^_Tbondtrader

Bond Market Comments

3/09/10 - 9:00 a.m. - The low tick yesterday in the 10-year was 116-23, the bottom of the first short band of support I was hoping would hold (I posted 116-22+ as a stop) based on it representing a 38% retracement target even if that target took some imagination to come up with. It was based on using the high of 2/26 as the end of an impulse wave up vs. the more convention notion that it ended at the higher high posted on 3/04 (I should mention here that a spike high posed on 2/25, more than 2 points above the previous trade in what appeared at the time to be a bad tick, has in fact been upheld by the exchange but will not enter into my calculations for support/resistance or pattern do to the degree to which it was beyond any logical level for a trade at that time as it was result of a mistake on the part of an electronic order entry which is why it stands). So with that seemingly contrived reason to look to 116-23+ for support, it still has worked so far and qualifies as a nice area for a low should it continue to hold. The cash 10's held less than half a bp from their 62% target. The low tick in the 30's was 2 ticks below the 50% retracement target while the cash long-bond trades slightly through its' 62% target. A lot of basis and curve changes make the lows difficult to trust just yet but wanting to see a quick recovery based on my preferred count, I'm watching closely for any signs that we may have found a bottom. And so far, so good as we are opening this morning with a bit of a bid accompanying a slightly weaker stock market and a sharply higher dollar. 

The key here - as it has been before - may still prove to be the stock market as yesterday the S&P futures reached a 93% retracement of the decline off the January highs. While the rally appears to be impulsive suggesting it should make it to new highs, the possibility that we can double top in here is still real and if the rally is not the first of several with objectives much higher, then it can prove to be the entire rally once completed. The volume yesterday in the S&P futures was the lowest since 12/31 which is not what a bull should want to see on the day of a rally high. With the early weakness today, it merits watching. 

As we begin the trade today - with a nice little upside gap I might add - any trade above 117-10 will look constructive while yesterday's high of 116-30 now represents a gap-fill price and should be used as the first indication that we may still be headed lower. The volume yesterday was very low and that too can be viewed as positive going forward. Just a normal volume day today accompanied by a higher close will give reason to suspect we may just head right back up.

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