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JUNE U.S. DOLLAR INDEX:
The dollar has hit the upper end of our downside target in the 96.30 region, but should rise further because other foreign currencies have not quite hit their downside targets of 5747 for the June DM and 6686 for the March SF. With Greenspan indicating that monetary policy may tighten, the dollar will probably continue to move higher into late March. The wide yield spreads between the U.S. and other G-7 countries as well as continued weak European growth suggests that the other countries will not be able to match any U.S. rate hikes. Consequently, the dollar will continue to rise until June, and possibly as late as September. Because the Europeans' only way out of the recession is to lower their currencies, the dollar will continue to appreciate for at least another quarter.

The EMU is currently in a mess due to the European recession. The Masstricht requirements have forced tightening of fiscal policy in nearly every major country, leaving Luxembourg as the only country that currently qualifies. If the EMU continues to crumble, the DM is the currency most likely to benefit. The most important cyclical date for the U.S. Dollar should be March 31st, which should be a high for the dollar if it rallies while T-bonds and stocks sink. The seasonal rally on the yen should be over by the latest on March 27th but could end as early as March 21st.

Trading Strategy--Favor June DM and SF and yen puts on rallies as the downtrend should continue into June.

Monthly Chart Trend--Higher to 104.27.
Weekly Chart Trend--Higher to 101.83.
Daily Chart Trend--Higher.
Turning Points--Major Dates: March 31, April 14, May 16.

JUNE JAPANESE YEN:
The Japanese Yen has been recovering, partly in response to seasonal tendencies to go higher. Also, fears that the Bank of Japan will impose restrictions in the next fiscal year has boosted trade before the current fiscal year ends. Still, economic data has not fundamentally changed the bearish picture. Even the recent 5% increase in auto production was a result of the declining yen. Moreover, we expect a second quarter decline in GDP of up to 7% to result from a consumption tax that takes effect April 1. However, this dip should be tempered by the fact that most of the decline in property values has already been factored into the market. Our cyclical work suggests that the yen is vulnerable to a fall to the 130 region, which is roughly equivalent to 7692 on the futures. Our weekly chart computer model targets a steeper fall to 7076 as the September cycle low. Rallies are not likely to go much above 8528 on the June contract, and cyclical strength should end by March 27th. Continue to buy long-term June and September put options in the March 20-27 time window, looking for a counter-trend slide.

Major Dates--March 27, May 2 (low), June 9.
Minor Dates--March 14, March 21.

JUNE DEUTSCHEMARK:
The Deutschemark has been stabilizing recently but we expect the downtrend to resume. Economic data his been mixed. In early March, industrial production and manufacturing orders were revised sharply downward even as plant and machinery orders were increasing. Unemployment continues to grow to record levels. The falling DM has probably helped spur growth, although not enough to turn this economy around. The President of the Bundesbank has expressed doubts about Germany meeting the requirements to join the EMU, especially in terms of reducing the budget deficit to 3% of GDP. Moreover, should President Kohl not be re-elected in 1998, this would further jeopardize Germany's push for EMU membership. Fundamentals suggest the DM falling to the 57.15 region short term, with key support at 57.47 on the June contract. Rallies are not likely to go beyond 62.00, and monthly charts and cycles suggest that the market will fall to 52.65 and eventually 50.86 before downside activity is complete.

Cycle highs peak into the March 17-19 time window. Further downside action is likely, into March 3lst, with a recovery possible into April 14th. We would continue to use rallies to buy put options.

Major Dates-- March 17, March 31, April 14.

JUNE SWISS FRANC:
Economic conditions in Switzerland remain dismal as the long-term recession continues. The Swiss National Bank continues to support a lower currency by providing ample liquidity. Continuing pressure by Jewish organizations to make restitution for hoarding during the holocaust has not been helpful.

Cycles suggest lower prices into March 31st, following the last cycle high due by March l7th. While patterns could allow a 4th wave to the 72.00 region, the weekly chart does not support that scenario. The monthly chart projects 65.54 before a possible bounce to the 72.00-73.34 region. The monthly chart projects a low of 52.64, and given weak economic conditions in Switzerland, such a decline may be justified.

The April-May time window may provide the best chance for the weekly chart 4th wave to manifest. Therefore it will be difficult to press the market below the 65.54-66.86 region.

Major Dates--March 17, March 31, April 14.

