For years when the bond futures pits actually had live traders doing price discovery through open outcry, many large traders would only show up for the monthly unemployment day. Generally the bonds would break or rally violently usually a point or a point and a half depending on that number. There truly was nothing like standing in that pit or in that room at 7:29:55 right before the number was released.
A palpable feeling of anticipation, like waiting for a tidal wave to ride if you were a surfer… trade skillfully and you had a great opportunity.. trade stupidly, and you’d wonder how long you could hold your breath while you waited for the white water to subside so you could breath again..How long can you hold your breath.
My first UN-employment as a trader was memorable. The number came out lower than expected, signaling the fed would have to raise rates to ‘cool off the job market’ lol (remember those days?) Unemployment was around 3 or 4 percent, and the democrats were still screaming that it was too high… now its at 9 and probably heading for 10, and the fed has no more tools in the bag… interest rates are at zero..
Someday either next year or, depending on your level of pessimism, perhaps next century, the US economy will once again be firing on all 8 cylinders, or all 12 as the case may be… at that point, we will see the fed tightening and tightening to try to rein in all this inflation they have created, debasing the dollar, to get us through this crisis..
In any event, tomorrow at 730AM CST, the US Unemployment figure (or as we liked to call it UN-enjoyment figure) will be released. From the looks of things today, some people perhaps got an advanced warning that it would be worse than anticipated… Perhaps tomorrow, the bonds will open sharply lower, then as all the traders who were not short as of today joint the herd and get bearish, perhaps then we will see the worst action of all, a sickening short covering rally, spurred on by the insane volatility which has characterized the last 2 years in these markets.
Thank you computer trading, which allows people to disguise orders, place 10,000 lots which disappear if a one lot gets filled on the order, iceberg orders which disguise real legitimate 1000 lot orders as a series of 5 lots which just re-load endlessly until the 1000 lot is filled. Deception like that would not have been tolerated in the trading pits.
If someone bid for 1000 there were 5 huge traders who might actually say ‘sold’ to the order.. if the filling broker then smiled and said, no wait, my hands were down, and I only needed a one lot, someone would have stabbed him in the face with a pen, and/or never traded with him again. Same thing if a broker tried to disguise a large order by filling it as a bunch of 2 lots.. at some point, someone would put a print high or low against him, and then miraculously the whole pit would explode because that filling broker would now be hung on the remaining order he had not filled.
That broker, then, would owe his customer a fill on what ever was traded through, and no broker wanted to be holding a position by mistake on a 5 lot, much less on a 1000 lot.. The risk exposure was not in his best interest, to put it mildly.. Brokers got paid 1.50 or 2 bucks a contract..
A thousand lot order meant 1500 or 2000commission, however, having a 1000 lot position was a potential 1,000,000 error if something came out and the market moved a point on some unexpected disaster.. And no, the treasury secretary was not going to bail out a bond broker in Chicago… So the risk in errors actually was a determining factor which helped keep the markets 1) more orderly, and 2) more efficient… large orders would be absorbed with much less volatility than with screen based trading…
As this blog goes on, I will talk more and more about how I feel the open outcry markets were more efficient and actually much more beneficial to the hedgers who actually needed the market than they are today.. We have taken a hedging instrument, and turned it into what it is today…
Ah well, change is good, isn’t that what people say? lol
Anyhow, my advice to you tomorrow, is unless you are already sitting on a ten handle profit in your spoos, i would wait 5 minutes and trade after the initial insanity around the number expires… Its a long day, and there will be plenty of time to catch a good trade if one is patient… No need to ruin your day by 731 am on the flip of a coin.
I would imaging there will be some follow through from the outside markets if its extremely bearish. A large move in the Dow, or spoos will undoubtedly weigh psychologically on the commodities.
On a bullish note, I watched Jim Rogers on CNBC Asia talking about how bullish he was on all commodities, based solely on the gradual debasement of the US dollar. A double edge sword, but a way to profit if inflation comes back like it was in the 1970’s …Maybe Obama will then break out Jerry Ford’s WIN button, whip inflation now…lol like the average American consumer had a hand in eliminating inflation…
20 percent interest rates did that.. it squeezed out every ounce of inflation, and one day, when the Fed has to calm this market down again, they will do the same, other wise we will be paying ten bucks for that Starbucks coffee which now costs 1.80…
C