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For: Wednesday 05-12-2010

Bonds Below

The bond market has fallen off quickly after a spike high in flight to quality buying. Last Thursday, when the stock market fell 1000, points we saw investors flock to the US bonds. This leaves what appears to be a simple blow off top pattern. As there is still risk of a retest of the highs, should we see another round of selling in the stock market, we will use options and option spreads for this trade.

Aggressive traders may opt to use futures. As always please consult your personal broker at Great Pacific Trading Company to see if this trade is suitable for your account.

Trade Recommendation: Buy the June 119-00 put for a debit of 20 ticks on a limit. Risk the premium paid. (>$313 not including commissions and fees), Look to take profits if the market trades to 118-00.