March Treasury Bonds are up 6/32 at 117:24 this morning as I write.  The included chart shows that March T-Bonds have established two battle zones that I have marked on the chart.  On the high side is the double top at 123:00, the horizontal blue line, and then on the bottom side, approximately 117:00, the horizontal red line.  A close outside of that range should bring on strong trade in that direction.  Right now, the bonds are on the defensive as they await the Fed’s commentary later today following their yearend meeting.  Traders are concerned that the Fed will begin making hints that a rate rise may be in our intermediate term future.  Either way, there is a constant growing new supply of treasury paper to be issued in the weeks and months to come, so excessive supply may become a problem, especially with foreign investors.  The other side of that argument is that as long as the Fed has a zero interest rate policy, banks and other institutions can borrow from the Fed for virtually zero interest and then turn around and buy US treasuries for three to four percent interest.  This is a zero risk proposition for the banks.  No wonder they don’t want to lend money right now.  Why should they?

The directional movement indicators are bearish and more importantly, the ADX line is now rising suggesting that there is strength to this down trend in prices.  The key now for the bears is for March T-Bonds to close below the 117:00 area and then follow through to the downside.  We shall see.

 Followers should be:

 Long one March Bond (114:00 strike) put option from 2 12/64. (Cost basis of 28/64, or $437.50, if you include the buy back of the two short 110:00 put options on December 8th).

Long one March Bond (108:00 strike) put option from 52/64.  (Cost basis of 2/64, or $31.25, if you include the buy back of the two short 105:00 put options on December 8th).

Long one March Bond (117:00 strike) put option from 128/64.

Short one March Bond (113:00 strike) put option from 51/64.

March options expire in 65 days.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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March Treasury Bonds are down 12/32 at 117:21 this morning as I write.  The included chart shows that T-Bonds are looking a little heavy on the chart.  The double top still looms overhead at 123:00.  The neckline of the double top pattern is the price lows from early November just below 117:00.  The textbooks will tell you that a double top is confirmed when the neckline is violated.  The to get a projection of where prices should go afterwards, you take the distance between, (in this case), the double top highs and the neckline, then subtract that distance from the neckline.  So, rounded, take 123:00 minus 117:00 equals 6 full points.  Take those 6 points away from 117:00 and you get a target of 111:00.  So, if T-Bonds close below 117:00, and confirm the double top, then the initial downside price target will be 111:00.  Back in June, prices hit 110:00, so a drop back towards those lows would not be a big deal or surprise.  We are currently positioned well in case that event takes place.  The directional movement indicators are bearish and the ADX line is rising suggesting the beginning of trend strength to the downside.  The Fed has a two day meeting beginning today.  The speculation is whether the Fed begins talking about raising rates or being less easy with their money.  That statement will be released on Wednesday afternoon.  Either way, the bonds are trading below the trend line and it will be interesting to see whether prices can close below the trend line and see what happens at the 117:00 level.

 Followers should be:

 Long one March Bond (114:00 strike) put option from 2 12/64. (Cost basis of 28/64, or $437.50, if you include the buy back of the two short 110:00 put options on December 8th).

Long one March Bond (108:00 strike) put option from 52/64.  (Cost basis of 2/64, or $31.25, if you include the buy back of the two short 105:00 put options on December 8th).

Long one March Bond (117:00 strike) put option from 128/64.

Short one March Bond (113:00 strike) put option from 51/64.

March options expire in 66 days.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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March Treasury Bonds are up 4/32 at 117:31 this morning as I write.  The included chart shows that T-Bonds tested, broke and closed back above the intermediate term up trend line formed since the June lows.  A similar event took place in early November, where prices crossed the previously drawn trend line and reversed to close higher.  That reversal resulted in a rally back to the recent highs of 123:00, that now looms as a double top over this whole bond market.  I think that the more important support level to look at is that consolidation and reversal area made in early November.  Last Friday’s price low before the reversal was 117:05.  Back in early November there never was any closes below 117:00.  Prices traded through that level a couple times but there was never a close below 117:00.  So, to me, that would be an important technical event if March T-Bond prices were to close below 117:00.  We shall see.  The directional movement indicators are bearish and the ADX line is beginning to rise.  Back in early November, the ADX line was not obviously rising as it is now.  This ADX rise right  now suggests that this down leg in bonds could be for real.  Today may just be a bounce before more downside is seen.  On Friday, we bought one March Bond (117:00 strike) put option at 2 full points and sold one March Bond (113:00 strike) put option for 51/64.  That means that the total cost and risk of this vertical put spread trade is $1203.12 gross.  That gross risk could turn in to $4000 if March Bond prices finish in 67 days below 113:00.

 Followers should be:

Long one March Bond (114:00 strike) put option from 2 12/64. (Cost basis of 28/64, or $437.50, if you include the buy back of the two short 110:00 put options on December 8th).

Long one March Bond (108:00 strike) put option from 52/64.  (Cost basis of 2/64, or $31.25, if you include the buy back of the two short 105:00 put options on December 8th).

Long one March Bond (117:00 strike) put option from 128/64.

