JUNE S&P 500 STOCK INDEX:

Stock index bulls remain in a vulnerable position, as it's feared that renewed weakness in the credit
markets and the U.S. Dollar could easily precipitate another downward leg. Thus far, the surge in the high technology sector has not proved too beneficial to the overall market as the Fed's move towards higher interest rates has dampened trader enthusiasm. However, market observers warn that end-of-quarter bargain buying by mutual funds could increase market volatility and generate a rebound. The rising slow stochastic continues to favor additional follow through buying off the pivot point low posted last Thursday. Technically, a close above the weekly high at 806 would be a positive sign and could generate a rally to the resistance slope now near 818. Conversely, a collapse beneath the 782.50 pivot point would serve to reinvigorate the bears and keep the trend in a corrective mode. A drop to the 61.8% Fibonacci band sees June futures back at 767.
Recommendation"Look to sell near 806. Buy Stop"807, close only. Objective"767.

JUNE U.S. TREASURY BONDS
:
A growing belief that the Fed's recent 1/4% hike in the fed funds rate could be the beginning of trend
towards higher U.S. interest rates, clearly has unnerved the T-bond bulls. The jump in the long bond yield back above 7%, on heels of the latest round of data showing tight labor markets and a robust economy, stands as testimony to the renewed concern over inflation and tends to justify the Fed's preemptive strike. Should foreign buyers, sensing lower prices in the offing, step back from our credit markets, the drop in demand could precipitate a considerable decline in futures. However, if yields continue to rise, some believe that the increased riskless return on Treasury securities could entice investors to abandon their stocks in favor of bills, notes and bonds. Should the stock market continue to weaken, this is a real possibility. Chartwise, the collapse below 108-00 now has analysts lowering their sights towards the 106-00 level. The negative stochastic also continues to enhance the odds for further weakness.
Recommendation"Maintain short positions. Buy Stop"109-00, close only. Objective"106-00.

MAY SOYBEANS:

Reports of a port fire in Brazil was all that wasneeded to inspire bullish bean traders and launch prices back towards the contract high. Even though the Brazilian harvest is accelerating and heavy shipments of soybeans are being reported, signs of strong export demand here in the U.S. continue to support ideas of higher prices. Traders are now awaiting the release of the prospective planting and stocks report on Monday, March 31. Some analysts see U.S. farmers planting as much as 70 million acres of soybeans this year; however, the average trade guesstimate remains at 65.86 million acres. Soybeans stocks are expected to come in at 1.091 billion bushels, as compared to 1.19 billion last year. We expect any surprises will have an immediate impact on the market, especially if the surprise is a bullish one. Thus far, our outlook for a nominal correction back to the $7.98/bu. chart gap has not panned out. Breaks are being bought up just as quickly as they occur. It appears to us that this market simply wants to be bullish"and expectations of seeing $9.00/bu. May beans nearly self fulfilling. Indeed, unless Uncle Sam throws this market a curve come Monday morning, a jump to this price level seems probable.

Recommendation"Those deciding to take a position into the report are advised to consider buying limited risk call options.

March 27, 1997
Siegel Trading Company, Inc.

Added to the WWW 04-17-97
Last updated on 04-17-97

Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com

wmeubank@ocp.kcmo.com