MARCH BONDS: The near-term bearish correction that we were looking for, took place last week, with our profit objective at 118.00 achieved early on. For this week, the return to new contract highs has set up another selling opportunity. Although the break of resistance at 119.26 is very bullish in the short term, a failure to close above key intra-day resistance at 119.24 should once again send the March bonds lower. If however, the 119.24 is taken out on a closing basis, next resistance does not come until the 120.14 level. Risk/reward continues to favor selling-strength for the now, however we will be quick to change our view if bonds break through resistance.

S&P 500: We were able to short S&Ps from the weekly upper volatility band at 979.08 last week. Our stops at 999.96 were barely missed as the market traded to a weekly high at 999.50. Finally, our profit objectives were hit at 955.40. For this week, continue to be bearish S&Ps, this time looking to sell a break of the daily volatility band at 960.04 (at the time of writing S&Ps were trading just above it at 962.30). Daily momentum oscillators are backing our view, as they are locked in a sell mode. Also, daily directional indicators have broken through key support, suggesting that the medium-term uptrend may have run its course. Our downside target this week is at the prior low at 900.61.

U.S. DOLLAR/DEUTSCHEMARK: The 1.7794 level was finally taken out on a closing basis last week, but it may have been a case of too little, too late. With prices once again falling below key support, now at the 1.7762 level, we are forced to switch our outlook to neutral/bearish. Once again, we will view an upward penetration of the 1.7762 level on a closing basis as a crucial event. If this occurs, we will be forced to cancel any and all sell orders. However, until such time, we will look to sell intra-day tests of the 1.7750-70 area. Look to exit the trades at 1.7300 level.

U.S. DOLLAR/KOREAN WAN: As the situation in South Korea continues to dominate the headlines, we have decided to forego our usual U.S.$/yen comment, in order to provide our view on this subject. As we have continually restated on our daily newsletters, we feel the situation in South Korea is equally effected by perception as it is by the recent rash of bearish fundamentals. There is a severe lack of confidence in the South Korean economy and therefore in the Korean Won right now. This lack of confidence is evident in the overabundance of bullish sentiment indicators on U.S.$/KW charts. The Korean Won has suffered four consecutive limit down days against the dollar, at the time of writing. So far this year, the won has lost 51% against the U.S. Therefore, we, like most others in the marketplace, are remaining staunchly bullish U.S.$/KW. Look for at least two more limit-up days this week, with the won continuing to push into uncharted territory. Unfortunately, the devaluation has been so swift and so drastic, that the technical picture has become marred. Look for the fundamentals to continue to dominate this market, and for now, that's bad news for South Korea and its currency.

December 11, 1997 Gregory P. Fortuna

Thomson Research

22 Pittsburgh Street, Boston, Massachusetts

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