Don't get technical with me! 11/13/09

Yesterday's long bond auction was very interesting. I had been bearish going into it, went long some TBT, was feeling very good about myself until...

That my friends, is a bullish reversal. I've circled the auction time in red. The auction was a disaster, with almost a 5bps tail. I'm sure there have been worse long bond auctions, but not many. Anyway, the sell-off lasts for about 10 minutes before the short covering began. It took us all the way to the previous high on the day (yellow line) before tailing off slightly at the end. Still, quite a move.

Interestingly, the momentum chart has converged, producing a slightly bullish signal.



Otherwise I'm having a hard time seeing much in the charts. Looks range bound to me. In fact, I ran the tick-by-tick data on the old 10-year from September to now to see where the most trading has occurred.

42% of the trades have occurred between $101.2 and $101.9, which translates to roughly 3.48% and 3.39%. I had noted the 3.48% as a major support/resistance point in the past, so this graph validates something I'd been seeing in the chart. Anyway I highlighted in yellow the price we closed at today, meaning we're right there in the thickest part of the recent range.

I wanted to put on some 10-years today thinking we'd hit 3.48%, but we just didn't quite get there. I'm going to be patient and wait for us to get back to that level, then play it from the long side. I might be willing to leg into it at a level slightly below.