T-Bond trading comment (December 14, 2007)

Not a good day... Did not respect the trading plan and got caught trading the wrong positions at the wrong time with the wrong size and blew the whole week's PnL in half an hour. Up to there, had a pretty good streak posting good stable PnL all week long but got ahead of myself this morning thinking I new better than the market... In the end, the market was right and I was wrong... Before I blew up more money, I pulled out the plug, suck on my losses and thought of why I did not respect the clear and simple rules I have established... The answer is I was too confident. There is a saying going around stating: "Don't worry the market will make you humble whether you want it or not". True.

Outside of that, CPI numbers got out on the strong side this morning and led to a sell-off (again) in the bond market... From there on we just oscillated in a 10 point range all day long with liquidity dying out as we where closing the week... The last two days have been a bit of a change as for once the bonds did not follow the opposite of stocks... Both ended down these last two days.

Looking at a weekly chart we see the drop has been very steep over two weeks in the T-bond... Sure we have a depricing of the credit/liquidity crisis and some strong inflation numbers but I think the market has maybe fallen a bit too hard lately and should maybe bounce a bit... From what I hear, I am not alone with that opinion... In any case our daily elasticity model gave us the go ahead to buy some long bonds at 3PM. Our target is 50 cents. Hope to see it sooner than later!