Euro−Bund future –Dec 2009

Nicole Elliott from Mizuho Corporate Bank at 10/19/09

Comment: Last week’s pullback is undoubtedly corrective, another balk at the benchmark 3.00% level. From overbought the contract is now almost oversold and momentum is nil. Expect it to form an interim base, probably around 121.50/121.00, around short term Fibonacci support, helped by the rising Ichimoku ‘cloud’. Note also that the Lagging Span should gather support from the candles and Fibonacci support. This is seen as a buying opportunity for an eventual move higher so that yields could drop to 2.50% and maybe 2.25%.

Strategy: Buy at 121.30; stop well below 121.00. Add to longs on a daily close above 122.00 and again above 123.00 for 124.00/124.60 and probably a lot more before year-end.