T-Bond trading comment (November 8, 2007)

Days pass by and the market remains the same. Bearish intentions in the morning quashed by bad credit/losses/downgrade/liquidity/... news during the rest of the day. Today was no different than the rest of the trading week as we closed still hovering near the 114-00 yard line. The market seems to have bearish intentions but the actual financial crisis keeps prices-up as no one seems to be willing to sell the market.

The market opened on the strong side overnight challenging the 114s, as european equities were susbtancially lower. The Bund made a gap at the open but subsequently filled it, fuelling bearish convictions. This lasted until 9h40, just before Bernanke. In the mean time, scalping on each side of the market was profitable but not trend following. About then, the market started to climb as bad news started to hit the screens at the same time that Bernanke was reiterating the Fed's view for sluggish growth in the next 2-3 quarters and continued problems in the financial markets. Nothing new there but it had the expected impact. Stocks tumbling down, bonds higher and curves steeper! In late trading, we subsequently retraced or moves to the downside leaving the T-bond about unchanged.

What to expect for the next few days? The market looks like we are due for lower prices over the next two weeks but the short term will be controlled by the amount of bad news that continue to fill the screens... Also, from a graphical point of view, we aren't able to make new highs but our lows are higher and higher... Tomorrow is half day with no work on Monday. We have trade balance, import prices and U of Michigan.

One last thing, our daily momentum model is showing the green light to be long for tomorrow, but tomorrow is a half day... So could be weird... The lights turned green yesterday for eurodollars futures...