Thursday, April 2, 2015

USFI Steady Bull Trend on Employment Report Approach

Technical conditions in USFI remain strong.  Overnight gains are being added to in front of the claims data and these numbers must suggest employment gains else the short contingent should be expected to further reduce positions in front of tomorrows employment report for March. 

Open interest declined by 32K in Eurodollars as a result of bullish price action on Wednesday with the Eurodollar futures yield curve flattening throughout the first 7 years.   The size of the open interest reduction is not much given recent gains which have put some shorts into precarious positions with ‘THE’ data event forthcoming. 

EDM7, shown in chart is 50 bps above the March 9th level and so there would be some who would point to the market being stretched.  However, price gains have been fairly well distributed and the consolidation following the post-March FOMC advance has tempered overbought conditions.

As a rule, we do not look for outlying moves in the session before the employment report (‘THE BIG SHOW’) as the proximity to this important, though often substantially revised, data tends to overshadow and minimize the perceived value of preceding events.

As such, we again see good chance for marginal gains in USFI with modest to complete retracements by day’s end.  If instead there is a move that is ‘substantial’, either higher or lower, we shall recognize this as indicating the market has found something that has changed its perception, despite the looming employment report.  

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