Short one March Bond (113:00 strike) put option from 51/64.

March options expire in 67 days.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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March Treasury Bonds are down 13/32/at 118:00 this morning as I write.  The included chart shows that after a poor 30 year auction yesterday, the March T-Bonds have dropped in price to near the rising up trend line coming up from the June lows.  That line today comes in at about 117:20.  The directional movement indicators are bearish and the ADX line is beginning to rise a little.  Bonds appear to be beginning to break down at this point.  We already own some put options at lower strike price levels.  This morning, I recommend buying one March Bond (117:00 strike) put and selling one March Bond (113:00 strike) put at a cost of 80/64 or better which is $1250.  If by expiration, March bonds are below 113:00, then we could turn that cost into $4000 in revenue for a gain of $2750.  We already own the 114:00 and 108:00 puts to take advantage of any price drops to lower levels.

 Followers should be long one March Bond (114:00 strike) put from 2 12/64. (Cost basis of 28/64, or $437.50, if you include the buy back of the two short 110:00 put options on December 8th).

You should also be long one March Bond (108:00 strike) put option from 52/64.  (Cost basis of 2/64, or $31.25, if you include the buy back of the two short 105:00 put options on December 8th).

March options expire in 71 days.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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March Treasury Bonds are down 17/32 at 118:24 this morning as I write.  The included chart shows that the potential double top at 123:00 still looms above the treasury market.  You can also see that the major uptrend line from June is still intact and rising.  The directional movement indicators are bearish but moving sideways along with the ADX line.  There will be a 30 year treasury auction today that may influence the direction of T-Bonds later today.  We have a good position already In place to take advantage of the T-Bond prices if they break down the rising support line in the intermediate term.

 Followers should be long one March Bond (114:00 strike) put from 2 12/64. (Cost basis of 28/64, or $437.50, if you include the buy back of the two short 110:00 put options on December 8th).

You should also be long one March Bond (108:00 strike) put option from 52/64.  (Cost basis of 2/64, or $31.25, if you include the buy back of the two short 105:00 put options on December 8th).

March options expire in 72 days.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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March Treasury Bonds are down 10/32 at 119:11 this morning as I write.  The included chart shows that T-bonds have a potential double top that has formed overhead in the 123:00 area.  The longer term uptrend line from the June lows is still intact.  That line comes in around the upper 117:00 area.  The directional movement indicators are bearish but the ADX line continues to meander sideways.  T-Bond prices are currently trading in the vicinity of several major moving averages, the 5, 40, 90 and 200 day, all of which are moving sideways.  This suggests that T-Bonds aren’t acting as if a major move is going to happen right away.  I recommend focusing of the fact that there is a double top looming overhead and a rising trend line coming up from below.  Now, that range is basically between 118:00 and 123:00.  That range will narrow every day as the uptrend line continues to rise.  In the next few weeks, that space between the double top and the rising trend line will run out of room.  Yesterday, we were successful in buying back the two short March Bond 105:00 puts at 4/64.  That resulted in a gross gain of $781.25.  The matching put option we bought with that short option was the March 108:00 put that we originally spent $812.50.  So, the way that I look at it is that we now own the original 108:00 put for an average cost basis of $31.25.  Combine this with the buy back of the March 110:00 puts yesterday, that brought the original cost basis of the March 114:00 put that we own down to $437.50, and we have a strong position in bonds on the bearish side, should T-Bond prices decide to fall sharply between and February 19^th, the expiration date.

 Followers should be long one March Bond (114:00 strike) put from 2 12/64. (Cost basis of 28/64, or $437.50, if you include the buy back of the two short 110:00 put options on December 8th).

You should also be long one March Bond (108:00 strike) put option from 52/64.  (Cost basis of 2/64, or $31.25, if you include the buy back of the two short 105:00 put options on December 8th).

March options expire in 73 days.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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March Treasury Bonds are up 21/32 at 119:25 this morning as I write.  The included chart shows that the intermediate term trend is up since June’s price lows marked by the rising straight red line.  The chart also shows that T-Bonds have recently formed the appearance of a double top on the chart marked by the horizontal blue line over the highs.  The directional movement indicators are bearish but the ADX line is moving sideways.  After four sharply lower days last week, not surprisingly, the bonds are bouncing for the second day in a row.  I would expect the bonds the fish around sideways for a bit before making its next move.  The double top looms over this market now.  There are three big treasury auctions this week starting with a three year auction today followed by a 10 year treasury auction tomorrow and finally ending with a 30 year T-Bond auction on Thursday.  Investors will be watching how aggressive the auctions are bid.  The amounts of the auctions from now on will get larger and larger.  Last week’s 5 and 7 year Treasury auctions were very well bid for.  One wonders how much demand will be there in the future with all the supply that will continually come out.  Yesterday we attempted to cover our short put positions at the 110:00 strike and the 105:00 strike.  Overnight, we were successful in buying back the two March Bond (110:00 strike) put options at 17/64.  We originally sold those options for 1 9/64, so the total gross profit on this trade is $1750.  The matching long March 114:00 put cost us 2 12/64 or $2187.50.  So the way I look at it is that we now own the March 114:00 puts at a cost basis of $437.50 following the liquidation of the 110:00 strike puts last night.  Today, since we weren’t able to liquidate the two short 105:00 puts at 5 ticks, we will re-enter that order today at 4 ticks.  The goal here is to unwind all the short puts so that in anticipation that the bond market is going to break down, we won’t have anything in the way of our outright put options that we own at the 114:00 and 108:00 strike prices.  We completed half of the task last night.

