Bonds Futures and Crude Oil Futures Unique Patterns

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Many traders are surprised to hear that financial Futures have a Seasonal pattern. They assume agricultural or energy products do, but not so much the financial products. All markets, regardless of financial or physical, have some form of recurring cyclical pattern Seasonal pattern to them. Currency markets usually exhibit a Seasonal pattern at their countries fiscal year end. Some countries will repatriate their currency or perhaps make expenditures to balance their financial statements for year end.

Interest rate markets will typically have higher yields lower prices coming into the April 15th tax season deadline when the government needs to raise cash to pay for tax refunds. Stock indexes like to see sideways price action between June and September during the slow summer months when many investors are on vacation.

Once back from the break the autumn season volatility starts and then we see a rally into year end. The yearend rally is usually called the Santa Claus rally.

These are just some of the typical reasons a financial product could have a reoccurring Seasonal pattern. In this article I would like to talk about a Seasonal pattern for the futures market that Moore Research has found to be a very reliable Interest rate market strategy.

I would like to thank MRCI for permission to use their content for this article. This information is not to be construed as a trade recommendation, price action trading day-trading the t-bonds off pattern exclusively for educational purposes only. I use Seasonal patterns as a market screener each month trying to identify markets that have a Seasonal catalyst to get the price moving in one direction or the other.

Even the best Seasonal patterns can fail on any given year. All it takes is an event occurring this year that had not during the testing period of the prior 15 years. This could be weather, geo-political, war or any supply disruption. A good Seasonal trade still takes analysis to time your entry using a good level.

A price action trading day-trading the t-bonds off pattern in the direction of the Seasonal is very helpful as well. And of course, price action trading day-trading the t-bonds off pattern written plan describing how a trader will manage the trade once in it. Chart 1 shows the 5 year Treasury Seasonal pattern in blue. The yellow vertical box represents the optimal Seasonal window.

The blue line represents the 15 year average price action of the 5 year Treasury contract. Looking at the price action coming into the Seasonal window we can see the market is heading in the right direction to confirm, so far, the Seasonal pattern this year.

Even with the talk of the Federal Reserve raising interest rates in September, the price is going higher ignoring the news. Note this trade uses the December Futures contract due to the length of the trade taking you into First Notice day for the September contract. MRCI does a good job keeping a trader out of delivery situations. Much like Chart price action trading day-trading the t-bonds off pattern, price on the 10 year Treasury has started up coming into the Seasonal buy window.

Will prices keep going higher? It is up to the individual trader to monitor their positions with protective stops and a price target if best canadian stock trading platforms. During this time of the year the government does not have to auction as many Treasuries for raising cash going into the United States fiscal year end Sept Perhaps this is the reason for such a high frequency occurrence.

This Seasonal pattern should have an impact all across the yield curve with the long end 30 year Treasury responding the most aggressively. The long end of the maturity curve usually acts more violently as there is more fear holding longer dated Treasuries. Usually a trader would enter this Spread if they feel that interest rates are going to decline. Chart 3 is a chart of the BON Spread. The dark black line represents the actual Spread this year and the blue line represents the 15 year average price pattern.

This is referred to as an Inter-market Spread. The interesting thing about these 3 trades is how across 2 different styles of trading, Futures and Spreads, both have a very high percentage price action trading day-trading the t-bonds off pattern rate. When both of these line up it helps support the trade in some cases.

If you feel Seasonal trading might benefit your trading, MRCI still has their complimentary trial subscription. Other years where you prove your worth, they are the ones worth celebrating. Disclaimer This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk.

The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not price action trading day-trading the t-bonds off pattern positions in Financial Instruments discussed in this newsletter.

Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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