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I take the advantage of a new contract to try getting a broader picture.
On the attached weekly graph, I see the Bund june contract forming a square rising triangle with an horizontal resistance at about 144,35. As the Bund contract entered into the structure by below, it is expected it will exit from above.
Average True Range is at a low level, which might indicate that a strong move is to come soon (at week scale).
While prices are broadly within 138,50 - 144 range for ten month (since may 2012), in the same time frame, Eurostoxx rose from 2130 to 2725 and DAX from 7420 to almost 8000 !
Therefore, I am convinced that as soon as stocks will enter into some sort of decline, the 144,35 resistance will be overcome, giving a target 600 points higher.
On another post I will give an analysis of friday session and my view for the first half of the week.
Friday session opened with a down gap, filled the gap and went up to 142.95, a shade lower than the 143.00 level given in thursday post as the neck line of a Head & Shoulders strcture. It then came back to open level. Upon release of the US figures, market dropped down to 142.27, missing the 142.00 target and 9 ticks higher than january 24th high (142.18). In after 5.30 pm session, market rose back to almost open level.
Result of the day is a very neat hammer, almost a doji with volumes concentrated around 142.75 and in the
142.35 - 142.50 area and a valley in between. POC is at 142.72.
Volumes associated to the 4 hours red candle (from noon to 4 pm) are double of those associated to the following green candle (from 4 to 8 pm). I therefore think that the up move from 142.27 comes from reactive buyers and that such reaction could be short lived.
As long as the 143.00 resistance level holds, on a 4h basis, the 142.00 target is still valid. It is to be noted that daily MA 20 will be at 142.03 tomorrow. Upped hedge of the cloud is still at 141.80.
As can be seen on the 4H graph, MA 44 and 23 made the Death Cross and I am expecting MA 23 to act as resistance if price move down in the coming days.
It is only if a 4H candle closes above 143 and above MA 23 level (at 143.12 on friday evening) that I will be positive on the Bund market.
During the last week, every day POC was lower than the previous one. In the coming days, would the POC level stabilize, that will be an indication that the down move is loosing momentum.
Monday I am expecting a quite day where the abovementionned valley could be visited.
A down week, the daily chart shows five down days in a row. Three low range days at the start of the week and then two news-driven wide range days.
On Friday the market was driven by two news/reports. First the positive NFP report which took the market down. A pull-back followed, but a second down leg did not materialize because the news of Fitch downgrading Italy pushed the market back up to its open.
The 5-day volume profiles (Today = weekly profiles) show 2 levels of resistance and 4 levels of support.
Two levels of Resistance
• 143.32 (PoC)
• 143.15.
Four levels of Support
• 140.95
• 140.70
• 140.64
• 140.03.
Over the last weeks essentially there are two levels standing out: one around 143.10 and one around 141.00. Both separated by an area of thin trading made on the 25th of February. This thin area stretches from 141.80 to 142.60, a 80-tick range. On Friday the market stopped just shy of the midst of this range.
The daily volume profile for Friday shows two peaks: one around 142.70, the VAH and one around the PoC (= 142.46).
Stock markets rose uniformly last week. Economical reports were not entirely positive, but all-in-all US Economy seems to recover. There is a lot of talk about stock markets being overbought and an unavoidable "crash" but I'm not so sure. Where should investors park their money? Buying treasuries is a losing trade. Some investment entities are forced to do so, the FED and Central banks buy treasuries to support the economy/stabilize some countries. Rising interest rates will change this, but a few basis points won't be enough. Maybe we will see another year of "Sell in May and go away".
Next week Monday and Tuesday are void of reports. Tuesday - Thursday sees auctions of 3-Yr, 10-Yr Notes and 30-Yr Bonds. Friday is packed with reports.
There may be some follow-through buying to Friday's late-day buying on Monday morning . Else I'm afraid Monday will be quiet, at least till US exchanges open.
An up move to 142.82 should be no surprise, up to 143.00 looks interesting. Depending upon speed, volume and timing of such a move (before/after cash/stock markets open) I think that will be a place to look for a short.
Forgot to mention: This Sunday US starts to use Summer Time, Europe will follow on the last Sunday of March: 31st March 2013.
