(March 25, 2002) FINANCIAL INSTRUMENTS: T-BONDS AND T-NOTES--The fixed income markets collapsed in recent weeks on the assumption that a strong economic recovery is underway. I believe this is a major trend change at hand that will have repercussions across many markets. Higher interest rates have always been accompanied by higher commodity prices. From a technical point of view, daily, weekly, monthly and yearly charts have all turned bearish. This does not mean to go out and sell short T-note futures today. The good news is that this is an orderly sell off that will likely give us many opportunities to sell rallies to strong resistance levels, the key is knowing them in advance. A look at the weekly charts of T-notes illustrates a bear market that is heavily oversold. Fibonacci confluence resistance is above the market between 105-15 and 105-29. Interest rate markets have historically not been strong trending markets and often perform retracements. If we are patient we will have an opportunity to sell short on a rally in the next few weeks. However, we need to be very diligent with regards to monitoring these markets for good short entry positions. Interest rate markets may not see these levels for years to come. The long-term charts suggest to me that interest rates are at the onset of reversing a long term down trend that began in the Reagan administration in the early 1980's.
EURODOLLARS--The trend remains very bearish in Eurodollars and traders who sold short the deferred contracts and bought put options for protection have done very well. I am monitoring Eurodollars for a possible short entry on the next market correction higher. The daily chart of the June contract shows that the market will likely encounter resistance at the 9760 area. Monitor the daily hotline for short recommendations in the next few trading sessions.
Kevin Riordan and Danielle Bourbeau www.riordanfutures.com