.00 strike) call option from 32 and short 2 December Euro (160.00 strike) call options from 20 ticks for an overall credit of 8 ticks or $100 gross.

Oct. 16, 2009
David Hall

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December Treasury Bonds are up 10/32 at 119:03 this morning as I write. The enclosed chart is showing that the bonds broke some important trend line and moving average levels yesterday in the 119:00 area. The directional movement indicators are bearish. Most of my other indicators have turned bearish as well. For today, I recommend selling one December T-Bond futures contract at 119:16 if prices reach that level. That would be a rally back towards the 5 day exponential moving average which typically happens during sustained bear moves. If filled then we would initially place our protection at 120:21 stop close only.

Followers of this letter should be long one December T-Bond (115 strike) put option at 50/64 and short 2 December T-Bond (113 strike) put options at 27/64 for an overall credit of 4/32, or $125 gross as of yesterday’s recommendation.

Oct. 16, 2009
David Hall

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December Treasury Bonds are down 7/32 at 119:06 this morning as I write. The enclosed chart shows that the directional movement indicators have crossed to the bear side as of yesterday’s close. My other indicators show that about half are bearish and the other half are neutral. The 119:00 area is an important trend line and moving average support level. Overnight, the bonds pierced through that 119:00 level but has since rebounded to where prices are this morning stated earlier. If the 119:00 area does not hold, then 117:00 will be the next major trend line support level, followed by the 113:00 area. With those support levels in mind and the half and half bearish attitude of my indicators, I recommend buying one December T-Bond (115:00 strike) put option and sell 2 December T-Bond (113:00 strike) put options at a total credit of 4/32, or $125 gross. These options expire in 36 days. If the market doesn’t make it that low by expiration then we will keep the $125. The maximum gain would be $2000 if prices end right at 113:00 in 36 days. The risk is if prices spike down to and below the 113:00 area in the very near term. We would have to either liquidate or adjust our position if that happened.

Oct. 15, 2009
David Hall

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