March Treasury Bonds are down 21/32 at 120:18 this morning as I write.  The included chart shows that bond prices continue to fall back from the recent challenge to the 123:00 area highs.  The included chart on the T-bonds still show prices in an uptrend.  The rising channel of the trend line underneath the weekly price lows of the past several months will be the overall support for this bull move.  That area of support is in the 117:00 to 119:00 area.  A higher level of support comes in around the area where bonds recently broke out, and that was in the 120:00 area.  So, prices are already approaching an area of interest as a possible entry point on the bull side.  The directional movement indicators are barely bullish and threatening to cross to the bear side.  The ADX line is still meandering sideways.  So, for now, I do not recommend placing any new trades into the bond market because we have many conflicting signals: a potential double top and a directional movement indicator threatening to cross bearish combined with an overall uptrend and very strong price support below.

 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 78 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 7/32 at 121:13 this morning as I write.  The included chart shows that March T-Bonds are in an uptrend that has run into resistance at the previous rally highs in the 123:00 area made in early October.  The directional movement indicators are bullish and the ADX line is rising slowly.  There should be good support for the bonds on this pull back in the 120:00 right along the 200 day moving average and the mini break out area that took place a little over a week ago.  So, I recommend standing aside from placing new positions until prices test back into the 120:00 area.  At that point, I will see if a new trade is warranted.

 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 79 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 21/32 at 122:02 this morning as I write.  The included chart shows that the T-bonds continue to be involved in an intermediate term uptrend despite the resistance in the 123:00 area.  The directional movement indicators are bullish and the ADX line is beginning to rise.  I am looking for a good correction in the bonds to put on a long oriented trade.  For now, stand aside on any new positions.

 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 80 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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Dubai seems to be the word of the day.  See my UAE comment from earlier today.  March Treasury Bonds are up 23/32 from Wednesday’s close as I write this morning.  Overnight, March Bonds hit a high of 123:00 on a spike resulting from the news that Dubai, one of the seven members of the UAE, wants to suspend payments on $60 billion owed to 70 international banks for the next six months.  In my opinion, $60 billion is a drop in the bucket in the scheme of things these days in world finance.  But with the Thanksgiving holiday in the US and religious holidays in the Middle East, many markets were closed yesterday when the announcement was made.  So, low volume is leading to a lot of volatility.  My experience with these scenarios is to take advantage of windfall profits and take them and be very careful beginning anything new until the smoke clears a little.  This announcement was apparently totally unexpected around the world and caught a lot of investors off guard.

It is so ironic that this announcement comes about one month before the tallest building in the world open for business in Dubai.  This kind of reminds me of the mid to late 1980’s in Houston when several tall building were completed only to be virtually empty when the economy here went bad, and you could literally see through the glass windowed buildings.  It wasn’t but a few years later and Houston was bustling again, so I see this issue in Dubai as a short term problem.  Abu Dhabi, the capitol city of the UAE, could easily solve this problem is they wanted to.  The UAE has the 6^th largest oil reserves in the world.  If $60 billion is the total amount involved, as reported, then I don’t think that this is a big deal.  What I do think, is that many markets including stocks and gold have risen a long way over the past six months, so this could be an excuse to finally get a much needed correction for these markets.

But, what does the chart say?

 The included chart shows that this rally in the bonds just approached the highs made in late September just above 123:00.  The visual trend is up but now spiking.  The directional movement indicators are bullish and the ADX line is beginning to rise.  So, the charts suggest that there could be more rally ahead for the bonds, but you have to be careful about chasing a price spike.  Aren’t we glad that we liquidated the covered put write spread the other day.  Had we not, we would be in a severe loss at this time, but the technical’s told me to get out days ago.