Well, first, I'm convinced that stocks will eventually make a down leg (down 10%+) this year, too. Of course, the only problem is, at which level that downturn will start..
Secondly, I recognize the horizontal resistance and a significance of a potential break-up of that line. But, 600 points? That would imply a yield of about 1.00% in GER 10y - a new record and so on, right? It's a brave call and I don't want to challenge the potential or reasons for that, could happen, why not?
I'm more like a stock investor and tend to think about gov bonds with a yield approach (level and direction), not from the "points" point of view. With a "yield point of view" a 600 points uptrend for FGBL seems farfetched. Comment appreciated, thanks
Friday has two distinct "balance" areas, we will see which takes preference (if any) on Monday. Otherwise we are in a downward channel after reaching the top of a LTF range. We took off after hitting the thinnish area between 142.57 and 141.86. The upmove was quite swift with responsive buyers. Will they be there tomorrow as well?
There are small balancing areas within the channel, however the downtrend seems intact for now.
The 600 points is a target given by the hight of the square triangle at its beginning. I agree with you that 1% in GER 10y does not make much sense and that therefore such target is probably out of reach but it is the target given so far in the case of an upward exit
Obviously, the exit from the triangle could also be on the down side, breaking the supporting oblique and on such side there is no problem to find the 600 points.
I have the feeling that stock market rise is mainly due to central banks actions while healthy level of Bund prices not only does reflect the excess of cash in the financial markets but also that investors holding euros are not so positive on the sovereign risks other than Germany.
Actually I am puzzled by the rise of the stock markets since june 2012 and the stability of Bund prices during the same period : something is wrong and should be corrected sooner or later but how is still to be seen.
Regarding the weekly structure of the Bund future market, my point is that a big move should happen when the Bund future contract will exit from the triangle but down or up, god only knows and I will follow, as usual....
Well below average volume (just 60% of average) and well below average range. A down day, an inside day. Though the PoC (=142.72) is up from Friday's and the VA sits on top of Friday's.
Market traded in a 22-tick range till about 17:00 CET and then dropped out of this range to make its LoD.
ESTX and DAX and NQ made an inside day too, though up.
In the 5-day volume profile chart the PoC dropped to 142.72.
Four levels of Support
• 141.65
• 141.00
• 140.64
• 140.03.
The little down trend which started last Monday is not broken. The chart pattern in the daily chart suggests a continuation of this down trend.
For tomorrow there are are no reports scheduled. So a copy of today must be expected.
In the 60-minute chart the area 142.70 - .72 looks interesting: It's the PoC in the TPO charts both for Friday as well as today and it is today's PoC. It is Friday's VAH and today's VAL. Though today's lack of volume and volatility makes it difficult to attach much meaning to it.
I think it is more likely that the market will continue to drop. For this scenario I would like to see an open above 142.60 and an up move to 142.72 during the first hour. Up to 142.80 would be ok too. If this happens on normal volume I will be looking for a short.
A move down should take the market below Friday's PoC (142.46) or preferably below Friday's low; then I'll be looking for a long position.
Close on the low of the day, unfinished auction.
The downtrend channel widened a bit due to more balancing, it might have been some short covering. We will see if the downtrend continues tomorrow.
SUPPORT
141.86
142.22
142.53-60 (?)
RESISTANCE
142.73-77 protruding HVN, might serve as resistance
142.95
143.08
The session was a quiet one and prices visited the valley.
In the morning the Bund contract tried to rise but 142.87 was the maximum achieved and after trading sideways around the open level, market ended at its low with a drop during the after 5.30 pm session. Volume is therefore concentrated within the IB (142.65 - 142.85) and POC at 142.71 is same as yesterday : the downard move is loosing momentum.
Head and Shoulder target at 142.00 is still valid. Daily MA 20 will be tomorrow at 142.10 and upper hedge of the cloud is still at 141.81. Before such levels, friday's low (142.27) could see some reactive buyers.
On the upper side, high of the day (142.87) is the first obstacle and then the 143.00/10 area.
The 5 days profile shows a big node by 142.75 and a much smaller one at 143.10.
Tomorrow, as there are no figure released, I am expecting a quiet day with a smooth continuation of the downard move.
