wmeubank@ocp.kcmo.com
FISHBACK MANAGEMENT & RESEARCH
P.O. Box 23798, Lexington, Kentucky
(August 14, 1997) FINANCIAL INSTRUMENTS: SEPTEMBER BOND FUTURES–Our bond market model is neutral. The money market yield curve is bullish but continues to deteriorate, as the difference between short-term and long-term money market rates continues to narrow. The trend in interest rates is, as you might imagine with the most recent action in the fixed income markets, bearish. The trend in long-term and short-term interest rates is higher, and that is a big negative. Sentiment is also bearish. Recently, the level of bullishness among the usually wrong crowd hit a peak at an extremely high level. When the bullishness started to wane, that was a strong indication that selling would ensue. It is unlikely that all the selling has abated, as there are still many more bulls than bears. On the other hand, the action in the gold market is unequivocally bullish. What can you say, gold can't seem to get a break. The latest PPI report was the seventh consecutive month showing a decline. Who needs gold when inflation is dead? Looking at the action in the gold market itself, the answer to that question is virtually no one. When gold prices do eventually start to really head higher, that's when there will be serious pressure on bonds. In the meantime, our composite is in neutral territory.
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