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 84 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 2/32 at 120:28 this morning as I write.  The included chart shows that the bonds broke out over a small consolidation range yesterday suggesting that the bonds want to test towards the early October highs in the 123:00 area.  People wonder how the treasuries can be so strong in the face of all the treasury security supply that is coming to the market.  Who is buying all this paper?  Yesterday, there was a 5 year treasury note auction of a record amount of $42 Billion worth.  This auction was oversubscribed by almost three times!  There were bids of over $118 billion worth trying to buy only $42 billion in 5 year notes.  Clearly there is great demand for US Treasury securities.  There are many possible reasons for this demand.  One possible reason is that many institutions including banks, may have taken profits on large stock market gains and want to stand aside until the end of the year, but still need to park their cash somewhere.  Since money market funds are paying virtually zero, then the alternative is US treasury securities.  Another reason could be that some large institutions may have the ability to borrow from the Fed at virtually zero and can then invest those funds into treasury securities for an instant arbitrage gain in yield.  Foreigners may have nothing to do with this rally in bonds at all.

The chart says that the trend is up and a test of the October highs is very possible.  The directional movement indicators are bullish but not by much.  The ADX line is still edging lower suggesting that this is a reluctant uptrend with not much momentum yet.  I am currently looking for a good ratio call spread to put on, but so far, I can’t find one that makes any sense.  I may put out a recommendation later if I can work out a bullish trade.  Stay tuned.

 Yesterday, I put out a special report to liquidate the covered put spread.  Here are the results of the overall trade since it was first entered.

The original trade was selling one March Treasury Bond futures contract at 117:00 and selling one March T-Bond (117 strike) put option at 3 15/64 back on November 6^th.

On November 17^th, we rolled the short 117 put up to the 121 put.  The gross profit we made on the short 117 put trade was $1515.63. 

Then yesterday, as the bonds broke out to the upside, we liquidate both the futures contract for a loss of $3906.25 gross and bought back the short 121 put for a gain of $703.13 gross.

So the overall results of this losing trade was +$1515.63-$3906.25+703.13 = -$1687.49.  Sometimes we have to take losses to avoid bigger problems, once we recognized that we were on the wrong side of this trend.  My motto is that we can always get back in.  We still own some ratio put spreads down below just in case the bonds turn over again.

 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 86 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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I recommend liquidating the covered put spread right now in March Treasury Bonds.  The enclosed chart shows that the T-Bonds appear to be breaking out to the upside and the directional movement indicators a turning bullish as well.  So, buy back you short futures position and also buy back the short March 121:00 put option.  This will be an overall losing trade, buy I want to get out of that before it gets worse.

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.

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March Treasury Bonds are up 10/32 at 120:19 this morning as I write.  The chart included shows that T-Bonds are attempting to break out above the last several day consolidation this morning.  A close above this consolidation could put the bonds in position to challenge the early October highs in the 123:00 area.  The directional movement indicators are basically right on top of each other showing a slight bias to the bull side.  The ADX line continues to fall suggesting no strong trending movement.  The overall trend is up which is a concern for our current covered put write position.  I will be watching this particular position today and may decide to liquidate if prices continue to rally.  When a market continues to rally when the theoretical fundamentals are supposedly so bearish, then you have to go with what the chart says.  This chart is beginning to say that the bond market wants to rally despite all the talk about how much supply will be coming to market over time to finance the growing national debt.  As mentioned last week; there may be a problem attracting foreign investors, but when certain institutions can borrow from the Fed at virtually zero interest and then buy US Treasury securities for 4% yield and higher, it is a no brainer to lock in that spread.  That game will end when the Fed begins to raise rates which is not expected any time soon.

 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.

And finally, you should be short one March T-bond futures contract from an average cost basis of 118:16 and short one March T-Bond (121:00 strike) put option from 3 24/64.

March options expire in 87 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.

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March Treasury Bonds are down 11/32 at 119:29 this morning as I write.  The enclosed chart shows that the T-Bonds have stalled on their near term rally right in the middle of the trading range of the past couple of months.  The directional movement indicators are slightly to the bull side but both lines are edging lower along with the ADX line suggesting that there really is no trending market at this time.  As we approach Thanksgiving holiday this week, I would expect the trading volume to slow down.  Stay with current positions for now.

 Our December 115:00/113:00 ratio put spread expired on Friday, worthless.  That means that the $62.50 they paid us up front to do that trade is ours to keep.  It is nice to be paid for trades that don’t work out.

 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.

And finally, you should be short one March T-bond futures contract from an average cost basis of 118:16 and short one March T-Bond (121:00 strike) put option from 3 24/64.

March options expire in 88 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.

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