T-Bond trading comment (November 5, 2007)

I am back from holidays and the market is radically in another configuration than when I left! When I left for holidays, the market was firmly in a bearish move and we were trying to break the intermediate resistance standing near the 110 level. In the end, we did a nice little double bottom configuration and went back-up on the back of the return of the liquidity crisis.


Now the interesting question is where are we going ? The conscensus we are hearing on the street is that we should see higher prices before lower prices, but to confirm that we have to overstep in a convincingly way the114-00/05 level that has hold (minus a few overpass) since December 06. Granted, Friday we went to see much higher prices on the back of bad news in the banking industry ( Merrill's CEO out, Citigroup's CEO most probably out and a score of huge write downs by lots of banks in their fixed income books), but after testing higher prices this morning we went straight back toward the 114 level. This week will be interesting to look at, because there is no big economic news on the radar so the market will be able to develop its own story. If we do not overpass the 114 level significantly, we could see the 112 level as a first target and 110 after. It will be especially interesting to look at the T-bond's move since the Bund in Europe is closing on upside targets.


Did not look to much at the trading session today as I was touching back with the market.... Satisfied myself with some small scalping in the T-Notes and T-bonds.