wmeubank@ocp.kcmo.com
TECHNICAL DATA MARKET REVIEW
Interest Rates
SEPTEMBER BONDS: September bonds continued to slide lower, and the technical picture is starting to look very bleak. The daily chart continues a pattern of lower highs and lower lows, and with daily MACD quickly approaches the zero line, we expect momentum to accelerate to the downside. A break below the zero line on a daily basis would be very significant, and would occur for the first time since March 3. More importantly, we have identified a double top on the weekly charts, at the December 2 high of 116.28 and the August 1 high of 116.31. The August 4 break of the April 28 trendline at 112.26 provides technical confirmation, and we recommend aggressive shorts on strength. Weekly stochastics have already crossed bearishly, and MACD is turning over as well. With the contract trading at the bottom of the April 28 weekly trendline at 113.20, look to sell strength with targets at 111.21, the 50% retracement of the April 14 low (106.12) to the July 28 high (116.31).
DECEMBER EURODOLLARS: December Eurodollars also appear weak following the August 4 break of the April 29 trendline. Daily MACD continues to fall, but is approaching the zero line, and backed by a bullish cross in daily stochastics, the contract may find near-term support at 94.00. However, the weekly charts are starting to turn over, and traders can look to sell against the August 8 and 13 highs at 94.11, or against the bottom of the April 28 trendline coming in this week at 94.21. Downside targets lie at the 38% retracement of the April 15 low (93.30) to the August 1 high (94.24) at 93.87.
Commodities
DECEMBER GOLD: December gold received little follow-through after the August 8 break below the July 7 trendline on August 4 (bottom of the daily symmetrical triangle), reaching 321.0 before finding support. However, with the contract trading back against the bottom of the July 7 trendline at 332.5, the daily charts offer an excellent risk/reward trade against the top of the July range at 334.3. Daily MACD is stalling at the zero line, and stochastics are also overbought. Traders can look to sell against 332.5 as the measured move of the triangle break remains at 310.0.
SEPTEMBER CRUDE OIL: Our bias is increasingly bullish for crude oil following the August 8 bounce off of the June 20 trendline at 19.49. The weekly chart looks very healthy as both MACD and stochastics continue to climb after generating buy signals on July 28. With the contract trading at 20.37, we recommend longs against 20.00 with stops on a break below the June 20 trendline at 19.53. Target 20.88, then 21.75.
SEPTEMBER CORN: Our longs against 250.4 worked out well as September corn hit 246.4 on August 11 before resuming its bull trend. The daily picture remains bullish with MACD and stochastics continuing to rise. Also note that weekly MACD has generated a buy signal following a potential bullish divergence. With the contract trading against the 260.0 gap created on the August 12 gap, longs are strongly recommended. Monitor the August 4 high for continuation, as upside targets remain at the May 2 high of 283.2.
Dollar
SEPTEMBER YEN: The June 11 trendline passed with flying colors on August 6, as the contract reached 8810 before selling off, trading at 8525 as of this writing. The daily chart remains bearish, continuing a pattern of lower highs and lower lows, and we continue to look to sell strength. Resistance lies at the 8590 daily center bollinger. Monitor a break of the August 6 low of 8406 for continuation to the downside to the April 4 low at 8240.
SEPTEMBER DEUTSCHEMARK: We expect the D-mark to continue its recovery this week following the August 6 5303 low. The daily MACD histogram has climbed above its signal line, generating a buy signal. Also, the daily chart has developed a pattern of higher highs and higher lows, and we will remain bullish above the August 6 trendline at 5389. Look to buy dips and target the May 27 trendline at 5520. Stay long on a break of 5520.
SEPTEMBER CANADIAN DOLLAR: The September Canadian Dollar exceeded our downside targets, reaching 7178 on August 12. This downside break puts the contract below the April 18 wedge at 7199. The daily chart remains bearish, and more importantly, the weekly chart is turning negative as well. Weekly MACD is generating sell signal, and as long as the contract can hold at 7200 by the end of the week, the April 28 low of 7155 is within reach. Traders can look to sell against 7215-22, with stops above 7250.
Stocks
SEPTEMBER S&P 500: The September S&P 500 sold off sharply on August 8, breaking firmly below the 943.73 daily center bollinger band for the first time since the beginning of the April 14 rally. This gives rise to great concern. Daily MACD continues to fall bearishly, and the daily chart has started a pattern of lower highs and lower lows. This allows for the drawing of a new trendline off the August 7 high, and we will remain bearish below 933.03. With the contract failing at the trendline as of this writing (trading at 929.00), shorts are recommended for new relative lows. A break below the August 13 low at 916.00 would be very bearish.
August 14, 1997 Roman I. Dutkewych
Technical Data
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