The Hightower Report

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

While the Treasury market looks to come in above the prior two closes on the charts, the trade is probably hesitant to drive prices sharply in either direction ahead of the FOMC statement that will be released later today. In fact, with the FOMC statement today expected to be accompanied by individual Fed member interest rate forecasts and perhaps by inflation targets, many traders might take a wait and see attitude. However, some Treasury market support might be present this morning from the Euro zone situation, which in turn might be fostered by the avalanche of Press commentary flowing from the Davos conference as that coverage has tended to focus on the negatives from Europe.

The US Treasury market garner some support from news that the UK 4th quarter GDP was negative and also because that reading was slightly below market expectations, as that in turn seemed to keep the fear of a global recession alive. On the other hand, the BOE MPC voted 9-0 to keep its QE efforts unchanged and they also suggested that there was a slightly reduced nearer term threat of a sharp contraction.

In looking ahead to the scheduled US data flows today, market expectations call for a minor contraction in pending home sales figures. Following the home sales release will be an 11:30 AM FOMC statement release, a mid day auction of $35 billion in 5 Year Notes and then a 1:15 Fed Press conference.

With the new format from the Fed offering additional information, it is difficult to predict the reaction in Treasury prices, especially with the rate and inflation forecasts lacking historical reference. Also due out today, is a report on mass layoffs, which could attract some attention, as the flow of scheduled data recently has been a little thin. At least for the coming 8 hours, the focus of the Treasury trade is likely to increase its attention to events on this side of the Atlantic, especially since the Greek debt talks have seemingly returned to square one.

With weaker equities to start, steady demand for the auction yesterday and unresolved Euro zone issues, the bull camp might think that the recent lows are capable of holding up prices. On the other hand, a clean sweep of better than expected US scheduled data and overtly upbeat dialogue from the US Fed, could revive the bearish attitude that seems to have dominated the US Treasury markets since the January 18th highs.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

Apparently the markets have mostly discounted the end of week credit ratings downgrade from Europe, as global equity markets are showing overnight gains. In fact, with Euro zone inflation readings overnight also prompting talk of easing from the ECB, the trade has found a number of issues to distract attention from last week’s downgrades. Even results from a Spanish debt auction overnight appear to have provided some fresh optimism for the equation this morning, as falling yields in the Euro zone go a long way in reversing the anxiety that was put in place late last week by the S&P. Sentiment might be drawing an additional lift from favorable Chinese data overnight, as portions of the trade have come to the conclusion that a downtick in Chinese inflation and signs of weakness in the Chinese GDP figures, have opened up the potential for Chinese easing. However, the slowing in China was limited and that in turn could tamp down fears that China might be flirting with a hard landing. With German ZEW economic expectations overnight showing a massive improvement to a reading of -21.6 from -53.8 in the prior reading, it isn’t surprising to see a quasi risk on tilt in place to start the US holiday shortened week. In the US action today, the market will have a somewhat thin scheduled report slate, with the Empire State Manufacturing report the only report due out. Expectations call for a modest increase in the Empire State figures and that might serve to embolden the bears in Treasuries further, especially if equities see additional lift in the wake of the data. There will be some key financial sector earnings released this morning and in the wake of somewhat disappointing JP Morgan results last week it is possible that bank earnings could damped the initial bullish tilt in equities and physical commodity markets. In looking forward, the markets will see a relatively light US scheduled data slate this week, with Industrial Production and PPI reports due out later this week but those reports aren’t expected to markedly alter existing sentiment.

The Commitments of Traders Futures and Options report as of January 10th for U.S. Treasury Bonds showed Non-Commercial traders were net short 34,694 contracts, an increase of 5,966 contracts. The Commercial traders were net long 15,942 contracts, an increase of 3,503 contracts. The Non-reportable traders were net long 18,752 contracts, an increase of 2,463 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 15,942 contracts. This represents an increase of 3,503 contracts in the net short position held by these traders.

US Treasury 10 Year Notes showed Non-Commercial traders were net long 25,067 contracts, an increase of 15,921 contracts. The Commercial traders were net long 11,164 contracts, an increase of 4,497 contracts. The Non-reportable traders were net short 36,232 contracts, an increase of 20,419 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 11,165 contracts. This represents an increase of 4,498 contracts in the net short position held by these traders.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

Treasury prices remained strong throughout the trading session Monday, but it was clear that other flight to quality markets like gold and silver were being overlooked in the wake of the most recent wave of concern over the Euro zone. Renewed concern toward Italy was seen after a downgrade of that sovereign debt to just 5 levels above junk overnight and that keeps the Euro zone anxiety theme in a front and center position. Surprisingly, US Treasuries aren’t seeing additional upside action in the wake of the Italian ratings news, especially since Treasuries were given a psychological boost by statements overnight from a Chinese newspaper, which suggested that the Chinese government would continue to purchase US Treasuries. In another failed reaction, US Treasuries aren’t seeing any definitive overnight lift from a Harvard Business review survey of 1400 international business leaders who apparently feared the world is falling back into a recession. Perhaps Treasury prices became technically overbought from the sharp range up move to start the new trading week yesterday and perhaps the market has paused because of the lack of scheduled economic readings from the US yesterday. With the market seeing US housing starts and permits today and the beginning of a 2 day FOMC meeting, the Treasury trade might return to more of a US economic focus. Expectations for the Housing starts and permits call for slightly weaker or unchanged readings, with some economists holding out hope that ultra low interest rates might have cushioned the US housing market from what seems to be a deteriorating economy.

Overnight European numbers from Germany suggest that the rate of slowing in the German economy was decelerating. In other words, the rate at which things are getting worse in Germany is slowing! All things considered, the US and global economies are generally thought to slowing and US and European officials don’t seem to be doing everything possible to remove the uncertainty that is largely being fostered by their lack of leadership. While the focus of the markets seem to be heavily focused on the ebb and flow of the Euro zone debt situation, a very large measure of uncertainty is also arising from the lack of patriotism and statesmanship from US leaders. In other words, the political agendas in the US and the election of 2012 continue to take precedence over the economy. Perhaps the inability to get the second half of the necessary spending cuts in place, before the deadline, will be a good thing, as then mechanical cuts in spending will take place and the politicians can rightfully claim they didn’t vote to cut payments to their backers. In the short term, the market focus will remain on the Greek and Italian debt situations, with a temporary shift in focus toward the US housing situation this morning. With a two day FOMC meeting starting today, speculation on the operation twist program is likely to rise, but traders and analysts generally think that the program won’t have a noted impact on the economy. With a slight attempt to bounce in equities early this morning and the Treasury market potentially short term overbought into yesterday’s highs, a modest corrective track this morning is not that surprising.

Unless there is surprise forward movement on another payment to Greece, it might be difficult to remove the flight to quality vibe in US Treasuries, especially with the Chinese seemingly leaking news of their support for US instruments overnight.