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This morning the bonds are showing another Three Drive formation. Look at
a five minute day-only bond chart. Note that at 9:15 the bonds put in a
high @ 128.13, then 128.22, then 128.24 at 11:15.
Their is a clear cut trend line (recently broken) and the detrend study is
showing a second divergence. This trade isn't as clear cut as the previous
examples (particularly with the equities background that we are trading
against this morning) but the risk to stop is very low.
Note that the underside of the broken trend line should act as resistance.
Note that there is potentially climax volume just to the left (earlier this
morning) and that the market has already moved strongly higher and in fact
a gain of more than a point on the day is a very rare occurrence.
Additiaonly, the hourly and the fifteen minute charts are very overbought.
Is the trade doable, yes. Will it work? Hell if I know, but it's the kind
of setup that I almost always take....even when like today I have a great
deal of doubt. Frankly, at this point I see the bonds as being more an
equity bet than a bond bet. I wouldn't stick with the trade very long and
would be quick to exit if the equities began to weakness very much.
Would I do it in a big way.... no, not today. It's a scalp at this point.
Iwould put a stop three to four ticks above the high.
Anyway, just trying to stimulate discussion.
Stewart Taylor
Taylor Fixed Income Outlook
Voice: 501-219-9774
Fax: 501-228-0963
E-Mail: staylor@xxxxxxx
Web Site: http://www.cei.net/~staylor/
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