T-Bond trading comment (October 5, 2007)

That was a real curve ball that a lot of people did not see coming! NFP up 110k and revision of +93k for the preceding month ! Evidently, T-bonds got trashed... Two months ago, I underlined the importance to not take face value on NFP data... Basically, the error margin on the NFP is something around 70k and this month we've had the perfect example with a 93k revision sending the market in turmoil with people scrambling to re-evaluate their view of the economy. Let's just hope that the Fed did not put too much weight in August's NFP to cut their rate... In any case, unless very adverse economic conditions come in the very near term, it is safe to say that the Fed will probably not move for the rest of 2007!

So the 112 line looks a bit far from the 110-25 line. After playing with it for the past week, we have cleared away on strong NFP data. Until the number, the market did not want to move away as it did not knew were to go. After that, it was all the way down except in the last hour and half of trading were people were just covering their shorts for the long week-end. In terms of trading, you just had to be short. Our intraday trend model gave us the tip (believe it or not) 1 minute before the NFP. The model covered just before the final bell on the little pick-up. That was the good trade. The bad trade was our swing trading model that was bulllish coming in this morning... The cost was over a buck today and wiped out just over a third of the yearly profit on this model... Not good. Better chance next time.