JUNE CANADIAN DOLLAR:
The Canadian Dollar has been hurt by prospects for higher U.S. interest rates. But further major declines are less likely as Canadian economic fundamentals have been steadily improving. Their account balance has moved into a surplus and domestic demand has been strengthening. Canada's leading indicators rose a sharp 9% in February and retail sales rose 10% in the 4th quarter over the previous quarter. Accommodative monetary policy at the Bank of Canada has fostered much of this growth.

We do not see a rise in the Canadian Dollar as interest rates are likely to stay even in the near-term. Core inflation is at 1.8% and the economy could even sustain 3.5-4% GDP growth without raising inflation worries.

Cyclically and technically, the downtrend is likely to continue into May 8th and May 27th. Monthly chart patterns could even allow a 5th wave to the 69.05 region.

Short term, cycles appear weaker into March 31st, but technically the June contract could recover to the 73.88 region or even to a maximum in the 74.18 area during the March 17-19th time window. That would offer a good place to add June put options and to sell futures.

Major Dates--March 20, March 31, April 14.
Minor Dates--March 18, March 24.

Stocks have held up better than we thought in March, reinforcing our primary analogue scenario which favors the highest high in the May 16th or May 19th time window. Patterns to the upside look incomplete to the 840 region on the S&P and Dow 7236. While March still looks vulnerable to the downside, as long as we hold above March S&P 763, I suspect that we will push out one more high or a double top. Cycles in March may be dominated by more congestion than downright bearishness as the trade awaits the March 25th Fed meeting. Minor cycles will turn bearish as we move later into the month and we see no sustained rally beyond March l4th. However, April does look friendlier as does May.

Should the March S&P break 763 (about 770-771 on the June contract) the May high could be a double top or secondary retracement high. In either case, we see the bulk of the move down occurring in the summer between May 19th and August 15th. While it is too early to estimate a downside target, we would expect a minimum of a 20% correction or a maximum of 50%. Because we see a six-year bear market unfolding, this spring will be an important transition period for diversifying your portfolio and start looking into rare coins, gold mining stocks, and energy stocks.

In the current market, stuck analysts can point out all the extremes that describe topping action, including the following: the S&P 500 is at a record high of 17 times earnings; mutual funds' cash is at a 20-year low, and in 1996 mutual funds traded $235 billion; and characteristically a 218% increase in investment clubs--this is similar to the 1929 period when everyone was investing in stocks.

Another alarming observation is that the majority of the rise in the Dow and NASDAQ has been on just a few stocks such as GE, IBM, Intel and Microsoft. If you take out these gains, the Dow and NASDAQ are actually much weaker. Also of concern is that NASDAQ has been in a down trend since mid-January, and the DOW utilities have also shown great weakness. Under-performance in small stocks and utilities are both leading indicators of subsequent declines.

Recent economic data for March has been stronger than expected as February consumer confidence declined only slightly to 118.4 compared to 118.7 in January. Retail sales, were stronger as suggested by the Johnson-Redbook Survey, which rose 11.5%. Durable goods rose 3.6% vs expectations for 1.2%, home sales rose 2.1% and the Chicago Purchasing Managers' survey for February rose to 56.2 from 55.9 in January. All of this data gives Greenspan the ammunition he needs for a small rate hike.

Topping action is usually more complex than what we have recently seen, and thus we are inclined to expect consolidation and more divergent highs. Overall, we expect that there is enough evidence to indicate that it's time to start looking for new mutual funds and other places to park your money. Die-hard investors who want to hold out to the bitter end will probably squeeze the last nickel out into the mid-May time window. And, as we go to press, the latest indicators suggest a new high will occur.

Trading Strategy--Favor light April puts into the March 31 cycle low and reverse with May and June calls for the last push higher.

Monthly Chart Trend--Higher to Dow 7236 into May 16.
Weekly Chart Trend--Higher into May.
Daily Chart Trend--Lower and consolidating into March 31. Support/Resistance--Breakout: buy June 828.70 stop with a 825.70 stop. Breakdown: Sell June 769.80 stop with a 772.80 stop.
Turning Points--Major Entry/Exit Dates: March 31 (low), May 16, August 16 (low).

JUNE T-BONDS:
The March 7th Unemployment report showed that unemployment fell to 5.3% from 5.4% last month, with non-farm payroll rising 339.000. The data continues to suggest a strengthening economy. Cycles to the downside suggest a weakness into March 31 and April 14, but congestion is much more likely than a major slide. We see T-bonds holding up into the week of May 12 and possibly into the first week of June, but we are still crunching data on our long-term perspective for the rest of 1997.

