(March 11, 2002) FINANCIAL INSTRUMENTS: NOTES AND BONDS--The fixed income markets took it on the chin last week as prices collapsed across the board. While the weekly trend briefly turned bullish on the latest rally, T-notes failed to break above weekly confluence resistance and are now testing nine-month lows. These markets are factoring a robust economic recovery that is believed to become a reality latest this year. For now these markets have dropped too far too fast to blindly sell them short. Traders should look for the first test of importance resistance levels to establish a short position.
EURODOLLARS--The trend in short-term interest rates remains bearish with recent rallies being rallies to resistance levels. Traders who followed the short covered purchase recommendation in the September contract (sell the future and buy a call option for protection) that I wrote about in recent issues have got a great trade going. When we consider the implications of the CRB chart I showed at the beginning of this issue it is likely that this could be the beginning of a new long term bear market.
Kevin Riordan and Danielle Bourbeau www.riordanfutures.com