May 14th, 2008
**Read my monthly column "Futures for You" in Stocks and Commodities!!
A smart client of mine used the term fickle to describe today's bond trade and I don't think that I could have said it better. A weak overnight session and day session open was quickly reversed following the release of last month's CPI data. However, the gains were short lived. Today's range was nearly a point and a half and likely wreaked havoc for those trying to day trade.
The headline CPI was reported in line with expectations at an increase of .2% while the core reading was actually slightly tamer than many expected. The news sparked a sharp short covering rally but fresh longs failed to join the party. It wasn't until much later in the session that bond traders realized that the stock market was in the midst of a full fledged rally and dipped back into the lows of the session.
Under normal circumstances, I may be looking to sell puts as we are near support and at or near the lower Bollinger band on both a daily and weekly chart. However, this time around seems different. The volatility remains eerily low, we are still in a seasonally weak time of year and if the data released over the next few days is positive for the economy there may be a temporary spike below support. Bonds aren't the type of market to trade in a range for an extended period of time and there is no reason to believe that this will be an exception.
While CPI was the week's most watched report. Thursday and Friday bring several tidbits of information for traders to chew on including regional manufacturing reports and consumer sentiment readings.
Option Recommendations
**There is unlimited risk in naked option selling.
May 12th - With premiums relatively cheap you may want to buy a June 115 put for 10 ticks or less and a 120 call for 10.
Futures Recommendations
**There is unlimited risk in trading futures.
Flat
Carley Garner
Alaron Research Team
800.935.6492
cgarner@alaron.com
www.CommodityTradingSchool.com
There is substantial risk of loss in trading futures and options.
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers, directors, employees and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
