Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: HairBall who wrote (24511)	9/2/1999 9:30:00 AM
From: HairBall	Read Replies (2) \| Respond to of 99985

To All: The Technicals revealed the Market was going down, long before this recent news form Fed Gov Kelley. I can't imagine Greenspam, not raising one more time, unless the Market tanks. The Talking Heads always have to attach an excuse or reason for the Market to do what it does. Now, just for those that are interested, the previous rising support line that has become resistance on the TYX 60-Min Semi-Log Chart is still in play. It has been penetrated this AM, let's see if it gives way completely or if this is just an overshoot. That support line can be identify as a rising red line inside the rising wedge (blue lines) on my Qchart TYX chart on my I-35 Road Kill page. Uploaded on Sunday, it is not current but you can use it to draw your own and track it. If you are interested in seeing it check my profile for the link to the Road Kill page or there is a link on the MDA Web Site as well. Regards, LG

To: HairBall who wrote (24511)	9/2/1999 2:31:00 PM
From: James F. Hopkins	Read Replies (2) \| Respond to of 99985

LG; LOL; RE > the bond market is taking these warnings seriously and now sees a 57% probability of a Fed rate hike at the October 5 meeting If it's so serious I don't see why they couldn't get a little closer with the percent , why a 57% probablity could mean anything from 56.5% to 57.5% shucks , I wonder if that % will change any from now till Oct, no I guess not now that the experts have fixed it..

To: HairBall who wrote (24511)	9/2/1999 3:06:00 PM
From: Les H	Respond to of 99985

I thought those probability calculations were derived from the bond futures, not the cash bond. TALK FROM THE TRENCHES: KELLEY SHOCKS, BONDS SLIDE AND THE NORTON RULE By Isobel Kennedy NEW YORK (MktNews) - The 2/30Y curve of the U.S. Treasury market steepened out Thursday from +35 bps to +40 bps as the short end of the market held around Wednesday's levels -- but the long end got beaten down. Our own Steve Beckner reported this morning that Fed Gov Kelley and other Fed official stand ready to tighten again, and Y2K certainly does not tie their hands. Kelley also said it would not take a lot to tip the balance towards tightening as officials worry about asset price bubbles that they say resemble 1980s Japan. The market was caught off guard by Beckner's exclusive interview in the first place, and the nature of the remarks shocked players back to reality. Prices in the long end dropped sharply and very quickly, preventing many players from selling out before the market weakened further. Of course, market players were already wound up pretty tight because of the Friday employment report, and the Kelley comments only tightened the screws. But who knows, tomorrow might be a pleasant surprise. And if not, remember the old Norton Rule (a well-known gunslinging bond trader of the late 70s) which says no market goes the same direction for more than seven days in a row. If the long bond closes lower today, it will mark the sixth day in a row. Oddly, the short end held in quite well. Sources attribute this to players putting on steepeners and/or taking off flatteners. In addition, other accounts have been parking cash in the short end during this time of general market uncertainty. The fear of central bank intervention in the ever weakening $US against the yen also supported the 2Y note. The logic is that any buying of dollars during an intervention would eventually find its way into the short end of the Treasury curve, sources say. By the way, some think that the upcoming Labor Day holiday in the U.S., and the resulting thinned conditions, could provide an opportune time for intervention. While there have been no reports of asset allocation today, sources say that the deep drop in the DJIA today could indicate that money leaving stocks may find its way into the safe, short end of Treasuries. Also pressuring the long end is the much feared corporate supply. While upcoming U.S. Agency new issuance is weighted in ten years, sources are in the dark about what maturity sector all this corporate paper will fall into. The behavior of the swaps market has players betting that the corporate supply comes in ten years or longer. 10Y swap spreads are pushing out to the August highs while 2Y and 5Y swap spreads have actually narrowed from those levels. Eurodollar traders say they are experiencing pressure in the back end of their curve as well. And since swaps traders use eurodollars to hedge their positions, they also think it might be an indication that the upcoming supply is mostly longer maturities. Japan's first 30Y auction had a great 4.88 times cover today. It sold with a 2.80% coupon at 2.84%. Interestingly, JGB traders were said to be using JGB 2Y note to hedge those new positions. With Japan set to issue more and more supply, maybe they should consider selling more paper in the long end. It certainly would make hedging a little easier. Speaking of 30-year paper, the long UK gilt market saw prices fall nearly three points earlier today. Sources say there is a lack of liquidity in that market due to a lack of supply. Some European analysts say the U.S. Treasury might want to re-think its reduction in 30-year issuance and cite the UK gilt market as a good example. Note of caution on inflation: Latest Fed study says U.S. employment cost index (which we know Mr. Greenspan watches) may be understated by about 0.3 point because it fails to measure properly for profit-sharing and lump sum payments given in lieu of regular pay increases. ECI would be running at about +3.5% after the adjustment. NOTE: Talk From the Trenches is a daily compendium of chatter from Treasury trading rooms offered as a gauge of the mood in the financial markets. It is not hard, verified news.