Monday, August 27, 2012

Undersupply condition has been aleviated

The treasury market's levered players who bought the market last week have taken their profits (between friday and today).  This means that the high probability trend is over, and the market has stabilized at these new higher prices.

So what do we do now?  Well, with the undersupply condition gone, the market should be tethered to some center of value.  With month-end looming at the end of the week, the bias in the treasury market is still to higher prices...but the bias is nowhere near as strong as it was when there was an undersupply condition embedded in the market.  So, with my bullish bias, i will try to find the bottom of the bell curve overnight, buy when the market gets too low...get flat in the middle...and get short with 50% of the position size that i would use when getting long....again getting flat in the middle.

While it looks like 133-25+ is shaping up to be the high mode...only time will tell.  However, if 133-25+ is the new center of value, then 133-20 should be too low in randomness.

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