Thursday, August 9, 2012

New plan...time to buy dips in bonds

A pretty exciting development has occurred in the bond market for Market Profile traders.  If we look at the ZN price action from the bond auction to the present (2 hours of market activity), a clear buying profile has emerged with decent volume.  In bell curve language, this would be described as a "P up."  Zoom in on your ZN 5min charts from 1pm thru 3pm to observe this pattern.  2 of these patterns in a row delineates a new trend.  We just witnessed the first.  Combine this pattern with the knowledge that todays down move in bonds was completely dominated by primary dealers selling 30yr bonds to setup for todays 30yr bond auction, and we can easily see where this is heading.  I'd bet money (and that's what trading is after-all), that we will see another "P up" in the next 24 hours.  At the very least, the low print in ZN should have been seen for the time being.  I do not think this (133-05) will be revisited. 

With the days center of value at 133-13+, and the days Value Area Floor representing the "buy zone" (where product was bought in size), the probability of there being another uptrade in bonds over the next 24 hours in close to 85%.  The definition of "buy a dip" in this context is about 133-10 in ZN.

Hopefully, there will be some bullish stock movement overnight to help us buy a dip in bonds.
I'm setting alerts in my thinkorswim platform to go ding ding if the market gets near this level overnight.

Good luck trading....govttrader out...

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