wmeubank@ocp.kcmo.com
(May 9, 1997) S&P 500 INDEX: The SPUZ rallied to 834.10 as Wednesday's rally ended. Bonds have jumped 23 tics to 110-07 June. The new up leg started at 736.70 basis S&P June. This was expected as the intermediate-trend correction halted on April 4. The S&P peaked at the 834.10 market this week, rising impressively on Wednesday with an 800-point rise in the last two hours. The trend is up intermediate. The trading sellers and shorting sunk the bonds and stocks on Thursday as S&P gained 5-plus points on the day Thursday. A Fed no move on rates this week was positive. The overseas were quiet this week with a nice rally in European stocks. The FTSE 100 rallied 24 points on Wednesday. The bull of 1997 is not dead yet. Professionals are short for the short-term here as bond yields fell to 6.9% and a jump to 110-07 in June bonds. The GNP numbers still show a recovered economy and inflation in single digits. Greenspan warned of a hike of discount rate in his talks. The results were not far from estimates. The stock market is trending up on a short-term basis as most technicians can see. The latest target was 800.00 hit on the upside Wednesday. We prefer to stand aside now as 810 traded. The next time point to look for a change is May 8. The mini trend is up, major trends are staying negative, except the long-term trend up from the 1987 crash low.
For now we will watch and observe the action. The 800 high was a surprise on Thursday when everyone was watching. The majors were buying. Salomon bought 3000 contracts as stocks jumped sharply, then gave back all to the shorts by day's end. We look for equities to remain volatile until the end of May. IBM fell to 133. and Microgates hit 106.25 before pulling back to 104.25. Good earnings for MSFT this week up 80%. May 8 was a high as expected. The levels to watch are 823.20 and 7150 Dow Jones and we saw our 780.00 high this week on Thursday. If these break either way, we will see follow through to the next support or resistance levels--i.e., 823.20 and 7150.00. This technical picture is clear as in the Dow and others and the NASDAQ breached 1200 on the OTC Composite Index. The other indicators are now mixed up. Most of the buyers have been rewarded this week as averages came back nicely. The other indexes were selling off into lower ranges. Stocks slumped with a 20-point fall on Thursday in the Dow to 6792.25. This was a 252-point rise on the week in the Dow Jones Industrials. The long-term trend is still upward. The great ranges in the S&P continue at 600-900. We now expect it from this market. The next target will be 765.00 and we can see if there is any signals occurring here. Dow and S&P were up in the third week of May 59 percent of the years from 1956 through 1996. The U.S. stocks have a bit more oomph to see. The spring looks to be tough sledding for bulls. Please sell the puts we recommended last week. Go a bit long now as May continues. IBM is the leader in the Dow.
June S&P 500 Index--Position: Close 822.55 up 2040.
David E. Triester
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