I have been speaking about options plays on T-Notes for months now and I will do it again today because what I believe will be a vast move and shift in that market space touches so many people. It is extremely important to evaluate your portfolios and your exposure to Bonds, T-Notes, Fixed Income products, etc. If you haven’t yet positioned yourself for protection or for the impending move, may I suggest now as the time for action.
Americans love their bonds and have viewed these instruments as a “safe” haven for years. When people get scared in the markets they run to bonds as a “risk off” scenario. The trouble with this looms in the fact that yields and interest rates will rise and this causes prices to fail when the yield shift occurs. Keep in mind that we do not have to wait for the Fed to take action in order for this market to move.
This Daily chart shows the dramatic pricing failure that we experienced in just 2 months based on chit-chat at the Fed about when they would taper in addition to other market forces. It represents a ballpark $9,000 move per contract. This is the type of momentum that we want to be present for and the type of move in which we are participating.
This week I spent 15 minutes or so doing a Mini-Webinar on this market and when I took the screenshots for it just 3 days ago, this is what the Daily chart looked like:
(10 Year T-Notes-08-12-13)
Notice that we were unable to break well above the 127 level and were resting around 126-15.
Today, we have found failure again and have had lows below 125 even:
It is important here to note that following the drastic failure we did retrace a bit, we did consolidate, and now is a great time to be paying attention and on the watch for the next impending failure. The fail that we’ve seen again over the last few days this week tells us once more as reaffirmation that this market is ready to come down. It’s as if we rest on the brink in this market and one slight nudge will send the whole thing reeling. The questions are: What have you done about it? Are you ready for it? Do you have a stake in the game that would allow you to potentially move with it and not be burned by sitting on the sidelines?
Our Weekly chart:
This chart illustrates the consolidation since the last large failure. Once more, the strength of retracement has not been that strong. I do not personally foresee a massive rally on T-Note pricing and that is why I am writing to you today. Be aware, be proactive and respect the conversation that these charts are trying to have with you.
The Monthly chart on our 10-Year T-Notes illustrates the dramatic rising trend that has existed for the last six years. I have also highlighted on this chart, the fact that we are currently trying to break the trendline. Even a decent retracement of the overall trend here without a massive failure will lend itself to quite a shift in pricing. A trend reversal, which I believe more likely, could lead to years if not decades of bearish nature in this market.
It is now your obligation to yourself to do your due diligence and evaluate where you stand and what you can do for your portfolio.
Learn more about the pressures involved and how to play this opportunity by watching my Mini-Webinar that I conducted this week: Taking Advantage of the Treasury.
Don’t sit idle as the Fed and Fixed Income threaten your future. Make attempts to protect, preserve and potentially grow what you’ve worked hard to earn. Use your options wisely and remember, that we are here to keep your options clear.
Lindsay Hall is Chief Market Strategist with commodities specialists RMB Group. Get the latest futures and commodities commentary from Lindsay and the RMB Group on our Big Move Trades--an online report offering trading ideas backed by research. Questions about this report or trading futures? Contact us online. Follow us on Twitter @RMBGroupFutures. Read disclaimers here.