The markets are reported as of the close Thursday.

The dollar was able to retest Tuesday's highs but then dropped sharply as there were many excuses to take profits. Weak U.S. stocks, comments from Japan and Yeltsin's illness combined to spur a sharp dollar reversal. The dollar looked ready to break sharply to the downside in late trading but was able to stabilize and is a bit higher early Thursday. The daily studies are still positive, but some short-term divergences are evident. A further correction is likely over the near term but there are no signs yet that the dollar rally is over.

DEUTSCHEMARK/U.S. DOLLAR: The dollar pushed up to the 1.7950 level early in London trading but by early NY trading was back to the 1.7800-20 area. More important support at 1.7750-80 and then in the 1.7650-7700 area. The daily chart still show major resistance at 1.8000. The RSI3 did form a slight negative divergence at the recent highs. A break of support will be negative.

Summary–Traders are 25% long at 1.7340-94, stop at 1.7620. Added 25% long at 1.7805-45, stop at 1.7817.

DEUTSCHEMARK/YEN: The cross dropped sharply intra-day but then rebounded late to close just barely lower for the day. The daily indicators have turned negative. A further rally will fail. Traders were 25% long at 73.25, stop at 72.39.

SWISS FRANC/U.S. DOLLAR: The SWF/$ dropped very sharply tied to Yeltsin's illness. Next support at 1.4350-4400. Traders are still 25% long at 1.4045- 4105, stop at 1.4187.

The dollar was under pressure for most of the day as thinly veiled comment pushed the dollar lower. The dollar touched the 128.35 level before rebounding in NY and closed back above the 129 level. It is still edging higher but a further rebound should fail in the 129.80-130 area. The daily studies are still positive for the dollar but most are now declining. A break back below the 128 level should cause heavier selling. The yen crosses also appear to have topped out.

Summary–Traders are 25% long at 126.60-95, stop now at 128.37.

STERLING/YEN: The STG/yen pushed down to the 211 area, but then reversed course as the 214 level was reached by the end of the day. A further rally is likely but would only sell at stronger resistance.

SWISS FRANC/YEN: The daily chart still shows major trading range with resistance at 90.50 and support at 88. The APMosc and many of the other studies are negative. Go 25% short at 89.88-90.36, stop at 90.63.

CANADIAN DOLLAR: The dollar pushed sharply to 1.4280 and still looks positive. Traders are 25% long at 1.3992-4026, stop at 1.4177.

The STG approached the 50% retracement support at 1.6400 again today but once again rebounded back above 1.6500 on the close. A move above 1.6550-6600 will be more positive. The daily studies are negative but very oversold and ready to bottom out. Traders go 25% long at 1.6417-47, stop at 1.6367.

STERLING/DEUTSCHEMARK: The cross is still acting weak as the support at 2.9350-9400 area may not hold. A move back above the 2.9550 level is needed to turn the short-term trend positive. No position.

STERLING/SWISS FRANC: The STG/SWF also still looks weak as a drop back below 2.3750 will be more negative. No new recommendation for now.

MARCH TREASURY BONDS: The bonds have started to edge higher and a test of the recent highs looks likely over the near term. We will look for a rally failure to sell.

U.S. STOCK MARKET: Poor earnings by J.P. Morgan hit the market hard today as traders were looking for a reason to sell. A sharply lower close will be negative for the intermediate term.

December 12, 1997Thomas E. Aspray

APM Asset Management

P.O. Box 15366, Little Rock, Arkansas

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