Magazine article American Banker

Futures: Psychology May Hold Prices Higher

Magazine article American Banker

Futures: Psychology May Hold Prices Higher

Article excerpt

CHICAGO -- A sudden swing in market psychology may hold pices of interest rate futures higher -- for the next few days at least.

That is the opinion of most traders. But since the latest polls show that 91% of Treasury bill futures traders are bullish, as are 70% of the players in Treasury bond futures, a contrary opinion is a little hard to come by.

While figures of this magnitude are usually enough to prompt contrarians to take the opposite view, as long as they remain in the minority their impact on prices will be limited.

Many traders were surprised that prices bounced higher in the latest week. But their views changed as the markets rallied, and now they seem content to try to press prices a little higher before seeing what happens next.

All of which should leave Treasury bond futures within striking range of their June contract high of 73-8/32 set on Jan. 30. Some traders believe momentum might carry prices through that level; others expect the rally to run into very strong resistance there that will prevent the level being breached.

"that is a key level. I expect it to be tested this week," said Norman Frey, a futures specialist at Northern Futures Corp.

He believes prices will lodge in a narrow trading range as momentum slows near that resistance level. This will be seen as an opportunity for many to take profits, while those who missed the up move will be waiting to buy any price dips. The net result? Consolidation around 73-8/32.

Ron Kimmel, a futures specialist at Prudential-Bache Securities Inc. …

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