It's odd you mention that you find the 10y easier to trade, personally, I've found the 30y instinctively easier to track. Maybe because it's quoted in 32 opposed to 64ths? Who knows. 120k contracts/day traded is still enough liquidity for my tastes.
Anyhow, I absolutely hate to trade based on patterns that occurred 10 years ago, but it looks like that the war scenario is emerging perfectly:
Bush is going to start bombing on February 1st, maybe 2nd. It'll become increasingly obvious that'll be the case coming in the middle of next week.
I'm aligning my strategies to take that into assumption, and it'll be one hell of a bumpy ride there. But two things that I expect are that bonds will trade higher (flight for security) into this, and the S&P will trade down. There has to be some risk measured into the marketplace that Saddam is going to try some WMD trickery, and although I think he's been defanged, that perception of risk is tradable. The other thing is that I expect oil to climb up to about 38-39 bucks a barrel on a spike before dropping again to whatever more realistic levels are.
But here's a call: The bond market will make it's peak sometime in the next three months. I'd like to circle it down to the month of February, but I'll give myself more room there. It's pretty clear that the US effort to inflate itself is right on track.. with commodity prices rising, those industrial inputs to the economy have to show up eventually, especially in light with the declining currency and fiscal deficits.
After the bombing campaign starts, shorting oil would be a more difficult call. But shorting the 30-year won't be. And when they announce that the 30-years will be back for auction, watch for a limit down day on the markets.. |
