In association with

Market Bulletin 24th September 2010

Are Bunds recovering?

The Technical Trader’s view:
Euro Bund Continuous 137
136
135
134 MONTHLY CONT. CHART
133
Cont. Triangle 132
131
126.53/52 130 The Bund’s long-term chart
Parallel channel from 1995 129
128 is fascinating.
127
126
125
124.60 the High from 2005 124 The breakout of a long-term
123
122
parallel channel was
118.48 High
121
120
reversed, but there appears
119
to be good support from the
118
117 top of the parallel channel
116
115 and the price congestion
114
113
that formed the continuation
112
111
Triangle that drove the
109.66 Low 110 market further on up.
109
108

15000 Look closer.

10000
5000
x100
AS O D 2006 A M J AS O D 2007 A MJ J A S ON 2008 A M J J A S O N D 2009 A M J J A S O N D 2010 A M J AS O ND

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with
Euro Bund Dec 10

133.5
DAILY CHART
133.0

131.82 Prior 132.5

Low resistance
132.0
Looking specifically at the
61.8%
131.5
December contract we can see
130.37 Jun High (2.5% yield)
131.0 the very short-term rationale for
130.5 the bounce in the monthly
130.0
chart- a completed bull falling
50.0%
129.5
wedge.
129.0

Continuation Triangle
128.5
Note too, the 50% retracement
126.53/2 Prior 128.0
Pivotal High from weekly support
continuation chart 127.5
March 2009
127.0

126.5
and the proximity of the 2.5%
126.0
yield support at 130.37.
125.5

Wedges are not the most

1000000

500000 reliable of the signals, and there

21 28
July
5 12 19 26 2
August
9 16 23 30 6
September
13 20 27 4
October
11
is still telling resistance above
the market, for example, the
band of Fibonacci and prior
Low resistance at 131.82.

So we are not yet entirely

convinced of the short-term bull
case. But the seeds of a turn
are in place.

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with
The Macro Trader’s view:
The story of the Bund throughout much of September was one of decline as traders first took
profits and then went short. The Bund had enjoyed a long rally as traders fretted over the
global economy and more specifically the US economic recovery, but sentiment changed early
in September. Why was that?

There are several reasons:

1. German economic data had been very strong, suggesting the Euro zone as a whole
would be dragged better by the German locomotive,
2. Fed Chairman Bernanke in a speech let it be known that the Fed could do more to
help the US economy if the US recovery weakened further, and
3. The US non-farm payroll report released at the beginning of September, was better
than expected, turning sentiment even more positive.

The impact on the markets was clear:risk aversion subsided, allowing stocks to rally throughout
much of the month, drawing traders away from bonds and back into equities, as safe haven
trades lost their allure.

So why now are stocks under pressure and Bonds, including the Bund beginning to rally?

Again there are several reasons, but mainly:

1. Euro zone data has turned weaker over recent weeks, with today today’s Euro zone
PMI composite survey coming in weaker than expected, led mainly by weaker data from
Germany, and
2. The recent FOMC policy statement which again saw the Fed pledge to ease further if
the economic recovery weakened further, weighed on stocks this time.

So crucially the Euro zone economy that was fuelling the Euro zone recovery; Germany has
cooled off, and the very promises from Bernanke that earlier in the month helped fuel the rally
in stocks, has caused traders to rethink.

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with

Instead of taking the promise of additional easing by the Fed as a positive for the economy,
they are instead thinking the economy is in bad shape for the Fed to even consider a new
round of QE. The result is clear: risk aversion is again rearing its head and the safe haven
status of Bonds is once again being sought.

This change in sentiment could drive the Bund much higher, at as far as the highs of August,
as traders are now thinking the rest of 2010 is going to be something of a struggle for German
and Euro zone growth.

Moreover this might re-awaken sovereign debt fears that seemed to have been put to rest over
the summer months, since weaker GDP will make the austerity measures adopted by many
Euro zone countries seem even more unpopular.

Mark Sturdy
John Lewis
Seven Days Ahead

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.