U.S. Bond Futures See Liquidation

First-time jobless claims unexpectedly fell by 7,000 to 340,000 in the week ended March 2, the lowest since the period ended Jan. 19, according to data from the Labor Department in Washington. That's now two days in a row with very positive labor market data from the U.S. and the U.S. equity indices are continuing to rally, with the MAR 13 emini S&P 500 trading up 4.75 pts to 1543.75.

Everyone is waiting for the big employment numbers, Friday, and the biggest mover could end up being the bond market. If we get a big surprise to the upside, we could see a big sell-off in the U.S. bond market. The JUN13 U.S. 10-yr. note is down 14 ticks today, and is experiencing some weakness as the recent jobs figures have surprised to the upside.

Wheat
One of the big stories in the grain markets is in wheat. Wheat futures have been in a strong and steady downtrend since trading over the $9 level last November. Today, MAY 13 Wheat futures are down $.01 to $6.82. We see strong resistance right below the $7.50 level and see the first key support/target level at around $6.70. If wheat does get a big liquidation down to the low $6′s, we could see a big short covering rally. Also, The Energy Department’s Energy Information Administration reported that natural gas in storage shrank by 146 billion cubic feet to 2.083 trillion cubic feet in the week ended March 1.

Natural Gas is one of the biggest movers on the commodities board today, trading up $.11 to $3.58 (APR13 contract). Natural Gas has been in a volatile but clear uptrend since last May, and we believe this market could continue to march higher, possibly testing the $4 level before the year ends.

We focus more on the U.S. 10-year note today. This market is been in a pure range trade since last August, and we look for the breakout to occur to the downside. We have resistance at 132 for the JUN13 contract, and our first support is very close to being hit at 130 ’16. Our next key level to watch for is 129 ’16. For this market, tomorrow’ labor report could be huge. If we get a surprise to the upside, we would not be surprised to see the bond market tank and for the 10yr note to approach the 129 ’16 level.

Jason Rotman is President of Lido Isle Advisors, and Managed Futures & Options investment firm in Newport Beach, CA. Mr. Rotman has been featured on Bloomberg TV as well as Marketwatch.com.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. TRADING COMMODITY FUTURES AND OPTIONS IS SPECULATIVE, INVOLVES RISK OF LOSS, AND IS NOT SUITABLE FOR ALL INVESTORS.