Wednesday, February 3, 2016

USFI; ‘Move Along Folks…’



‘Keep on moving, nothing to see here folks.’  You can almost hear the Beat-Cop intonation as he ushers you by the gawkers.  You don’t look because you have seen these sights before and it hasn’t led to anything productive.  Such is the case when reviewing bearish technical signals in fixed income since the start of the year. 

So, if we examine something today that purports to indicate a bearish technical development, we will do so with an appropriately jaded attitude.

Tuesday was a ‘non-event’, right.  We know it was Groundhog Day and in nearly all aspects it proved the point with trade.  Prices moved higher in Eurodollar and Treasuries.  They settled higher and again of course open, interest was higher ED +86K, TU +7K, FV +39K, TY +74K and US +11K), indicating new participant positions or that existing position holders added to positions. 

It might surprise you to learn that yesterday many Eurodollar and Treasury futures contracts had the largest open to close gain in nearly a month.  The bond had not seen as big an open to close advance since June.  Yes, it was a big move on moderate volume with increasing open interest. 

What does this say?  It says longs are still in control.  That shorts are still suffering, and have been adding to their misery by increasing their positions.  That there is room for still volatile price action in fixed income. 

There is an opportunity to examine price action today and tomorrow to gain insight as to how confident position holders are in front of the employment report.  That insight will help us to project a reaction function for price action relative to the actual employment report data compared to consensus expectations.  

 

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