Fundamentally, Greenspan's Humphrey-Hawkins testimony is implying that if unemployment and wages continue to gain, he will have to raise rates. The usual solution of raising short-term rates has the effect of weakening the domestic economy, lowering imports, and attracting foreign money. Our Eurodollar cycles suggest that higher rates are coming, perhaps through the December time window. Fundamentally, T-bonds will be forced to stay below 114 until GDP growth lessens, and we will not have first quarter GDP data until late April.

Short-term, expect a trading range between 106.29-112.00, with higher prices to 114 possible in the spring. We need to complete additional research on our 1997/98 perspective. We are still vulnerable to foreign debt being sold off, and we cannot rule out a major slide occurring over the coming year, with 1998 looking particularly vulnerable.

Trading Strategy--Favor swing trades by following our daily service. Weekly Chart Trend--Consolidating between 114-106.24.
Daily Chart Trend--Lower to 106.24.
Support/Resistance--Breakout: Buy 114.07 stop with a 113.06 stop. Breakdown: Sell 105.07 stop with a 106.08 stop.
Turning Points--Major Entry/Exit Dates: March 24, March 31, April 14, May 16.

APRIL GOLD:
Gold finally popped due to extreme oversold conditions, but we do not expect cycle lows until May 15th at the earliest. Seasonally, gold tends to move lower through March. Gold has fallen enough since its March 3rd high that we will probably not take out the 365 region or even the 360 gap area before moving lower. Fundamentally, there is little on the inflation front to support gold. The energy complex has topped out and is not helping matters, and the dollar continues to be an enemy of gold. With the Treasury's new inflation-indexed bonds, who needs gold?

Longer term on the friendlier side, a recent report suggests that threatened central bank intervention is not likely to make a difference for EMU candidates' need to lower their debt-to-GDP ratios. Moreover, a new ruling by the EMU made it unacceptable for EMU members to reduce debt by selling gold. Also, a longer-term positive is that decreased prices may force the closing of some South American mines.

Another long-term positive is that strong Far East demand in response to instability in China will bring in new buying. However, as we do not expect the stock market to begin dumping big-time until June-August, gold prices will continue to erode near-term.

Short-term, cycles suggest lows dominating into March 19-20 and March 24, with a recovery possible into April 11, but with new lows coming into May 15. We may end up with a trading range between $345 and $365 rather than a downright aggressive breakdown on this bear market. While our longer-term work is still bearish and the chances of new lows continue, most of the bearish fun may be over in the gold market and soon we will have to begin focusing on long-term buying. When the dollar gets into big trouble in the spring of 1998, gold will again be king. You may want to start doing your research on rare coin catalogs and look into buying gold bullion.

Trading Strategy--Continue favoring short June gold or June put options on rallies, watching the 357-361 region on April for an ideal entry. Monthly Chart Trend--Down to at least 336 if not 322 into May 1997. Weekly Chart Trend--Lower into May 15th.
Daily Chart Trend--Consolidating and lower into March 24. Support/Resistance--Breakout: Buy April 373 stop with a 364 stop. Breakdown: Sell 344 stop with a 351.10 stop.
Turning Points--Major entry/exit dates: March 24, April 11, May 15.

MAY SILVER:
Silver has fared better than gold but has remained under the key 5.31 region on a weekly chart closing basis, suggesting that we have had a bear market rally. Supportive cycles are pretty much over, and we think that seasonal downward pressure will retake control during the month of March.

Fundamentally, fund buying has supported the market as has the rally in platinum, but we expect the bubble to burst again as we hit the March time window. Still, longer-term analysis is supportive as one metals analyst said that $6.00 silver could easily manifest based on the ongoing supply/demand deficit. Cycles suggest that the latest silver will hold up is the March 19 time window, but we would expect a strong decline as we move toward the March 24 time window, followed by a recovery into April 11-14.

Technically, if May silver can push through the 5.43 region, we would project a 5th wave target of 5.55-5.60, and this would rule out new lows to 4.20 or a retest of the 4.60 region. Because fundamental support is strong in the 4.50-4.60 region, this should be the extent of the early June low. We expect that July 500 puts will make money, and even if May silver can reach the 5.55 region, we will come down one more time. Longer-term, we expect that a sharp rally in the June-to-August time window will be worth buying.

Trading Strategy--Buy July 500 put options and focus on shorts from March 10-11, looking to take partial profits into March 24 and re-selling rallies into April 14.

