July 30, 2013

Logical Signals Update: 10-Year Note & 30- Year Bond Update

10-Year Note & 30-Year Bond Update, U.S. Dollar Caught between Rock and Hard Place

Treasuries were looking to hang the early rally attempts on Tuesday, albeit small attempts, on a positive result from the Consumer Confidence Index, which was released. The index fell in July from a five year high and the drop of 2.2 % was credited to consumers concern over higher borrowing costs and gasoline prices.

The treasury markets as viewed from the 10-year note and 30-year bond didn’t give much of a reaction either way, which leaves current expectations in place. Wednesday’s trade may be dependent on the release of the FED Notes, although I’ve not heard any talk that something different is to be expected.

10-Year Note

Tuesday’s narrow range did little to alter current parameters with the September future closing right at 126’15 support/resistance. Near-term I can’t rule out just yet the possibility for another attempt at reaching 127 to 127’05 if a trip to support at 123’30 to 123’11 is in the wings waiting to begin. The pattern in progress is not totally clear as to near term direction. Unfortunately the non-committal to direction by the market continues to allow both a rally and decline in the near term potential column. A break above 127’11 should clear the path for a quick push to 127’23 to 128’30. A break below 126 should clear the way for a downside continuation to the support zone at 123’30 to 123’11. Longer-term expectations remain for larger down leg to push towards support at 121’12.

10-Year Note (September future Weekly) click to enlarge

30 – Year Bond

The 30 – year bond is loosing its appeal as the treasury instrument of choice to trade. With the focus shrinking in terms of duration the 10-year note has taken over as the interest rate barometer. Nonetheless, the trading range on the 30-year was also very small on Tuesday as any rally attempts were squelched by the lower Consumer Confidence Index numbers. The 135 level held things thus far and may continue to do so. Near-term don’t rule out a run for the brass ring at 136’28 resistance. First though, resistance at 135’16 to 135’27 needs to be dealt with. As with the 10-year note longer term expectations remain for a drop to support at 129 to occur before a more defined sustainable rally takes over.

30-year bond (September future Weekly) click chart to enlarge

I am continuing to include the graph of the Federal Reserve’s outright holdings. This chart needs no additional explanation and is included to keep in perspective who has the motivation to keep it all going.

U.S. Dollar/Euro

The near term direction of the U.S Dollar/ Euro has also been held within a somewhat tighter range so far this week. After quickly touching the 1.33 level on Tuesday morning, the rally lost steam for the better part of the day regaining some buying steam towards the end of U.S. trade. The 1.3305 to 1.3317 area should continue to hold rally attempts before the Dollar resumes its rally potential. The Euro would be expected to drop back to support at the 1.2750 to 1.2675 area. The stochastic oscillator on a daily basis turned lower giving a sell signal on Tuesday from overbought readings. Longer-term expectations include the strong potential for a stronger more sustained rally favoring the Euro reaching up towards 1.38 to 1.40. This outlook bodes well if the wedge/triangle pattern proves correct as drawn on the weekly chart.

The Euro September future has been consistent in producing larger ranges over the past several weeks and remains high on my list for day trading. There are several contracts to choose from – the “full” future is valued at $12.50 per tick and the margin requirement is $3750.00 per contract. The “mini” future is $6.25 per tick with a margin requirement of $1875.00 per contract. The “micro” future is $1.25 per tick and the margin requirement is $375.00 per contract. So, this product neatly meets capital requirements for small, medium and large trading accounts.

Euro FX (Daily September future) click chart to enlarge

Euro FX (Weekly September future) click chart to enlarge

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The last two points above are valuable tools to use. It will show you where some “tweaking” is needed to improve results through the back testing feature.

My point on money rotation and sector rotation is similar to that on parabolic moves that they happen with frequency within many time frames. As traders these types of moves can be a bonus for day trading or position trading so again don’t get caught up in the “what’s the catch.” Realizing a rotation is occurring within a stock you trade or a sector is a great source of stocks to plug into the Diversified Trading System. Allowing DTS to cleanly and beautifully capture the moves though any or all three DTS trading platforms. Our goal remains to assist traders to make greater profits during all types of markets. Sector and money rotation is another tool.

The Diversified Trading System used together with Trade Manager should continue to produce numerous trading signals in the DJIA, YM (mini), S&P 500, ES (mini), RUT, TF (Russell 2000 mini), AAPL, AMZN, GOOG, NFLX, and LNKD, GS, and Tesla Motors (TSLA). In the near future I will be adding options strategies to the trading list.

Here is an updated (7/29/2013) list of the markets where I have found that DTS (all three birds) are producing numerous signals. Continue to bear in mind that there are days when trading opportunities are not as plentiful. These are days when not trading is likely more profitable than attempting to “force” a trade”:

DJIA future (e-mini available) – highly recommended for experienced traders
S&P-500 future (e-mini available) – highly recommended large intraday moves.
Russell 2000 future (e-mini available) – highly recommended can lead in either direction.
NASDAQ 100 future (e-mini available) very highly recommended and dominated by AAPL, AMZN, NFLX, GOOG, and TSLA
US$/Euro futures (e-mini and micro available) – very highly recommended – easy to trade afterhours as well.
GS (Goldman Sachs) – good two way volume –
AAPL (Apple Computer) – highly recommended – Options trading as well
GOOG (Google) – highly recommended
LNKD (LinkedIn) – solid intraday range
NFLX (Netflix) – solid intraday range
TSLA (Tesla Motors) – highly recommended
30-yr Treasury Bond future – highly recommended
10-yr Treasury Note future – solid two way trade
TLT (Treasury Bond Long ETF) – very active
TBT (Treasury Bond Short ETF) – very active (moves inversely to TLT)
Gold (futures and ETF – GLD) very active – not suitable for all traders
Silver (futures and ETF – SLV) – very active – not suitable for all traders

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