T-Bond trading comment (September 14, 2007)

Again we tested higher levels and again we failed and went lower to try important support levels witout breaking them decisively. We opened to the upside this morning on bad news from Europe. Stocks were getting hit after Northern Rock announced it had liquidity problems. This pushed the T-Bonds higher toward the 113 line. 8h30, the durable good orders came out on the weat side and propulsed the market higher still. We were going for the 113-17 level on which we failed yesterday, but before arriving there UoM came out as expected and the equities decided there was no more credit crisis for the time bieng and shot upward. This killed our little rally in the blink of an eye. In 45 minutes we lost almost a buck to come and sit on yesterday's support just below 112-2. After that, the market got stuck between 112-16/22 on low volumes and looked like it was going to stay there, but the market initiated a little rally for the 3 o'clock close and went to 112-27. A possible explanation for this, is market participants covering their shorts for the week-end in case any bad happens.

The credit/liquidity crisi is looking a bit beter right now. Countrywide got more financing, GMAC too. Market participants are depricing risk which sends credit and stocks indexes back to more normal bahaviors and Libor is coming back. That is all well, but I find myself surprised to hear everybody around me saying this is merely the calm before the hurricane... Guess we will see.

By the way did you look at a S&P500 chart lately?