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If you have been following this report over the past week or two, you know we hadbeen (annoyingly) repetitively noting the possibility of a round of sell stoprunning that would put the 30-year bond just under 136 and the 10-year notenear 127.  Finally, after weeks of sideways trade the market seems to haveflushed out the week longs and could be headed into higher territory (loweryields). 

Werealize that predicting lower yields with the long bond near 3.5% and the 10year near 2.5% isn't a popular school of thought but if history means anything,this isn't the best time of year to  be bearish Treasuries (bullishyields).  In addition to seasonals, we are beginning to hear pessimisticchatter regarding the governments "super committee" created to cutbudget expenditures.  Similar to the market's infatuation on the nowforgotten debt ceiling debate, it seems the door could be open for unnecessarypolitical drama surrounding the looming deadline for the committee to makeprogress on the deficit.  Perhaps some flight to quality buying could moveinto Treasuries; we believe this despite the obvious fact that such a debatewould be a negative for the U.S. credit rating.  If you recall the Augustdowngrade of U.S. debt (it is a day I'll never forget, but would like to),Treasuries soared. 

Theday's economic news was overall bearish for Treasuries, but followingyesterday's bloodbath fundamentals were trumped by technical trade andend-of-week position squaring.  Accordingly, we could get some back andfilling trade on Sunday night/Monday morning, but overall we are looking forhigher prices.  The first target in the 30-year bond future will be 139'20,but a close above this points to another run at the 144's (and we think we willget it)!  If you are trading the 10-year note, look for an initial move to128'25 and a possible run to 131ish. 

* Due to time constraints and ourfiduciary duty to put clients first, the charts provided in this newsletter maynot reflect the current session data.  However, market analysis andcommentary does.  

**Seasonalityis already factored into current prices, any references to such does notindicate future market action.

TreasuryBond and Note Option and Futures Trading Recommendations

**Thereis unlimited risk in naked option selling.

10-27Clients were recommended to sell the December 30-year bond 130 puts for about28 ticks.

Inother markets....

10-11Clients were recommended to sell strangles in the November Euro (142/128 forconservative traders and 140/130 for aggressive traders), or December crude oil(98/67 for conservative traders and 96/70 for aggressive traders). 

(Our clients receive short option trading ideas in other marketssuch as gold, crude oil, corn, soybeans, Euro, Yen, and more.  Email usfor more information)