JULY/DECEMBER COPPER

Copper spreads have been quite firm as the nearby deliveries are maintaining large inversions against late 1997 and early 1998 contracts. This is not surprising considering that outright prices have been trading higher for the entire year due to good demand for nearby supplies. However, the recently expired May contract weakened late in its life to close at a discount to the July; the current spot June contract also is under the July. These price patterns could mean that the supply tightness is easing. However, spreads remain extremely inverted from July forward, despite July losing about 300 points against the December from a 1000-point inversion. Therefore, we recommend buying December and selling July if the inversion expands back to the 1000 level, risking 200 points from entry and looking for July's premium to narrow to the 600-point area.

OCTOBER/DECEMBER HEATING OIL

Despite a very strong spread performance by the recently expired June contract, current spread relationships weakened as outright prices came under pressure last week. For instance, the front-month July delivery has fallen to about 130 points under September from a discount of about 100 points. This two-month relationship remains narrower than the September/November spread (which we already have recommended) and the October/December spread, both of which are beginning to approach the full carry of about 170-180 points. There is a strong seasonal tendency for both the September and the October deliveries to narrow their discounts versus the deferred months as autumn approaches, in anticipation of users stocking up to meet cold-weather demand. Therefore, we recommend buying October and selling December at 170 points October discount, risking 40 points from entry and looking for October's discount to narrow by at least 80 points.

LONG OCTOBER/SHORT DECEMBER CATTLE

At 205 points December premium, with an objective of 100 points
December discount, risking to 365 points premium December.

LONG SEPTEMBER/SHORT NOVEMBER HEATING OIL

At 170 points November premium, with an objective of even, risking to 240 points November premium.

LONG JULY/SHORT AUGUST PORK BELLIES

At 210 and 30 points July premium, with an objective of 250 points July premium, risking to 60 points July discount.

LONG 2 JUNE S&P 575 PUTS/
SHORT 2 JUNE S&P 670 PUTS

At 35 points credit collected twice, with an objective of zero,
holding the position as long as the market is above 670.

LONG JULY/SHORT AUGUST PORK BELLIES

At even, closed out at 50 points July premium for a 50-point profit before commission.

June 9, 1997
Donald M. Selkin
Prudential Securities, Inc.
One New York Plaza,

Consensus National Futures and Financial On Line Index

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