Weekly Trend--Basing between 4.60 and 5.00.
Daily Trend--Lower.
Support/Resistance--Breakout: Buy May 5.61 stop with a 5.51 stop. Exit by March 11. Breakdown: Sell 5.13 stop with a 5.26 stop.

APRIL PLATINUM:
Platinum has completed the upside retracement we have been anticipating and even continued to its maximum upside potential in the 400 region. Maximum hang-time for platinum would be around March 10-11, but cycles point lower into March 24. Unless we close above 401.00, we will conclude that we have merely witnessed a bear market rally. The last push down into the spring could take another $63 from the winter retracement high. We currently project lows in the 333-340 region.

Fundamentally, long-term analysis looks excellent as dwindling stockpiles and decreased production in Russia could disrupt supplies and push platinum above 400. The tricky wrench hanging out there is that a strike is threatened for March 27th in Russia for a major producer named Norilsk. We expect that buying the May low will be a good long-term play, but platinum may get hit if stocks slide big-time this summer.

MAY CRUDE AND GASOLINE:
The oil complex never quite recovered in February as we had hoped, but the March 3rd low is showing good signs of bottoming action. While slightly lower lows are possible to 19.50 basis May, the market should find good support in this area and recover to at least the 24.00 region.

Fundamentally, warm weather has pushed the market sharply lower. At the 20.00 region, prices will be supported as global oil supplies tighten. Obviously, OPEC does not want prices to go lower. Gasoline looks particularly good as prices have fallen to prior-year levels, but gas stocks are 11 million barrels below where they stood last year. Gas stocks are also at their lowest levels since December, 1996, and the Oil and Gas Journal is looking for a 1.6% per year increase in demand.

Cycles suggest consolidation in March, with highs into March l7th and lows into March 24th and possibly March 31st. The 16- and 17-month cycle highs are due in late April, centering on the April 28-30th time window. We would use pullbacks in the May and June contracts into late March to buy crude and gasoline, looking for a recovery to at least 24.00 on the crude into late April. Following this high, patterns on the weekly chart could allow a "C" wave low to the 18.00 region into the second week of June, but our long-term analysis on the crude and products is very positive, and we expect a major bull market to emerge here in the next five years.

Trading Strategy--Watch daily service for buying opportunities in the March 24-31st time window for a rally into late April. Weekly Chart Trend--Lower into mid-June.
Daily Chart Trend--Consolidating and higher toward $24.00 into late April. Support/Resistance--Breakout: Buy 22.84 stop with a 21.95 stop. Breakdown: Sell May crude 19.60 stop with a 20.26 stop.

MAY AND NOVEMBER SOYBEANS:
In the March 11th Crop Production report, the USDA surprised the trade by keeping ending stocks at 140 million, most private estimates had expected 130 million. Brazil's soybean production was increased to 27 million metric tonnes (MMT) from 26.5 MMT. The market managed to make a new weekly chart high before the report, opening a number of possibilities since cycle highs dominate for beans into April 14th. One more new high to 880 or 905 is possible if we get a supportive March 31st report. We are inclined to expect that the USDA will lower carryout in the late March report.

Estimates for crop acreage in the March 31st report range from 64-65 million acres. The higher numbers may come in due to recent high prices. Given ideal growing conditions, we are likely to get a crop of 2.4-2.5 billion bushels, which would push ending stocks back up to the 200-225 mbu region. Historically, this is still at the low end of ending stocks numbers.

The 140 mbu ending stocks number means only a 3-week supply of soybeans in September. But the trade has become more and more accustomed to living with low stocks numbers because a new crop comes to market every six months in either North or South America. Still, Brazil's record 27 MMT crop will pressure the market in the spring when the 14-, 23-, and 26-month cycle lows are due, but we may have to temper our outlook for downside potential even though the removal of Brazilian export taxes will double their export shipments this year. The current pace of U.S. export is so strong that we will easily reach a carryout figure of 100-110 million bushels by summer. Prices must rise to 960 to ration supplies; even higher prices could manifest at the first sign of weather problems. Consequently, shorting this market is recommended only for aggressive traders.

Cyclically, the weakest period for the bean complex centers on April 28-May 14th and possibly continuing into May 22nd. Technical projections for May beans suggest resistance at 880, 891, and 905, with pullbacks likely down to 789 followed by a retest of the 880 region (or slightly higher). Unlike corn, beans have 4 cycle highs dominating into June 1997, but it is too early to estimate if the retest of 880 is due then. The possibility of reaching 960 on the July contract may come into the June cycle high.

