Friday, March 27, 2015

USFI; Stage ‘SEEMINGLY’ Set for Bears to Prevail Today

The 7yr auction yesterday was a dismal performance and followed a 5yr auction that was rated a 2 out of 5 by Bloomberg survey.  With that, Treasury and Eurodollar prices fell and open interest rose across the board (ED 16k, TU 5K, FV 61K, TY 38K, US 13k but WN -7K) save the Ultra.  Volume was moderate. 

The Eurodollar futures yield curve steepened throughout the first 7 years while the Treasury 5-30 yield spread steepened by 3 to 112. 

Recently, I have noted with emphasis some bearish developments, the likes of which had been absent since the last employment report on March 6th.  Specifically, in my candlestick analysis, I saw reason to highlight the ‘Bearish Engulfing’ that had developed in many of the Eurodollar and Treasury futures contracts.  We looked hard at the Green June Eurodollar and the 5 and 10 year Treasury and anticipated yesterday’s price action would confirm the bearish implications of the Tuesday/Wednesday ‘bear engulfing’ reverse. 

That pattern was confirmed with price action on Thursday and open interest data points to the bearish contingency having had the upper hand in trade over the last two days. 

MORE IMPROTANTLY TODAY, It is the consistency of the weak economic data over the last weeks that should be expected to remain forefront in the minds of bearish participants as the wind up trading for the week.  As such, though there could be, and I expect there shall be, some aggressive and productive selling next week, there is a VERY STRONG risk for prices to finish firm today in usfi.

I could reference a number of assets that support the above and would gladly do so upon individual request.  

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