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COMMODITY INSIGHT
152 Ennis Lake Road, Ennis, Montana
(September 28, 1997) FINANCIAL INSTRUMENTS: As most commodity markets slumped this week, bond prices rose. As a matter of fact, over the past two weeks, bond prices have rallied nearly 5 full points and on Wednesday. Treasury futures rose to within 5 ticks of a two year high. Bond prices have been especially bullish since the second week in September.
As always when the debt markets are bullish, equity prices generally follow suit. From September 11, to September 22 the December S&P rallied nearly $31.000 per contract. However, after rising to 972.20 on Monday, the S&P worked lower into the end of the week. Equities ended the week in a depressing manner.
It should be noted that the level at which I wanted to be short the S&P was 975.00 or higher. And since the S&P failed just below that level once again this past week, one should be ready to probe the short side of the market on another test of 975.00 or higher.
With October upon us, selling the S&P up near the 975.00 level may turn out to be one heck of a winner. On the other hand is the continued strength of the debt markets. As long as bond prices can hold current levels it's going to be difficult being short the S&P. And I make that statement knowing full well how bearish the month of October has been through history. For the next five days, I wish to have no position in either stocks or bonds.
Jerry F. Welch
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