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IRA EPSTEIN & COMPANY
223 West Jackson, 7th Floor, Chicago, Illinois
(August 13, 1997) FINANCIAL INSTRUMENTS: T-BONDS–Are the chances for a rate hike at the next FOMC meeting imminent? Is the September T- bond contract overbought or oversold?
These and many other questions have yet to be answered, as the latest series of economic data released today gave indications that the economy is still showing little signs of inflation, thus causing the market to rebound from last week's losses due to panic selling after the release of the unemployment data.
The market moved from a 111-31 low to a high of 113-19 before settling up 12/32nd's at 112-27, as the Producer Price Index (PPI) and the retail sales figures came in as expected.
With the Consumer Price Index (CPI) and industrial production being released on August 14th, 1997, the market may receive another boost or take another blow depending on how the figures in the data are interpreted by traders. All opinions are always subject to change as the next series of key economic reports ultimately determines the overall picture of the economy.
TECHNICALS–I still read signs of a decline in the once steady upside momentum in both the key moving averages of closes (18 and 3 day), along with stochastics.
Brian Thompson
T-BONDS–The September bond futures continue to look for direction this week, especially after Friday's sharp move downward due to fears of inflation and the stock market's sharp move downward.
This week's July retail sales and Producer Price Index (PPI) came out on Wednesday. July retail sales showed a 0.6% rise compared to June's revised 0.7% gain. The July Producer Price Index had little bearish impact on the bond market as it continued to show weakness; both overall and core numbers were down 0.1%. In my opinion this caused the bond market to rise 1 15/32 before giving back it's gains and slipping into negative territory due to weakness in the U.S. Dollar. The September bond future closed at 112 27/32 on Wednesday. On Thursday, the bond market will be looking at the Consumer Price Index (CPI) (forecasted at 0.2%) for direction.
I am watching for any information that might influence the bond market and help me determine a possible trend to work with. In my opinion, every report right now will be taken seriously as bond traders try to determine what the Fed will do at the next FOMC meeting.
Technically speaking, if you look at you look at the %K and %D momentum, you find that we are getting oversold. It also looks like futures are forming another sideways channel. But on a fundamental note, I do not expect this channel to continue due to the underlying instability of trading in the bond market.
RECOMMENDATIONS–I am still somewhat bullish on the bond market, but with the stock and currency markets acting the way they have been I am reluctant to recommend getting into a position trade at this time. However, this lack of direction allows for day trading opportunities.
Ole Rollag
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