Thursday, July 3, 2014

Move Along Folks...

‘Move along folks, nothing to see here’, the Beat Cop says in the old-time movie while at his back a team of detectives survey the carnage of a gang-style hit.  This movie plays today as the higher than expected non-farm payroll number and drop in headline unemployment rate brings ‘controlled’ selling in global fixed income markets. 

We had earlier remembered a lesson learned on approach of a long holiday weekend; Sometimes markets don’t cooperate to allow us to leave early. 

The bond is in a third consecutive session lower in a candlestick pattern called ‘three black crows’.  The pattern indicates a strong price reversal from bull market to a bear market.  This follows a bearish reversal pattern at the recent high.  June 26-27 formed a ‘bearish harami’ with June 27th forming a single session ‘bearish shooting star doji’. 

Over the last 7 years, we have been taught to buy weakness following the ‘one-off’ strong economic data print.  We had a strong data print today.  However, this follows 4 prior +200K non-farm payroll prints so it is not so much a ‘one-off’.  There is room for the market move significantly still.

In USU4 (Sep Bond), 134-24 is the opening level of June 11 and a settle below this level would leave little support until the bullish window at 132-04 to -11.   

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