Psychologically, until beans get adequate rain, nervous traders will probably keep them in a trading range. Because our weekly chart could allow 960, any weather concerns could inflate this market dramatically. Our rain cycle work suggest that a drier May will allow early plantings, and we do see rain increasing in June and July. Our only concern is the 9.5-year drought cycle.

November beans hit our upper target of 750, and we are skeptical that we will get above the 760 region into the April 14th cycle high. We would expect at least a setback to 7.05 or 6.95 into the May cycle low. While such a large crop could justify much lower prices to 6.41, we expect that until the crop is made prices will remain in a trading range between 6.95-7.60. Any weather scares during pollination this summer could drive the market up to 8.90.

Producers can still consider hedges between the April 14-May 23rd time window, using November 725 or 750 put options or July put options in case the drop is more severe. We may need to add November 725 and 750 call options as insurance against a drought from the late May low. It is still too early to guess the extent of the October cycle low. If you have futures or options hedges, we would recommend lifting them by March 24th.

Trading Strategy--Speculators can consider buying a July put option on April 14th to catch the fall into May 23rd and then reversing to September call options.

Monthly Chart Trend--Higher to 960.
Weekly Chart Trend--Topping into April 14th.
Daily Chart Trend--Lower and consolidating into March 24th.
Support/Resistance--Breakout: Buy May 911 stop with a 899 stop. Exit 940. Breakdown: Sell May 774 stop with a 789 stop.
Turning Points--Major Entry/Exit Dates: March 24 (low), April 14 (high), May 23 (low).

MAY AND DECEMBER CORN:
The USDA left February supply/demand estimates unchanged in its March 11th report. Our own forecast projects cycle lows dominating into April, May, and June, with six cycle lows due the first two weeks after the scheduled March 31st Stocks report.

The strong, unexpected rally in February started from fund buying and was technically related. In this instance corn followed higher on the coattails of beans. The only notable change in the March USDA report was a reduction of 1 MMT for South African corn. Argentina is still expected to produce a record 14.5 MMT crop. Strong Argentine competition in the spring will reduce U.S. exports by 60 million bushels. Also of concern and somewhat bearish is that China continues to muscle in on Asian markets, especially South Korea. Some Far Eastern grain traders estimate that China could export 2-5 million metric tonnes of corn this marketing year compared to about 1 MMT last year.

Estimates of 1997 planting intentions are currently 80-82 million acres; we expect the midpoint at 81 million acres. This would lead to a crop of about 9.49 billion bushels if we have ideal growing conditions. The Sparks Company is on the high side, looking for 81.5 million acres and 9.6 bbu in production. The USDA is projecting a stocks/usage ratio of 10.9% for 1996/97, which is still historically low. The persistent tightness of stocks underscores the need for a crop of at least 9.2-9.3 billion bushels. Yet the U.S. has not produced such yields two years in a row (in 1996 we produced 9.29 billion bushels). Our own weather cycle work indicates planting will be on time and perhaps early as rainfall may be a little below normal. Early plantings in conjunction with Argentine export competition will probably pressure prices to their lows in late June. With the onset of the 9.5-year drought cycle in July, the chances of a hot and dry late summer would reduce yields and raise prices. The extent of the damage will depend on how early the crop gets in and pollinates. Therefore, a strong summer rally is possible considering expected tightness of supplies.

We are currently projecting May corn in the 245 region and December corn in the 246 region. We have had producer's hedges in place and will lift them in late spring. We are recommending buying September and December calls as crop insurance into the summer.

In the short term we would be surprised to see May corn move higher after hitting our upper target of 312, with additional resistance at 316 and 320.

Trading Strategy--Speculators can buy July puts, looking for a fall into late spring. Monthly Chart Trend--Higher into 1998.
Weekly Chart Trend--Lower to 246 basis December into June 1997. Daily Trend--Topping and lower.
Support/Resistance--Breakout: Buy 316 stop with a 309 stop.
Breakdown: Sell 269 stop with a 282 stop.
Turning Points--Major Entry/Exit Dates: March 24, April 14.

JULY WHEAT:
With wheat prices so low, compensation for acres from oil seeds in Minnesota and the Dakotas is going to be fierce--and ultimately wheat prices benefit. Cycles on the downside suggest bottoming action by March 24th, with higher prices into April 14th and continuing into early June when hedging pressure may hit the market. Short term, upside prices may be limited to 385-387 on July wheat, with downside price action expected between 350-352.

