2/26 Morningline

The price of 20- and 30-year bonds issued by the U.S. Treasury (TLT) has gapped up for the second morning in a row.

At the high so far today, TLT is trading 3.5% above the low set Feb. 18, the day before the present rise began.

In six days of trading only once has TLT closed below its opening price.

Higher bond prices mean that traders expect lower interest rates ahead. The Federal Open Market Committee -- that's Fed Chairman Ben Bernanke and his merry band of bankers -- set short term rates. The longer term bonds tracked by TLT are far more market driven and move in response to a far more complex universe of causality.

TLT's macd is in its second bull-territory day, and money flow index is declining a bit. The mfi rarely hits extremes on these bonds, but mainly meanders in the neutral zone. Blue chip stocks (SPY) opened at the top of yesterday's trading range and pulled back, at first slightly and then with acceleration. The macd on SPY remains in bull territory for the ninth trading day, although it is declining toward the zero-line. The money flow index is rising perilously close to the 80-line, a point that signifies an overbought condition. The dollar has halted its precipitous slide against the yen, opening 3.4% below the high set on Feb. 19. USD/JPY is in the second day of a macd bull signal. Among my holdings, XHB fulfilled a trader's nightmare after I opened a bear position yesterday: It rose 1.7%. Today it has pulled back from that.

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My stop/loss on this position is around $16. That price is well within upside resistance, and is about a dime above the average true range -- how far the price tends to move in a single trading day.

At expiration the March bear call spread (-c15/c16) is profitable anywhere below $15.48.

Let's run the numbers, at about 10:05 a.m. Eastern:

Indicators:

• Blue chip stocks etf (SPY) is trading at $110.19, entered macd bull mode at close on Feb. 15 (at $109.74)
• Fear index or volatility (VIX) 20.50, bear (bullish for stocks), Feb. 12 (22.73)
• Treasury long bonds (TLT) $91.61, bull, Feb. 25 ($91.18)
• Corporate junk bonds (JNK) $38.52, bull, Feb. 18 ($38.40) 
• Emerging markets (EEM) $38.66, bull, Feb. 16 ($39.43)
• Gold (GLD) $108.61, bull, Feb. 12 ($107.04)
• Oil (USO) $38.39, bull, Feb. 10, ($36.51)

Forex currency pairs:

• Dollars per euro (EUR/USD) $1.3572, bear, Feb. 19 ($1.3611)
• Yen per dollar (USD/JPY) ¥88.93, bear, Feb. 25 (90.14)

Stock option holdings, March expiry:

• AKS, iron condor (p19/-p20/-c25/c26), $21.53, bear, Feb. 26 ($tbd)
• CAL, covered call (-c19), $20.05, bull, Feb. 16 ($19.88)
• CSCO, iron condor (p22/-p23/-c25/c26), $24.30, bull, Feb. 8 ($23.50)
• GCI, covered call (-c15), $15.37, bull, Feb. 18 ($15.27) 
• WFC, iron condor (p26/-p27/-c29/c30), $27.07, bear, Feb. 26 ($tbd)
• XHB, bear call spread (-c15/c16), $15.46, bear, Feb. 25 ($15.72) 

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