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TECHNICAL DATA MARKET REVIEW
Interest Rates
DECEMBER BONDS: December bonds continued to strengthen this week, reaching 116.15 before stalling, currently trading at 115.29. We maintain a very bullish bias, and expect recent contract highs to give way. The contract has been consolidating at the top of the September 2, 1996 weekly range following the September 16 trend-run up day. This price action is bullish, and we expect the July 28 high of 116.31 (nearest futures) to break. Also note that ADX has upticked from below 15 on daily, weekly and monthly charts. The fact that all time-frames are bullishly in sync indicates significant gains in the coming weeks. Stay long or buy weakness against the September 17 daily trendline at 115.16, with targets at the February 19, 1996 high of 118.03.
MARCH EURODOLLARS: March Eurodollars have traded sideways following the September 16 rally, currently trading at 94.12. This consolidation has resulted in the creation of a bull flag on the daily charts, a pattern that generally indicates continuation to the upside. Therefore, with daily MACD rising above the zero line, stay long or buy dips against the bottom of the flag at 94.10. Look for a break above the top of the flag at 94.16 to confirm further strength to the August 1 high of 94.19, then the January 27 low of 94.34 (nearest futures).
Commodities
DECEMBER GOLD: December gold rallied this week, reaching 330.2 on September 25, currently trading at 329.0. While daily MACD and stochastics continue to rise after generating buy signals, the contract is quickly approaching the February 28 trendline at 332.2. We recommend new shorts against this long term trendline, and look for a rotation to the bottom of the recent range at 324.3. However, keep stops tight, as a break above here will see an end to the long-term bear trend, and result in quick follow-through to 340.0.
DECEMBER SILVER: December silver remains well-supported above the July 16 trendline at 4701, but due to the fact that this trendline was violate on September 17, we remain cautious and look to sell strength against the August 28 and September 11 highs between 4850-4860. Look for a break below the September 17 low of 4570 to confirm further weakness, but keep stops tight above 4860. A break above here will continue a pattern of higher highs and higher lows, and see silver maintain a bullish bias.
OCTOBER CRUDE OIL: Our bullish bias finally paid off as crude moved to new relative highs on September 25, reaching 20.35 before stalling, currently trading at 20.20. We maintain a bullish bias, and recommend new longs against 20.00. This week's new relative high continues a pattern of higher highs and higher lows, and allows for a new trendline off the September 16 low, coming in at 19.71. Target the August 19-20 highs between 20.55-60 with stops below 19.70.
DECEMBER WHEAT: December wheat continues to make new lows, breaking to 362.0 on September 22, currently trading at 366.0. The bear trend will remain intact below the August 29 trendline at 370.2, and we look to stay short or sell strength for new lows. Daily MACD has broken below the zero level for the first time since May 20, which resulted in 2 months of lower prices. Near-term targets lie at the July 21 gap between 355.0-359.0, then the July 21 low of 343.0.
NOVEMBER SOYBEANS: November beans quickly retreated off the September 18 high if 653.0, currently trading at 639.0. While this failure at new highs questions our bullish argument, the daily structure maintains a pattern of higher highs and higher lows. The July 7 trendline at 629.2 remains intact, and the technical picture will remain constructive until the September 15 low of 627.0 is taken out. Therefore, buy against 627.0-629.0, and maintain targets at the August 4 high of 667.0.
Dollar
DECEMBER YEN: December yen continues to trend lower, reaching 8223 on September 22, and continuing a bearish pattern of lower highs and lower lows. While we maintain a bearish bias, we have identified a potential bullish divergence from both daily MACD and stochastics. The most recent low (8223) was met with a higher low from the oscillators than on the previous trough (8340). Therefore, shorts can look to take profits on a break above the August 7 trendline at 8424. However, this strength will simply offer better location for new shorts against the longer-term June 11 trendline at 8609.
DECEMBER D- MARK: The technical outlook for the D-mark remains bullish, as the contract bounced off the August 6 trendline at 5580 on September 23, currently trading at 5680. Daily studies continue to climb bullishly, and we look for the currency to make a break above the September 15 high of 5732 to continue its pattern of higher highs and higher lows. Stay long or buy dips against 5580 with targets at the July 11 high of 5763. Stop below 5580.
DECEMBER POUND: The British Pound broke above the September 2 high of 16200 and is trading at 16240 as of this writing. This week's price action continues a pattern of higher highs and higher lows, and we expect further strength in the coming week. Daily MACD is crossing above the zero line, indicating that momentum is accelerating to the upside. Buy dips against the recent 16160-16200 highs and target the July 31 high of 16340. Stop on a break below the September 9 trendline at 15946.
DECEMBER CANADIAN DOLLAR: The Canadian Dollar is making an attempt to break out the recent range, currently trading at 7255. This move above the 20-day moving average at 7245 confirms buy signals generated from daily MACD and stochastics. Continue to buy weakness against 7245 and look for a break above the September 2 high of 7288 to establish a pattern of higher highs and higher lows. Eventual targets lie at the May 21 trendline at 7318.
Stocks
DEC S&P 500: We maintain a bullish bias for U.S. equities in general, and the December S&P's present an excellent trade opportunity at current level. The contract is currently trading at 952.70, pulling back to test the top of the August 18 range at 948.17. The daily structure maintains its pattern of higher highs and higher lows since the August 18 low of 905.50. Therefore, buy dips against 948.17, and look for the S&P's to take out the August 7 high of 979.60. However, keep stops tight, as a break back inside the range could see a rotation back to the bottom of the range at 979.60.
September 25, 199 7Roman I. Dutkewych
Technical Data
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