IRA EPSTEIN & COMPANY
223 West Jackson, 7th Floor, Chicago, Illinois
312-207-1800(March 28, 2000) FINANCIAL INSTRUMENTS: BONDS--Bonds had a steady rally last week for the first three days then gapped up to have a very strong Thursday driving all the way to 9720. Thursday afternoon they sold off to close just above 9700. They gapped lower on Friday and gave back all the gains of earlier in the week to close 2 tics lower then they opened the week.
The minutes of the FOMC meeting and comments by an under secretary of the Treasury were the focal points of last week's trading. In the minutes of the meeting released last Thursday it became known that certain policy makers were pushing for a 50 basis point rate hike instead of the 25 actually executed. This creates uncertainty about the timing of the next rate increase. The negative comments about the difference in agency bonds and Treasury bonds sparked a flight to quality in the overseas markets that carried over to the bond opening in Chicago.
This week floor traders are disregarding Greenspan's statement about the U.S. economy being more immune to oil based inflation than in previous times and are keeping their eye on the crude oil prices expecting a reaction to the OPEC meeting Monday. The technical traders are expecting a consolidation of prices but are troubled by certain weekly chart patterns that depict more downside potential. If the bonds close above 9700 twice this week then the technicians are looking for a run at 9818, but they are leaning more towards testing the 9428 level before advancing.
RECOMMENDATIONS--Look for the 9513-9516 level to hold early in the week and would be a seller at the 9608 level.
J.B. Siewers III
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