wmeubank@ocp.kcmo.com
VIEWPOINT TECHNICAL OUTLOOK
DECEMBER BONDS: Our bullish bias was confirmed by the test of resistance at 118.17 last week. We are looking for the bullish trend to continue through this week, as traders roll over to the March contract as the front month. Look for bonds to make headway towards major resistance at 119.02, although weekly charts are beginning to enter overbought territory, which makes a break of this level that much more difficult. Daily charts are still providing positive readings on both our momentum oscillators and our directional oscillators. However, key levels needed for confirmation have yet to be achieved. We will remain cautiously optimistic, but we'll be quick to change our view if bonds break support at 117.05.
S&P 500: In last week's article, we were calling for a retracement back to the breakout level at 914.62. This prediction was met with this past week's lows of 905.96. Although the S&P fell further and faster than we had anticipated, we are sticking with the side of the bears. Daily momentum oscillators are still providing increasing bearish readings, however we must warn you that they are beginning to enter oversold territory. Weeklies paint even a darker picture, as they have plenty of room to go before the outskirts of oversold territory are approached. Provided that the double-bottom support at 903.68 can be taken out, our medium-term target is at the lower daily volatility band at 885.67. If the 903.68 level can hold, we will look to sell on approach of the daily volatility band at 930.83.
DOLLAR/DEUTSCHEMARK: The retracement of the long-term bearish trend which we were calling for last week, has gotten underway. Momentum oscillators which were deep within oversold territory are now providing very bullish readings. We expect this correction will continue through this week at least, with our near-term target remaining at the daily volatility band at 1.7391. Longer-term, we remain adamant that if the reversal gains strength, the 31.8% retracement at 1.7788 becomes the next upside target. Both daily and weekly momentum oscillators are pointing towards this level over the next couple of weeks.
DOLLAR/JAPANESE YEN: We have put out several warnings now over the past few weeks regarding the extreme levels on the weekly ADX readings. As our opinion that U.S. Dollar/Japanese Yen is poised for a major move is well established, we will leave this issue at bay for now. Instead we will turn our attention to a shorter-term, bearish outlook. Daily momentum oscillators are extremely overbought at this time, while directional oscillators are beginning to break down. Look for a break of the 60 level on the daily RSI indicator for confirmation of the trend reversal. Until that time, we must treat the next wave of trading as merely a short-term pull-back. If however, this level is broken, look for a test of the daily volatility band at 122.27. If weeklies follow suit, we could be in for a long hard fall over the next month or two.
November 13, 1997Gregory P. Fortuna
Thomson Research
22 Pittsburgh Street, Boston, Massachusetts
Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com