 Followers should also be long one March Bond (114:00 strike) put from 2 12/64.

You should also be long one March Bond (108:00 strike) put option from 52/64 and short 2 March Bond (105:00 strike) put options from 29/64 each or an overall credit of 6/64 or $93.75 gross.

March options expire in 74 days.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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March Treasury Bonds are up 11/32 at 119:05 this morning as I write.  The included chart shows that over the past week, March T-Bonds have fallen sharply to the vicinity of the 90 day exponential moving average in the 119:00 area, after falling back from a potential double top in the 123:00 area.  The directional movement indicators are bearish and the ADX line is flat.  Some of my other indicators are turning more negative as well.  I want to see the next bounce in the bonds to determine whether to take a short position or not.  We will continue to hold current positions for now.

For today only, I recommend attempting to cover some of our short put positions.  I recommend buying to liquidate the two March Bond (110:00 strike) puts at 18/64 and buying to liquidate the two March Bond (105:00 strike) put options at 5/64.  The goal here is to open up our March 114:00 and March 108:00 put options, that we own, to unlimited gain possibilities in case the bonds completely break down in price from this area.  If the 110:00 put is liquidated at our price above, then the gross gain would be  $1718.75.  The original cost of the matching 114:00 put was $2187.50, so combined, our total risk on the 114:00 put would be $468.75.  If the 105:00 put is liquidated at our price above, then the gross gain would be $750.00.  The original cost of the matching 108:00 put was $812.50, so combined, our total risk on the 108:00 put would be $62.50.  We will play this trade one day at a time over the next several days.  If we don’t fill today, I may adjust our buy back price in the days to come.  Stay tuned.

 Followers should also be long one March Bond (114:00 strike) put from 2 12/64 and short 2 March Bond (110:00 strike) put options from 1 9/64 each for an overall credit of 6/64 or $93.75 gross.

You should also be long one March Bond (108:00 strike) put option from 52/64 and short 2 March Bond (105:00 strike) put options from 29/64 each or an overall credit of 6/64 or $93.75 gross.

March options expire in 75 days.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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Overnight, March Corn was down ½ cent at $4.00 ¼.  The included chart of March Corn shows that the drawn ascending triangle continues to fill in and the lower end of the triangle is being stressed at this time.  If the rising angle of the triangle in the $3.95 area is taken out then look for prices to fall back towards the $3.80 area where the funds have been big buyers recently.  Otherwise, prices should hold near here and rally back towards the flat side of the triangle in the $4.20 to $4.25 area. I wouldn’t recommend adding any new positions to our existing corn trade at this time.

 Followers of this letter should be short 1 March Corn ($3.20 strike) put option from 6 ½ cents, and long one March Corn ($4.30 strike) call option from 17 ¼ cents and short 2 March Corn ($4.90 strike) call options at 7 3/8 cents each.  There are 77 days left until March options expire.

 With all the price tests above $4.00 recently,  I would hope that the producers have already liquidated most if not all of their corn that needs to be sold.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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March Treasury Bonds are up 1/32 at 120:07 this morning as I write as we await the monthly unemployment report for November.  The included chart shows the overall uptrend for the bonds.  The chart also shows that T-Bonds have a potential double top that has formed in the 123:00 area.  My experience with T-Bonds over the years is that they don’t usually have double top and bottoms, but rather they usually end up forming head and shoulders tops and bottoms or patterns where there are multiple up and down zig-zag’s.  But, that doesn’t matter, we still have to pay attention to this brewing pattern for clues as to what might happen next.  The overall uptrend that began in June has important support in the 117:00 area, then in the 119:00 area where the 90 day moving average Is located.  Over the past two weeks, there was a mini consolidation and break out in the 120:00 area where prices are finding support right now.  The directional movement indicators have crossed slightly to the bearish side and the ADX line continues to meander sideways.  I recommend not adding any new positions to our bond trades at this time.  Because the overall trend is still up, I will be looking for a place to add bullish biased trades when the signals are right.  Also, we currently have on some ratio put spreads.  If the bonds rally back up, I will be looking to cover the short side of our put positions for gains.  Stay tuned.

 Followers should also be long one March Bond (114:00 strike) put from 2 12/64 and short 2 March Bond (110:00 strike) put options from 1 9/64 each for an overall credit of 6/64 or $93.75 gross.

You should also be long one March Bond (108:00 strike) put option from 52/64 and short 2 March Bond (105:00 strike) put options from 29/64 each or an overall credit of 6/64 or $93.75 gross.

March options expire in 77 days.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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