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TECHNICAL DATA MARKET REVIEW
Interest Rates
DECEMBER BONDS: December bonds face another Employment report on November 7, and while this data will ultimately decide, the short-term technical picture suggests further weakness. Both the stochastic and MACD oscillators are on the verge of generating sell signals following a potential bearish divergence. Note that the recent high of 119.02 on October 28 was met with a lower high from these oscillators than on the previous rally to 118.18 on October 3. While this bearish picture would require a break below the 20-day average at 116.15 for technical confirmation, it provides a strong warning of lower prices in the coming days. However, keep in mind that both the weekly and monthly charts maintain a very bullish outlook, and new longs are recommended against late October lows 115.05-15.
MARCH EURODOLLARS: The daily technical picture for March Eurodollars is also turning bearish, and the 94.12 level will be critical for any further weakness. Daily stochastics have already crossed bearishly, and a break blow the October 29 low of 94.15 would establish a bearish pattern of lower highs and lower lows. However, the longer term picture remains very constructive, and while the November 7 employment data will decide, we prefer to stand aside and look to buy against 94.00-05.
Commodities
DECEMBER GOLD: While the trend for December gold remains bearish, the daily studies have generated buy signals following a potential bullish divergence. The October 24 low of 308.3 was met with a higher low from the daily MACD oscillator than on the previous sell-off to 318.5 on July 7. While a break above the October 1 trendline at 323.3 is required for technical confirmation, we look for gold to do better this week.
DECEMBER CRUDE OIL: December crude failed once again to hold onto last week's gains, and we expect a break below the October 28 low of 20.15 to continue a pattern of lower lows and lower highs. Daily stochastics have crossed bearishly, and the MACD oscillator is breaking below the zero line. This indicates that momentum is accelerating to the downside, and a sell strength strategy is required. Sell against 21.00 with targets at 20.00. Stops above 21.11.
DECEMBER WHEAT: December wheat made an attempt to recover following the October 22 sell-off, but the technical outlook remains bearish. Daily stochastics maintain a bearish bias, and the MACD oscillator failed to break above the zero line. New shorts are recommended against the October 22 trendline at 360.6 with targets at new lows to 348.4-353.0.
JANUARY SOYBEANS: Just as we give up on beans, the contract broke above the October 13 trendline on November 3, rallying to 730.0. This has forced the daily studies to turn bullish, and new longs are recommended against the October 2 trendline at 699.6. The weekly studies are very bullish, and further gains are in store. Next resistance lies at 735.4.
Dollar
DECEMBER JAPANESE YEN: December yen established new relative lows of 8145 on November 5, and the technical outlook will remain bearish below the June 11 trendline at 8425. The daily studies have turned over bearishly, and new shorts are recommended against the 20-day moving average at 8039. Target next support at the March 31 low of 8127.
DECEMBER DEUTSCHEMARK: The technical outlook for the D-mark remains bullish, as both daily stochastics and MACD make new highs with price, confirming recent strength. The bull trend will remain intact as long as the August 6 trendline at 5645 is not taken out. Buy dips against 5735 with targets at 5800-41.
DECEMBER BRITISH POUND: The pound continues to establish new highs, reaching 16920 on November 6 following a BOE rate hike. While the daily studies are in a very overbought condition, the weekly chart is just getting started. New longs are recommended against the October 17 trendline at 16612, with targets at 16960, then 17000.
DECEMBER CANADIAN DOLLAR: The Canadian Dollar broke above the October 8 trendline at 7162 on November 5, confirming a bullish cross from daily stochastics. This also established a new pattern of higher highs and higher lows, and new longs are recommended against the October 2 trendline at 7142. Initial targets lie at the 20-day moving average at 7191.
Stocks
DECEMBER S&P 500: December S&P's made a break above the October 22 trendline at 934.75 on November 3, the first stage of a recovery. Daily stochastics and MACD continue to climb bullishly, but a break above the October 17 trendline at 968.45 is require for a full recovery. Aggressive traders can look to buy against the November 4 low of 936.20 with targets at 947.65, and possibly 968.95. We will stand aside.
November 6, 1997Roman I. Dutkewych
Technical Data
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