T-Bond trading comment (November 16, 2007)

New high again today but rather weak close for the week-end. Altough after yesterday's monster move, today's consolidation was to be expected...

Arrived this morning at the office after challenging lower and higher prices that would proove to be the resistance and support level for the rest of the day. As people arrived at their desk, the market was getting challenged as stock futures were climbing. This lasted until the stock market opened and started to loose ground. From there on, we developped a nice upward trend that nicely topped near the high we created early that morning. We spent the rest of the day oscillating around yesterday's close climbing to 115-17 for the close as equities were being hit. In the afterhour session, the T-bond lost again some ground as equities shot higher to close with a 0.5% profit for the day.

The market is still fearing for more bad news to come, as we saw some fresh steepners being put on 20 minutes before the pit session close. The T-note was gaining 4.5 ticks while the T-bond was only up 4 ticks. Normally the long bond should have been up by at least 6-7 ticks.

Yesterday, we said that we were entering into a new configuration that enable us to see much higher prices... We still stand by this scenario, but it is important to bear in mind that in Europe, the Bund is still not able to make new highs and is still stuck under the 115 line. At one point, the bulls will run out of time, so the sooneer, the better.

Our option strategy is expiring Tuesday afternoon. Right now the strategy is a little in the red... To flat trade we need the T-bond to close at 115-7 so let's hope for lower prices in the next two trading days. As for our daily momentum, that showed the green light at 3 o'clock yesterday we had a better day than what we were expecting with a close at 115-17.