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800-528-0559(March 6, 2002) FINANCIAL INSTRUMENTS: The double top in T-bonds on the monthly charts is significant. It is highly unlikely the October 1998 high of 111-26 and the November 2001 high of 115-15 will be exceeded. March can often be significant in T-bonds. We could have the high established now. If the Fed tightens in late summer, T-bonds could begin discounting higher interest rates and lower T-bond and T-note prices soon. There are hints of this being reflected in the yield curve. June T-bonds would have to close strongly above 104 to turn bullish. This is highly unlikely now. A weak close by June T-bonds below 100-00 will clearly establish the intermediate top in T-bonds and the low in long-term interest rates. A close below 98-00 by June T-bonds could accelerate the downtrend. It will be important to observe if T-bonds weaken more if the June U.S. Dollar Index closes below 118. We would expect such to be the case.
RECOMMENDATION--Futures investors who have purchased put options in June T-bonds on scale-up strength--hold. Futures investors may sell June T-bonds short on scale-up strength with 103-17 open protective stops. Target 96-98.
R.E. McMaster, Jr.
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