Potential Double Top In US 10 Yr Treasury Futures

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As China eased restrictions on investing in banks and the ADP employment #’s were released this morning. ADP said U.S. Companies added 118,000 workers in November. The US stock market continues to trade below key pivot levels. Our key pivot level for the DEC12 emini SP futures is 1420, and this morning this market is trading barely below unchanged, at 1405. The market continues to find sellers beneath 1420, as everyone awaits more clarity on the fiscal cliff negotiations.There is hope, and then there is reality. Right now, the markets seem less hopeful and more concerned. But it really just takes one announcement about a budget and tax agreement to completely change market sentiment. We shall see if and when this comes.

Gold futures are now trading below the key level of $1700. Gold has not yet been able to recover from its sharp sell off of last week. We see the next major support level for gold at around $1625, and it looks like gold could be headed to test this level, to the potential disdain of goldbugs worldwide. Silver futures are trading below our key pivot level of $35/oz. Short term movements in silver are classically very difficult to predict, so we will stick to our way of viewing the markets with our “decision level” or “line in the sand.” To us, silver’s line in the sand is $35. As long as silver is below $35, we don’t believe it is a very bullish picture. But if silver rallies up past $35, it will look much more bullish to us.

We focus on the US 10yr Treasury Note futures contract today. We have noted that this market could very well be in a double top formation. It is trading close to its recent high which was placed in November. If the non-farm payrolls # comes out significantly above expectations on Friday, we are looking for a very big sell off of this market. The first major support level we see is right above 132’24. This level could be hit on Friday if the jobs # is very strong. If this market starts to sell off and trades consistently below this support level, we look for selling momentum to continue, especially if we see a fiscal cliff resolution.  We have noted some key trend indicator lines on the chart below.

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