Currently, prices are weak because the amount of soft red wheat exported out of the CBOT represents only 1% of total exports since February 1. Still, the USDA is expecting a total of 145 million bushels to be exported. To meet this projection, 1.25 million bushels will need to be exported weekly. This figure likely will not be met, implying that carryout will rise by 57 million bushels. However, Minneapolis and Kansas City wheat may meet their export targets. A spread buying Minneapolis and selling Chicago wheat would exploit the relative strength/weakness of export demand at these respective markets.

Looking to the spring acreage report, analysts are expecting 72 million planted acres. However, recent rises in oil seed prices will probably reduce spring wheat plantings by 10-15%, which would be supportive in the long term. Increased world production would offset some of this decline, as the IGC is projecting world wheat production to rise to 585 MMT.

As soybean prices continue to escalate, cheaper wheat will be in demand and prices will rise. The weekly chart would allow prices to increase to 435 on the December contract, but we do not have supportive fundamentals to justify those prices at this time. Buying December wheat in the 362-366 region in the March 24th time window, and looking for a move to at least 4.00 into the early June high might work here. We will provide firmer long-term projections in the next issue.

Trading Strategy--Buy December wheat on pullbacks into March 24th, looking for higher prices into April 14th and possibly 437 into June. Monthly Chart Trend--Higher toward 437.
Weekly Chart Trend--Consolidating between 350-387.
Daily Chart Trend--Lower into March 24th.
Support/Resistance--Breakout: Buy 379 with a 369 stop.
Breakdown: Sell 346 with a 355 stop.
Turning Points--Major Entry/Exit Dates: March 24, April 15.

JULY COTTON:
The March 11th USDA report raised exports 300,000 bales to 6.8 million bales. Mill use was unchanged, and ending stocks were lowered to 4.15 million bales. Still, the trade sold the report off. Cotton is likely to remain a fairly boring market in tight ranges between 72.65-79.40. We do see it breakout out later into July. However, December cotton has a chance of reaching the 82.00-84.00 region.

Fundamentally, exports have improved as ample U.S. cotton supplements low foreign stocks. Exports could even rally to 6.5-7.0 million bales this year at the current pace. Still, U.S. cotton must compete with Syria and Africa, but until their surplus is sold, U.S. cotton is unlikely to stage a major rally.

Spring plantings suggest reductions of cotton acres in favor of beans and corn. A loss of 1 million acres would reduce ending stocks to 3.5 million bales. Moreover, because we are in a wild weather-cycle year, unexpected weather patterns could boost prices in the spring.

Cyclically, a meltdown cycle for the CRB into March 24th would pressure cotton prices. But due to offsetting factors such as supportive linear cycles, price trends are not clear. We still have a 44% chance of seeing 73.90 or even 72.65 on the July contract which would offer a good position trading opportunity.

Trading Strategy--Buy July and October calls on pullbacks toward 73.90 basis July. Monthly Chart Trend--Higher into 1998.
Weekly Chart Trend--Higher into September 1997.
Daily Chart Trend--Consolidating between 72.65-78.00.
Support/Resistance--Breakout: Buy 79.00 stop with a 71.80 stop.
Breakdown: Sell 72.05 stop with a 73.90 stop.
Turning Points--Major Entry/Exit Dates: March 24, April 2, April 14.

MAY SUGAR:
Sugar has held up much better than we expected, and with weekly stochastics pointing higher, how can we be bearish? Fundamentally, sugar has held up on concerns about tighter Brazilian and Cuban supplies as well as a new interest in Chinese buying.

The bigger picture still looks bearish with global production set to outpace usage by about 2-3 million tonnes. Sugar stocks, when measured as a percentage of demand, are at very high levels, and in equivalent years in the 1980's, sugar prices were substantially lower. The key fundamental note is that India has 10 million tonnes in surplus, and it will probably not export much this year, especially since the rest of the world tends to dislike the quality of Indian sugar. Other parts of the world have also been troubled the Thai crop is disappointing. Brazil is not likely to export much, and Cuban production will probably be low. The cyclical outlook suggests higher prices into March 19, followed by a quick meltdown to March 27 and April 14. The May contract is likely to test the 11.50 region and then remain in a trading range between 10.00-11.50. Although weekly charts continue to suggest 7.70, we have no major cyclical weakness until the July-December 1997 time window.

