wmeubank@ocp.kcmo.com
TECHNICAL DATA MARKET REVIEW
Interest Rates
DECEMBER BONDS: December bonds established new relative highs of 116.21 on October 1, and remains well-supported above the September 12 daily trendline at 115.20. We maintain a bullish bias as the contract has been consolidating at the top of the September 2, 1996 weekly range. This price action has created a bull flag near the top of the range, a pattern that generally signals continuation in the same direction as the prior move. 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 12 daily trendline at 115.20, and look for a break above the 116.31 contract highs (nearest) to confirm targets at the February 19, 1996 high of 118.03.
MARCH EURODOLLARS: March Eurodollars made an upside break of the top of the daily flag at 94.16, and the daily MACD and stochastics oscillators also continue to make new highs, confirming this week's strength. Stay long or buy against the top of the flag and look for August 1 high of 94.19, then the January 27 low of 94.34 (nearest futures). The technical picture will remain bullish above the August 13 trendline coming in this week at 94.00.
Commodities
DECEMBER GOLD: December gold made a break above the February 28 trendline at 332.2 on September 29, reaching new highs of 340.7 and putting an end to the bearish trend. This price action confirms buy signals generated from weekly MACD and stochastics, and suggests large gains in the coming weeks. Buy dips against the September 30 gap of 334.4 with stops on a break back below the trendline at 330.8. Target the 38% retracement of the January 29 high (416.7) to the July 7 low (314.6) at 353.6.
OCTOBER CRUDE OIL: We maintain a bullish bias for crude oil following the September 26 upside break of the May 16 daily wedge (20.58). This price action confirms buy signals generated from weekly MACD and stochastics, and targets the May 12- 19 highs between 22.08-40. Stay long or buy dips against the top of the daily wedge at 20.58.
DECEMBER WHEAT: December wheat continues to make new lows, reaching 348.4 as of this writing. While a near-term bounce is expected due to extremely oversold hourly studies, the bear trend will remain intact below the August 29 trendline at 362.6. The contract has filled the July 21 gap between 355.0-359.0, and we revise our downside targets to the July 7 low of 335.0. Stay short or sell strength with stops above 362.6.
NOVEMBER SOYBEANS: November beans broke below the July 7 trendline on September 26, putting us on the sidelines. However, the September 23 Commitments of Traders report shows commercial traders (smart money) at their most bullish position since 1984. We maintain a bullish bias, but await technical confirmation. We will probe the long side against 615.0-618.0 supports, but prefer to go long on a break above the September 18 trendline at 633.0.
Dollar
DECEMBER YEN: December yen failed to break above the August 8 trendline at 8354 this week, trading at 8293 as of this writing. While this trendline remains intact, daily studies have yet to give up their bullish bias, and the risk of a pop to the upside still exists. We prefer to sell against the longer-term June 11 trendline at 8565. Downside targets remain at the May 1 low of 8135.
DECEMBER DEUTSCHEMARK: The technical outlook for the Deutschemark remains bullish, as the contract continues to establish new highs, reaching 5753 on September 26, currently trading at 5663. Weekly studies indicate that the bull run is just starting, and weakness from overbought daily studies may provide the opportunity got new longs against the August 6 trendline coming in this week at 5615. Target the July 7- 10 highs between 5790-5801 and stop on a break below 5615.
DECEMBER BRITISH POUND: The British Pound established new highs of 16250 on September 25, and has since pulled back to 16090. However, the technical outlook remains bullish, and current levels offer an excellent location for new longs against the September 9 trendline at 16034. Daily MACD is crossing above the zero line, indicating that momentum is accelerating to the upside. Also note that on the weekly charts, the August 4 low of 15650 was met with a higher low from weekly stochastics. This indicates a potential bullish divergence, and suggests further gains in the coming weeks. Target the July 31 high of 16340, and stop on a break below 16034.
DECEMBER CANADIAN DOLLAR: The Canadian Dollar finally made an upside break of the recent range, and is trading above the May 21 trendline (7212) as of this writing. Daily and weekly studies are bullishly in sync, and we anticipate further strength to the July 12-15 highs between 7380-84. Buy dips against the top of the May 21 trendline, and stop on a break back inside the August 6 range of 7278.
Stocks
DECEMBER S&P 500: We maintain a bullish bias the S&P's, but the contract has been unable to take out the August 7 high of 979.60, currently trading at 966.70. However, daily MACD and stochastics continue to climb bullishly confirming recent strength, and the weekly studies have recovered, and are on the verge of generating buy signals as well. Therefore, stay long or look to buy against the April 11 trendline at 932.09 in anticipation of new contract highs.
October 2, 1997Roman I. Dutkewych
Technical Data
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