SUMMARY OF UPCOMING DATA 09/10/09

  • 8:30 AM US INTERNATIONAL TRADE (-$28 BILLION),US WEEKLY JOBLESS CLAIMS (565 K)
  • 10:30 AM EIA INVETORY REPORT (PETROLEUM)
  • 11:00 AM EIA INVENTORY REPORT (NATURAL GAS)
  • 1:00 PM US 30 YEAR AUCTION ($12 BILLION)

   DATA RESULTS 09/09/09

US 10YEAR NOTE AUCTION- $ 20 BILLION (BID TO COVER 2.77, YIELD 3.510%, COUPON RATE 3.625 %)

US DEBT REVIEW AND OUTLOOK

US TREASURIES continued to trade mixed to slightly lower on Wednesday, even after a relatively strong reception for $ 20 billion of US 10 year notes at the second of three Treasury auctions this week. A total of $70 billion will be coming to market this week.

Early pressure came on Treasuries as the major equity indices move back toward their 2009 highs, breaking through some near term resistance levels. In addition, the US dollar continued to lose ground against most of the major world currencies, eroding potential gains by foreign holders of US debt. Overall the government debt markets were calm today. Global government debt did receive some support from a statement by Moody's that the rating service perceived it unlikely that US and UK sovereign debt would lose their top credit ratings. In addition, reports that speculative default rates have risen nearly 300% year over year continues to offer some defense against the crushing global supply of US debt and the concern that foreign holders may seek to dump underperforming yields based on increases in risk tolerance globally and the continued erosion of US dollar value under its own massive weight of supply.

The strong reception for US sovereign debt even at the long end of the yield curve does suggest that traders and portfolio managers are developing strategies that will deal with the perceived speed bumps that have been forecast for the global economic recovery. Look for the forces described above to have varying degrees of influence upon the sentiment regarding the real value of Treasuries. This could maintain the range within recent price parameters through October of year at the very least, with some volatility in prices leading into the end of December, when price support usually kicks in as a result of increased purchases by portfolio managers.

Technically, December 30 Year Treasuries broke through initial support at 118-07, trading down to a session low of 117-18. The move did set some precedent for a test of low end of range at 117-08. RSI on a daily and 60 minute indicator remain relatively neutral, with a slight bias toward the market having further downward momentum available. Market appears likely to make another attempt to test Wednesday's low of 117-17. If this level breaks, should signal setup to target 117-03, with next target below at 116-21. Upward resistance sets up at 119-20.

US EQUITY REVIEW AND OUTLOOK

US EQUITIES rallied for another session as risk appetites increased in the wake of continued speculation that the worst of the global economic downturn may have been reached. Reports from the US Federal Reserve Beige Book stated that pressure on the regional economies measured seems for the most part to be stabilizing.  This was apparently what the market needed to close at or near key near term resistance levels within their recent trading ranges. The markets closed within striking distance of their 2009 highs.

The tone of the market essentially mirrored the outlook by the Federal Reserve. While the worst of the economic downturn appears to be behind, it may be that the worst of the unknown factors and surprises may be behind. The actual recovery itself is likely to be a drawn out process with numerous starts and failures which may discourage traders and investors along the way, allowing for outlooks that may continue to suit equity traders more than investors.

The technology sector performed well today on the back of a well wishing sentiment as Apple co founder Steve Jobs made his first public appearance since his medical leave earlier this year. The sentiment actually did translate to Apple stock price due to announcements at that event of price cuts regarding a number of its products.

The M&A drama continued as Kraft Foods stock rebounded after Cadbury rejected its initial takeover bid. Speculation rose that other consumer products firms such as Nestle may enter the bidding contest.

The mixed picture of the Beige Book created another tense session. While the market appears to be forging ahead with gains, traders appear ready to exit long positions in expectation of the correction that so many appear to be calling for. How far or fast this pullback may be is still a matter for speculation and technical indicators. Euphoria is not the name of the game here.

Technically, September S&P futures closed at an initial resistance level of 1032.50, after testing and failing at 1036.20. Gains appear possible here but nit with near term range trading. Initial support levels set up at 1026.00 and 1022.00. A failure to breech 1022.0 should offer indication of higher highs and a likely test of 1038.00. Should 1022.00 fail, market should test 1015.00 as support. Maintain watch for possible breakout resistance at 1042.60.

US DEBT FUTURES

OPEN

HIGH

LOW

CLOSE

CHANGE

US Z9 (US 30 YRS)

118-16

118-24

117-18

118-11

-8/32nds

SP U9 (S&P 500)

1026.00

1036.20

1023.30

1032.50

+7.40