Treasury Bond futures had a breakout setup today, as might be expected ahead of today’s testimony by Fed Chair Yellen. Bonds had spent the past two days consolidating around the midpoint of the January – February rally so it was logical to look for a move away from that level today.
Monday was an NR7 day for bonds as they closed around the 151-10 Fibonacci retracement level. As Janet Yellen’s testimony was the first formal opportunity for her to discuss monetary policy under the Trump administration, a large move was possible, depending on what she said.
The Fed Chair’s testimony is always scheduled to begin at 9 AM Central. It begins with a prepared speech on monetary policy and the Fed’s view of the economy; the text of this speech is released at 9 AM sharp as the hearing begins.
In this morning’s Swing Trader’s Insight Morning Watch List I suggested we watch 151-00, the low on Monday, as a downside breakout level for March T Bonds. This would put it decisively under the 151-10 retracement level and the previous day low is the standard reference price we use for a downside breakout.
The prepared text was taken as hawkish, as she stated that the next rate hike could come “relatively soon”, citing strong economic data as a reason to move sooner rather than later. Her statement led to a sharp selloff in T Bonds, dropping below both today’s early low (151-02) and Monday’s low (151-00) in the immediate aftermath of the release of her text.
The break below 151-00 was our trigger for a short sale, and the market fell to a session low of 149-29 in about 45 minutes. The initial stop loss could have been placed around the 151-10 Fib level (also an intraday high this morning) although stops would be moved lower (quickly, in this case) as the market sold off.
Try Swing Trader’s Insight for 14 Days
Swing Trader’s Insight Trial - This swing trading resource is designed to help you improve your trading skills and make you aware of trends and new potential opportunities in the commodities markets. Regardless of your current skill level, access to this exclusive swing trading information will enhance your trading experience.
Swing Trader’s Insight includes access to premium web content.
Swing Trader’s Insight includes an email newsletter subscription.
Swing Trader’s Insight trial lasts 14 days.
Essential Guide for Futures Swing Trading
In this guide, experienced trader and broker Scott Hoffman explains the trading methods he uses to analyze and trade the futures markets and to publish his trade advisory, Swing Trader’s Insight.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.