The Nemenoff Report Bonds Higher, S&P's Lower, Silver Lower

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By Marc Nemenoff | February 1, 2013 1:41 AM EST

Price Futures Group

Financials: Mar. Bonds are currently 16 higher at 143'18 and the 10 Yr. Notes 8.5 higher at 131'14.5. Yesterday: GDP contracted 0.1% in the 4th quarter amid expectations of an increase of 0.1%. ADP Private Sector Jobs Report showed an increase of 192,000 jobs vs. expectations of 165,000. FOMC announced no change in interest rates keeping Fed Funds at 0.25%. Inflation expected over the medium term to run at or below the Fed's 2.0% objective. The Fed will continue to purchase $40 billion worth of agency mortgage backed securities and $45 billion worth of long term treasuries on a monthly basis in order to maintain downward pressure on long term interest rates. It is expected that the Fed will continue this policy as long as unemployment remains under 6.5% and inflation below 2.5%. This morning: Personal Income rose in Dec. 2.6% vs. expectations of a rise of 1.0%. Weekly Jobless Claims were up 38,000 to 368,000 vs. expectations of an increase of 35,000 to 365,000. The result of all this information, the Bonds have rallied in the last 24 hours from an inter-day low of 142'19 establishing a level of support that can be used for short term trading from the long side on breaks with protective sell stops just below this recent low. Medium term resistance is now the 145'24 level and longer term resistance the 146'20 area. My bias remains long term negative, however, for the short term I do not want to "fade the Fed" on breaks and caution against selling support. Should the market have a sharp rally into the 145'15-146'15 area I will once again be looking to position myself on the short side of the market preferring to use a strategy of using a combination of futures and options 1) sell futures and buy out of the money calls. 2) sell futures and sell out of the money puts. If you are risk adverse, consider either buying puts or put spreads. Monthly Unemployment Report tomorrow.

Grains: Mar. Corn is currently 2'2 lower at 738'0, Mar. Beans 12'2 lower at 1466'4, Mar. Wheat 4'6 lower at 782'2 and Dec. Wheat 5'2 lower at 814'6. Tightening supplies pushed the Corn to medium term resistance in the 740'0 area and exports just below expectations have set the market back a bit this morning. Technically if the market closes above the 742'0 level it should signal a rally to the 754'0-760'0 level where I feel the market will start running into heavy resistance and will be willing to go short should the market rally to the 764'0-770'0 area. I still like out of the money call spreads in Dec. Wheat.

Cattle: Apr. Lc are currently 27 higher at 133.20 and Mar. FC 25 higher at 149.35. Technically near term trends have turned up as the market has left a chart gap from 131.35 to 132.05 as a result of last Friday's Cattle on Feed Report inspite of sluggish demand for beef because of consumer resistance to current high prices. Mar. FC on the other hand has broken back and filled the gap left after the Report as the market reacted to high feed grain prices. I will be a buyer in Apr. LC on a break below the 132.60 level with an initial protective sell stop at 130.90.

Silver: Mar. Silver is currently 27 cents lower at at 31.91 and Apr. Gold 10.00 lower at 1670. If you remain long Apr. Gold from the mid 1650's either take profits or raise your protective sell stop from your break even level to 1663.00. Yesterday's high of 1683.00 has set resistance for the moment. As I mentioned earlier in the week the 200 day moving average is 1668.00, a level the market needs to consistently close above in order to turn the trend up. We remain long Silver.

S&P's: Mar. S&P's are currently 1.00 lower at 1494.25. Support is currently the 1483.00-1486.00 level and resistance the 1502.00-1507.00 area. We continue to hold a small short position. Monthly Unemployment Report tomorrow morning.

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