We do not see an exciting trade here and suggest looking elsewhere.

Trading Strategy--Stand aside and trade elsewhere.
Weekly Chart Trend--Higher into July 1997.
Daily Chart Trend--Higher to 11.50.
Support/Resistance--Breakout: Buy 11.70 stop with a 11.20 stop.
Breakdown: Sell 10.39 stop with a 10.79 stop.
Turning Points--Major Entry/Exit Dates--March 19, April 14, May 15.

MAY COCOA:
Cocoa slid a bit further and longer than we anticipated last month but probably has bottomed on the weekly chart. We need to rally in 5 waves up to be more certain, but the rally on March 10th provided a degree of confirmation. With CRB cycles turning ugly into March 24th and March 31st, we would be surprised to see the market sustain a huge rally after March 19.

News that the Ivory Coast may cut back production has led to the recent rally and lead to concerns that the market could rally to 1.500 sterling per metric ton. The Iranian commodities minister, speaking in London, forecasted that 1996/97 production could be around 950,000 MT, compared to 1.2 million last season. He also noted that his government plans to destroy illegally planted cocoa trees.

Fundamentally, E.D.F. Mann and ICCO have increased the size of the cocoa deficit to about 170,000-230,000 tonnes, up from prior estimates of 130,000-160,000 tonnes. Weather problems in Brazil could lead to the smallest crop since 1968-69. Mann noted that world grindings are up 5.7% in the 1995-96 year.

Fundamentals warrant at least 15.25 short term, but concerns that an international trade house may tender an extremely large tonnage against London March futures may prevent a major rally from being sustained. Seasonally, cocoa tends to rally during the spring. Once the weak CRB cycles are completed, we expect cocoa will gradually inch up.

Position traders can consider July call options on breaks, but as usual, there is not a lot of exciting activity here. Cycles are very mixed in late March, with weakness likely into March 25 and a sudden recovery into April 2 and probable weakness from March 12-25.

Trading Strategy--Consult daily service for futures recommendation or consider July call options on breaks. Monthly Chart Trend--Up to 15.25.
Weekly Chart Trend--Bottoming and higher into May.
Daily Chart Trend--Higher.
Support/Resistance--Breakout: Buy 14.10 stop with a 13.80 stop.
Breakdown: Sell 12.88 stop with a 13.43 stop.
Turning Points--Major Entry/Exit Dates: January 29-February 3rd, February 15th, February 24th (high), May 9th (high).

MAY COFFEE:
May coffee is moving much too quickly to call near-term action. Last month's target for the May time framework has already been taken out. Current projections suggest the 235.25-240.00 region for the top of the third wave and then a large consolidation between 156.70-235 until we make a slightly higher high into late May, when the 17-, 22-, and 25-month cycle highs are due.

We are reaching a point where the best part of the move may be over, and we will get a series of consolidations and higher highs with a large amount of consolidation occurring over the March and April time window. We see general weakness into March 25 with continued consolidation, and swings into April 2, April 7, April 21, and April 28.

Fundamentally, the Brazilian coffee exporters are projecting 1997/98 output at 23.3 million bags. Brazil's concern over their coffee deficit is demonstrated by their move to use coffee auctions to ration supplies. El Salvador is having trouble with production, and given current tightness in Brazil, problems in this or other regions will greatly magnify supply impacts on prices. Contributing to tight supplies is the possibility that other Central American countries may have sold their coffee, and Columbia may have less output than USDA's estimate of 12.5 million bags.

Our long-term cyclical work is now indicating higher prices for all of 1997, with the exception of April and June. A corrective fall is most likely March 11-25, with a secondary low into April 4.

Trading Strategy--Favor bear spreads during weakness March 10-25 and consult daily service. Consider long-term December call options on weakness. Monthly Chart Trend--Higher into 1998.
Weekly Chart Trend--Higher to 262.
Daily Chart Trend--Consolidating between 210 and 155.
Support/Resistance--Breakout: Buy 265 stop with a 255 stop.
Breakdown: Sell 139.95 stop with a 144 stop.
Turning Points--Major Entry/Exit Dates: March 10-11, March 25, April 23.

APRIL LIVE CATTLE:
Cattle have hit our minimum upside target, and with rising feed prices, have been slowly sinking as we go to press with this issue. Although a chance exists of reaching a new high to 70.95, the market will probably put in a double top in the 70.00 region by March 19th and then fall. A break through the 67.00 level would seal cattle's fate and preclude higher prices. Cycles turn weak March 19-April 2nd and appear to be heading lower into the first week of May.

