Bonds On The Burner

Bonds are getting burned this morning, more than a full session ahead of tomorrow’s FOMC madness. And I’m not talking junk bonds either – as I’m typing this ZF, ZN, and the ZB are all on a tear to the downside.

Forgive me for being a bit skeptical here but either someone knows something I don’t (very much possible) or fear and panic are starting to kick in early. Either way this is excellent turf for bottom feeding market rodents like yours truly – when there’s blood in the streets and all. That said, I’m definitely waiting for the short term panel to paint a convincing price pattern as I’m not in the habit of stepping underneath a falling sword.

One of the reasons given for the recent demise of junk bonds is a series of downgrades of junk-rated energy companies. Speaking of which – crude is actually looking pretty juicy here and as I’m feeling frisky today I’m grabbing a 1/3R long position with a stop below 30.5. I often enjoy taking emotionally difficult campaigns, especially when the crowd seems to be uniformly pointing the other way.

The Zero was extremely useful yesterday a pretty solid divergence helped some of my subs grab a few long positions ahead of EOD ramp higher. I myself am sad to say that I missed out on that one as I was busy working on a project. But I’m rooting for you guys, especially given that the spoos has clawed its way higher overnight. Move your stops a bit higher but give it enough space to sustain the whipsaw we’re guaranteed to get tomorrow.

Santa came early this year and, since we’ve been a bit less naughty, has bestowed upon us a little present. The dip down yesterday solidified a falling diagonal support line on the daily E-Mini panel (on the right), which will become extremely handy moving forward. If we dip lower in the future the ES 1980 mark will be one to be watched for confirmation. Similarly, if we drop into hades tomorrow (or later next year) then ensuing any rips higher will most likely find new sellers near here. So mark this one on your charts – you’ll thank me later (I prefer if you sign up a sub actually).

By the way – not to pad my own shoulder but my 1990 target for a pre-FOMC low was rather spot on. Some may laugh but those old fangled P&F charts rarely have let me down.

BTW, I’m kicking myself for missing out on this setup on the EUR/USD earlier today. What a juicy short setup as daily resistance was in line with the weekly.

In my defense – Scalpius was already in it and I had just fallen out of bed. Kudos for tagging the very high though – it certainly has the timing right.

However not all is lost. Here’s the USD/JPY which it has been riding six ways from Sunday. It’s still long right now and with a bit of luck it’ll hit the target at 121.8.

That’s all I got right now. There’s really not much to add to yesterday’s market update. I won’t be posting ahead of the FOMC announcement tomorrow but expect an update shortly after once the dust settles. In the interim please keep it frosty and don’t get sucked into emotional trades. See you on the other side.

The future is now – so don’t bring a knife to a raygun fight. If you are interested in becoming a Zero subscriber then don’t waste time and sign up here. A Zero subscription comes with full access to all Gold posts, so you actually get double the bang for your buck.

Cheers,