wmeubank@ocp.kcmo.com
TECHNICAL DATA MARKET REVIEW
Interest Rates
SEPTEMBER BONDS: Bonds breached critical 110.04 (110.22 June)
resistance levels mentioned last week, and while we are long and happy,
the contract has pulled back and is approaching supports at 110.04-06.
The June 6 breakout reached the 50% retracement of the 12/2/96 high-4/7/97
low at 111.20 (June) and both daily and weekly charts remain bullish. However,
with daily stochastics stalling in overbought territory, a near-term rest
is expected. Supports lie at the May 13 high, 110.09, the May 28 daily
trendline at 110.06, and the top of the 12/2/96 weekly trendline at 111.01
(June). These levels offer good back-drop for new longs, and will remain
pivotal for continuation of the recent breakout. A reversal below 109.24
will alter our bullish enthusiasm. Upside targets lie at the 62% retracement
at 112.28 (June).
DECEMBER EURODOLLARS: Eurodollars also displayed strength on June 6,
but have under-performed the long end, retracing barely 38% of the 12/2/96
highs, 94.23 (September), and falling at the 40-week moving average to
the tick, 94.21 (September). Nonetheless, the weekly charts look very constructive,
and both MACD and stochastics are just beginning to rise from oversold
territory after generating buy signals early last week. With Euros quickly
retracing to daily support at 93.77, the April 28 trendline, look to buy
dips to 93.64-77. If daily supports can hold, next targets lies at the
94.03 February 26 high, and the 50% retracement of the 12/2/96 high at
94.28 (September).
Commodities
AUGUST GOLD: Gold remains below the November 1996 trendline, coming
in this week at 348. The bullish divergence we were looking for has already
pushed gold to 347, and weekly MACD still suggests potential upside. However,
with the contract well below the 62% retracement of the 1/1/93 low to 2/1/96
high at 361, a 100% return to the monthly lows is likely. Look to sell
against the 348 trendline, and target new lows. Monthly supports lie at
326-337, the January '93-March '93 lows.
JULY CRUDE OIL: Crude oil continues to fall from the May 14 22.43 high, slamming through our April 4 20.00 trendline. Daily charts remain bearish, and no supports exist until the weekly time-frame. With the contract trading at weekly February-March 1996 lows and September 1995 highs, expect consolidation between 18.30-19.00 after the recent violent losses. Weekly MACD has stalled after recent weakness, but has yet to confirm the new relative lows. Potential strength may offer a chance to sell a bounce to 20.00.
Dollar
U.S. DOLLAR/YEN: We did not get the bounce we were looking for, as USD/yen
continues its descent before finding supports at 110.62. The currency has
since bounced trading at 113.90 as of this writing. While the weekly charts
still maintain a bearish bias, the potential bullish divergence mentioned
last week remains. Also, MACD is approaching the zero line for the first
time since February 1995, and the first attempt to break this barrier generally
results in a failure. Therefore, with the daily charts suggesting further
gains, a return to the 116-117.00 area is likely, and offers good location
for new shorts.
U.S. DOLLAR/CANADIAN DOLLAR: We alter our bearish stripes on USD/CAD
following recent price action at the former 1.3828-44 resistance, now support.
USD/CAD has been consolidating at the 1.3850-60 area this week, creating
a bull flag on the daily charts. Coupled with higher highs and higher lows,
and rising oscillators, we anticipate a break above the top of the flag,
coming in at 1.3884. Also of note, the recent (June 3) Commitments of Traders
data reports commercial traders net short -30%, while small traders are
net long +30%. This extreme divergence will precede a large move, and we
prefer to side with the smart money. While USD/CAD has pulled back to 1.3800
as of this writing, we look to buy dips for a break above 1.3900.
U.S. DOLLAR/DEUTSCHEMARK: USD/DEM continues higher, but the broad range
remains well defined. Short-term daily studies offer bullish arguments,
and stalling weeklies may allow it. USD/DEM could see potential strength
to the top of the range. However, with the overall weekly picture negative
look for rallies to 1.7400, the June 6 highs, as an opportunity for new
shorts. The May 21 daily trendline at 1.7024 will keep the currency afloat.
Stocks
It is inevitable. Just as we write about potential weakness in the Dow and S&P, both indices move onto new all-time highs. Our attempt to hope for a pullback was in vain. Next resistance? Measured move targets and round numbers offer decent targets in this situation.
Weekly studies continue to rise after having a chance at a brief respite,
and further upside is imminent. The 150% extension of the 7/15/96 low to
3/10/96 high is at 7848. And while there, let's go for an even 8000.
June 12, 1997
Roman I. Dutkewych
Technical Data
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