Fundamentally, the market has had too much to absorb after an $8.00 surge in boxed beef prices and a $6.00 rise in cash cattle. Retailers started pulling out and lighter-than-expected cattle slaughters are indicative of fat cattle building. Slaughter numbers have been coming in on the light side, indicating a decrease in cow slaughter earlier than the industry had expected. Low numbers are likely to be supportive through the rest of March and April as placement figures from last December were 12% below the year before.

The market has been roaring since last month's Cattle on Feed report. A close look at the numbers shows that while overall placements for January were 125%, we see the 700-799 pound category at 103%, with total placements under 700 pounds were at 131% suggesting that the bulk of heavy placements were calves that will not become finished cattle until the June-August period. Meanwhile, supplies still look tight from mid-March to mid-May, and the industry continues to feel positive toward a strong trend in demand for late winter into early spring. Supermarkets have been featuring beef in contrast to pork as demand for boxed beef has been exceptional.

The long June/short August spread may be the best play the rest of March. We think April will start coming off as funds roll into the June contract. We would take profits on longs by March 19. Producers should consider hedging some August contracts. Fundamentals suggest the heaviest supply is due between June and August. Our forecast of a $10-12 drop in futures could suggest August cattle will hit the $61-63 region.

Trading Strategy--Cover April longs by March 19. Consider August $65 put options and August futures for hedging purposes. Weekly Chart Trend--Up to 79.10 into 1998.
Daily Chart Trend--Consolidating and topping toward 70.95. Support/Resistance--Breakout: Buy April 70.75 stop with a 68.95 stop. Exit March 19. Breakdown: Sell April 66.75 stop with a 67.75 stop.
Turning Points--Major Entry/Exit Dates: March 19, April 2.

APRIL LIVE HOGS:
The dramatic collapse of hogs during the week of March 3rd was spurred by a number of factors. Retailers have not switched to pork as it has come down in price. Large numbers of heavy weights were pressuring the market at a time when several packing plants were shutting down. Moreover, Japan announced that it would maintain its tariffs on pork imports until June. Japanese imports had held the greatest potential for the pork complex until this announcement, demand from Japan usually helps lift prices in May and June. Hogs are likely to be under pressure until the Hog and Pig report on March 27th. Major support is at the 67.10 and then the 65.00 region, but it's difficult to determine exactly where declines will stop. Cycles are mixed into March 17-19 but then turn decidedly weaker into late March when the Hog and Pig report is due. Fundamentally, retailers have kept prices much too high to spark demand; when prices do fall, they may fail to promote pork consumption. On the bright side, while we tend to increase numbers seasonally during the March/April time frame, this increase should be much smaller than in previous years.

Short term, cycles suggest weakness from March 10-31 followed by a recovery to April 19 and a possible pullback into the second week of May. June hogs have an upward potential of $86.00, but our upward target will depend on Japanese demand.

Trading Strategy--Buy June calls and futures on pullbacks in the late March time period. Monthly Chart Trend--Up to 95.00 into 1998.
Weekly Chart Trend--Up to 86.00 basis June into the spring. Daily Chart Trend--Lower into late March.
Support/Resistance--Breakout: Buy 77.70 stop with a 76.70 stop.
Breakdown: Sell 67.95 stop with a 69.96 stop.
Turning Points--Major Entry/Exit Dates: March 19, March 27, April 19.

MAY PORK BELLY NOTES:
Bellies melted with the hogs in early March, and the weekly continuation chart suggests bellies at 71.40 to complete downside patterns. Only a 23% chance exists of rising to 109.14 into the June cycle high, when the 10-, 14-, 44-month cycle highs are due.

We expect downward consolidation into the March 27th Hog and Pig report, with some consolidation into the April 11th time window. The consolidation range should be between 74.40-78.40 on the May contract. We do not see a long-term position trade setting up here except for the possibility of buying July call options. Current fundamentals suggest that beef/bacon burgers will not be in great demand this summer as McDonalds is aggressively cutting its basic burger to 55 cents, which will lead to no-frills competition. Watch March 17, March 27, and April 14 for new swing dates of significance.

Major Dates--March 19, March 27, April 19.

You may also contact CONSENSUS at:

Relocated 04-06-97
Last updated on 04-06-97

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