Grecian Formula

Greece has never had this much power since Alexander the Great.  Greek officials, if they were trading futures, would have made a fortune just by trading off their own headlines.  I'm sure they would have made enough over the years to pay off their debt!  Really, it is puzzling to see the market so enamored over such an insignificant issue, but it is fear of the unknown.  Fear of Grexit.  I am sure the market would make a very slight dip, and rally huge after Grexit, because it would get rid of this uncertainty, and you would no longer have a cloud hanging over the market.  I don't buy the contagion argument, because the bond markets in Spain, Italy, Portugal, and Ireland are telling you that there is no contagion risk.  Spain and Italy 10 yr yields are trading below US Treasuries.

This range bound trade in the S&P really makes it hard to trade the index, and the commodity bear market is making it boring to trade most commodities, which are stuck in tight range bear markets.  So that leaves the bond market, which is giving more action than the conservative fixed income investors want.  There are cries about lack of bond liquidity.  It seems pretty orderly to me, the only time it was disorderly was when Treasury yields spiked lower on October 15, and I am sure the Fed doesn't mind lower rates.  I doubt you have the kinetic energy in this bond market to cause a spike higher in Treasury yields, especially considering the large number of speculator shorts in the market right now.  Remember, the spike lower in Treasury yields on October 15 happened because the bond market was still leaning short at that time.

The best trading is in the bond market right now, which is fine with me.  I have transitioned away from the dull S&P futures a long time ago.

I am thinking that the Treasuries have found a bottom, and we should carve out a range over the rest of the month, between 2.30% and 2.48%.  My plan is to trade that range, the only fly in the ointment is the Fed meeting next week, where I am reluctant to be long into because it seems like with this positive economic data, Yellen will lean hawkish, which could surprise and scare some fixed income fund managers into panicking.  I think we will maintain this higher yield range for at least another month, until we get enough weak hands out of this bond market and the sellers dry out.