May 282010

Nice to see the wild overnight range calm down a little and show a bit of clarity. We saw lots of institutional participation to the long side yesterday but overnight that is changing a bit. Volume is much lighter from the bigger traders and long interest is waning. Personal income flattening was a bit unexpected and we have seen a significant shift as a result. While the Euro has continued to gain ground we have come off a bit and the bid in the 10s is returning as I write. The carry trade has been extremely bullish overnight – straight up in the air actually, but risk appetite has waned a lot in the last 30 minutes or so there are well. If we get a mixed bag today in the sectors there should be some good fade opportunities and in those conditions it is best to just handicap with the 10s and the Euro at the key levels. We think the Euro will stay relatively flat but we may see some action return to the 10s off the continued weakness in corporate debt interest. We think the volatility will temper a bit today and volume will be light with traders leaving early for the long weekend. It may be a bit whippy today on the lighter volume but I doubt we stray too far out of the current range. We think support is fairly strong at 87-88 and the optimistic trader would have to put at least some support at 92 or so – at least for a couple full rotations. Resistance is certainly a wall at 16-17 but we may see a grind that can’t get above 10 just as easily. The overnight high is fragile and unlikely to hold but we don’t think a break of it will be perceived significant but the broad market and won’t attract mountains of volume right away. Pay attention to the sentiment number this morning as the stiffening claims and the overall equity picture this month may hammer the number and produce a knee jerk reaction. I wouldn’t trade near that release today – especially with the expected light volume.

 Posted by at 9:13 am

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