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VIEWPOINT TECHNICAL OUTLOOK
DECEMBER BONDS: Last Thursday's big move to the 117.00 level represented the highest print since September's bullish move came to an end at 117.24 on 10/8. The move blew through the daily Bollinger band at 115.26, which is now acting as strong support below the market. Next on the horizon is the upper daily Bollinger band at 117.07. However, there is major daily trendline resistance at 117.04. The bullish move is being backed by bullish momentum readings on both hourly and daily charts. Slow stochastics have just crossed bullishly from the outskirts of oversold territory on daily charts, and appear to be ready to do the same on hourlies. Near term we are looking for another probe of the highs at 117.07, with secondary resistance at the 10/8 highs at 117.24. Again, support lies below the market at 115.26, 115.16, and 115.00.
S&P 500: Thursday brought the demise of the S&P's previous gains from the beginning of the week. We are looking for a continuation of this downtrend into this week. Initial targets are for a test of the lower daily Bollinger band at 941.26, with medium-term targets lying below that at 931.58. Backing our bearish outlook are both negative momentum readings and negatively sloped moving averages. The big test for the December S&P contract's downward momentum will be whether or not it can break its 4-month lower channel line at 933.99.
DOLLAR/DEUTSCHEMARK: The correction within the correction seems to be over for now for dlr/DM. Dlr/DM has failed to retrace its nearly 6 big figure move from August to October. The recent downturn seems to suggest that dlr/DM will return to its bearish channel this week. The upper channel line lies at 1.7430, while the lower channel line is situated well below the market at 1.6815. The major support level, and the determinant of the next near-term trend, is the upper channel line. If dlr/DM can penetrate 1.7430, as the momentum indicators suggest it can, the recent upward push will be viewed as nothing more than a short-term correction. Expect prices to be back within the band by week's end.
DOLLAR/JAPANESE YEN: A bit longer-term look at dlr/yen reveals a sideways trend since the end of August '97. This sideways trend in itself does not hold much in the way of significance. However, all the while in which prices have been moving sideways, the weekly ADX readings have been dropping rather dramatically. At the time of writing this article, weekly ADX readings were at 18.42, their lowest level since the week of February 14, 1994. The last time ADX readings were anywhere near where they are now was in the first week of July 1996, which marked the beginning of the nearly year-long move from a low of 108.70 in July 96 to a high of 127.47 in April 97. We therefore are looking for another dramatic move soon, but the direction has yet to reveal itself. We will not ponder a guess at this time as it is too soon to tell. The low ADX readings have been shown to strongly coincide with the beginning of large moves, thus this week's comment is merely our way of warning that once the move begins, it is in your best interest to step on board and ride it all the way.
October 23, 1997 Gregory P. Fortuna
Thomson Research
22 Pittsburgh Street, Boston, Massachusetts
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