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IRA EPSTEIN & COMPANY
223 West Jackson, 7th Floor, Chicago, Illinois
(August 14, 1997) STOCK INDICES: THE S&P 500 STOCKS INDEX–The December S&P contract moved in tandem with the price of 30-year Treasury bonds this week because of inflation concerns. Tuesday the Redbook report showed national retail sales up 0.9 percent in the first week of August, compared with July. This news triggered a major sell-off in the stock and bond markets. The December S&P was down 15.05 points to 937.75, which is down quite substantially from its high of 969.20, which was set only a few days ago on August 7.
Technically, the December S&P contract could go all the way down to the 900.00 level, and still be well above the bullish trend lines. The 900.00 level simply represents a 25% retracement of the giant move we have seen since the middle of April, 1997. Long term, I would not be betting against this powerful bull market. It is my opinion that we should still be looking for buying opportunities whenever the market tests these support lines.
Today, Wednesday, the Producer Price Index dropped unexpectedly for the 7th straight month which continues to indicate that inflation, at the production level, is not present. At the same time, the July retail sales shows that consumer spending is off to a strong pace. With this news, the bond market is holding small gains.
Bob Gulley
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