COMMODITY REVIEW AND OUTLOOK

195 Route 6A, Suite 6, Orleans, Massachusetts

(August 14, 1997) STOCK INDICES: S&P 500–I remain uneasy that the S&P is following the bonds, not leading. For the time being, renewed strength in the dollar could provide support, but I remain cautious, and suspect that rallies remain a sale. Dollar weakness may increase, in a snake eating its tail kind of perspective. Investors may jump out of the dollar if it appears that the U.S. market is not doing well, and may liquidate stocks if the dollar is not doing well.

RECOMMENDATION–In just a few words, I am growing increasingly bearish. Stay cautious, and if not very aggressive and well capitalized, stay out. I suspect recent lows are going to be taken out very briskly. Support basis September remains in the 924.00-928.00 area, and further support may appear near 916.00- 917.00, 911.00, 907.00, 904.00 and as 900.00 is approached. Aggressive traders could sell rallies to the 930.00-935.00 area with 300-500 point stops or over 942.00, and take profits in the 907-911 area. However, I suspect a rally to near 141.00 is possible, and more conservative traders might sell in that area with 300-500 point stops for a hard break. Most option players should stay on the sidelines for now, but aggressive option traders might buy puts on a rally for a hard break.

M. Steven Morgan

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