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COMMODITY INSIGHT
152 Ennis Lake Road, Ennis, Montana
(November 23, 1997) FINANCIAL INSTRUMENTS: The week ended with U.S. Treasury bond prices at their highest level in 21 months while U.S. equity prices, basis the S&P 500 futures contract, ended the week at a one-month high. This week's rise in the S&P can be attributed entirely to the strength of the bond market.
And Treasury bond prices have been on the rise in large part due to the collapse in the CRB and Goldman Sachs indexes, along with a twelve- year low set for gold prices. In addition, bond prices have been helped by the currency crisis now strangling Asia. It's no great secret that bond prices thrive in an environment of doom and gloom. And for the past month and a half, doom and gloom has been the norm in the world's markets.
Interestingly enough, my work does not suggest one should be a buyer of bonds at current levels. My work continues to suggest that bond prices are in the process of carving out a long-term top. However, that top may not materialize until nearby futures rise to the 122-00 level. With nearby bonds ending this past week at approximately 119-00, the 122-00 level remains a bit higher than what we are now looking at.
The S&P has rallied $63,500 a contract in less than a month while bond prices are pushing a 2-year high. At this time, both markets are too pricey for my blood.
Jerry F. Welch
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