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COMMODITY INSIGHT
152 Ennis Lake Road, Ennis, Montana
(September 22, 1997) FINANCIAL INSTRUMENTS: I mentioned in the last issue of this newsletter that bond prices appeared to be ready to move higher. And if they did, I stated “the coming week will prove to be very bullish for stocks.” How bullish has it been for stocks you ask?
From the low set on Monday, September 15 to the high set this week, the S&P 500 futures contract rallied $16,480 per contract. Heck of a week in my book. Actually, the S&P has been in the midst of huge rally since hitting a low on September 11 at 910.25. In the five trading days following the low set on September 11, the S&P jumped a staggering $30,125 per contract.
The strength in the bond market is what ignited this week's rally in stocks. And with bond prices now less than a full point from a one-year high, it is hard to say just where stocks are headed. But of this I am certain–it is almost impossible to be short shocks when bonds are strong. This week proved that theory once again.
Regardless of how strong stocks and bonds appear, my work continues to suggest that a top in both markets is in the process of being carved out. Therefore, sell (1) December NYSE Composite at the market when the December S&P rises to 975.00 or higher. The last time the S&P hit that level shorts were also suggested. And that recommendation was a dandy. So, let's try it once again.
Jerry F. Welch
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