wmeubank@ocp.kcmo.com
COMMODITY INSIGHT
152 Ennis Lake Road, Ennis Montana
(December 3, 1997) FINANCIAL INSTRUMENTS: By mid-week, Treasury bond prices rose to the 119-16 level, basis March futures. That level represents the highest price for Treasury bonds in nearly two years. Thus far, bonds are 13 full points off the lows set in April and 8 full points off the lows set in mid- September. The bond market has been and is the steadiest and most certain bull market on the board for the past eight months.
It is the rise in bond prices that continues to support the equity markets. History has shown that equity prices tend to follow the debt markets regardless of direction. And that is exactly what is and has been taking place. Bonds rally and stocks follow.
However, all my long-term work suggests that both markets are pricey and due for a major break. In the case of bonds, such a break will only take place if the commodity markets show some sort of rally is about to take place. A sharp rally in the commodity markets should lead to a break for the bond market.
The Dow and stock indexes, however, have been a follower of bonds and not a leader. Therefore, the equity markets could really take a hard hit should bonds suddenly fall. And that is pretty much what my work is now suggesting.
Jerry F. Welch
COMMODITY INSIGHT |
BARNES BROKERAGE CO., INC. |
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