T-Bond trading comment (September 18, 2007)

Well the FOMC came and went and where are we standing at the bell ? Just over the 112-16 level... Granted we went to see much lower post FOMC, but this problem was only in the T-Bond. Notes went barely down before going much higher and firmly rejecting the breach of the 109-20/22 support. Now the only big news until the end of the week is the CPI tomorrow morning so this could smell foul for vega buyers as the options are expiring on Friday. The real question now, is were are we headed for the near future? The answer to this question may be lying on an intraday chart. If you look at a multiple intradays chart you will notice that we have a nice descending triangle. The horizontal line, forged by the lows, lies at 112-16 and the descending line is made by lower highs (114-02, 113-16, 113-06...). This picture is pretty compelling and indicates that we have more room to the downside than the upside...

We opened the market with, again, the exact same pattern as the last 4 days. We opened trying to challenge new highs and quickly failed before quickly retracing our steps towards the 112-16 level. From there on, we drifted higher like the other days. Altought this time we went lower as the market prepared itself for the Fed.

As you might have seen (duh !), the Fed lowered its rate by 50 bps, what the market was princing. Market participants are still haggling on the size of the cut. Certain people think the Fed had no reason to cut while others thought the opposite. Honestly, I do not care if they were right or not, the only thing I think about is that this move is inflationary... By the way, Greenspan thinks that our next big beast is long term inflation....