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TECHNICAL DATA MARKET REVIEW
Interest Rates
DECEMBER BONDS: While December bonds exceeded our 118.03 target by reaching 118.18 on October 3, the contract has since sold-off sharply, and we expect further weakness in the coming week. Bonds broke below the September 12 trendline at 116.22 on October 8, reaching 114.24 before bouncing, and breaking the pattern of higher highs and higher lows in the process. Also note that both daily MACD and stochastics have generated sell signals, which are confirmed by the break below the 20-day moving average at 115.04. While the weekly and monthly charts remain constructive, the contract needs to break back above the October 3 trendline at 117.14 in order to restore a bullish outlook. We will stand aside and monitor supports at 113.22-114.00.
MARCH EURODOLLARS: March Eurodollars have also sold off from the October 3 high of 94.26, currently trading at 94.12. Daily studies anticipate further weakness, but the weekly outlook remains constructive. Therefore, we look to probe the long side against the August 13 trendline at 94.02.
Commodities
DECEMBER GOLD: December gold has come under pressure after reaching a new relative high of 340.7 on October 1, but we maintain a bullish bias. Daily studies continue to climb bullishly, and weekly studies have just started. We look to buy against the top of the February trendline at 329.4, or go long on a break above the October 1 trendline at 336.7.
DECEMBER CRUDE OIL: Our bullish bias finally paid off after the contract reached 22.95 on October 3. While crude oil has since come off the highs to 22.00, we maintain a bullish outlook. The daily chart will maintain a pattern of higher highs and higher lows until the October 2 low of 20.86 is taken out. The consolidation at the highs is bullish, and we recommend new longs against 20.86 with targets at new highs to 23.15, then 23.40.
DECEMBER WHEAT: December wheat failed to reach our downside targets, breaking above the August 29 trendline at 358.4 on October 7 and putting us on the sidelines. This price action end the bear trend, and we look to buy weakness. Daily MACD and stochastics have generated buy signals, and the contract has closed above the 20-day moving average at 363.4. This support offers a good location for new longs, with initial targets at the 50% retracement of the August 29 high (398.0) to the October 2 low (348.4) at 379.0.
NOVEMBER SOYBEANS: November beans rallied after breaking above the September 18 trendline at 632.0, reaching 673.0 on October 7, and currently trading at 665.0. This price action is extremely bullish following the break above the August 4 high of 667.0, and we look for large gains in the coming weeks. Daily MACD and stochastics continue to climb bullishly confirming recent strength, and the weekly studies are just getting started. Buy weakness against 650.0, and target the top of the July 31 channel at 698.4.
Dollar
DECEMBER YEN: December yen finally broke above the August 8 trendline at 9298 on October 8, currently trading at 8335. This price action confirms buy signals generated from daily MACD and stochastics, and appears to present an excellent opportunity for new shorts. The daily structure maintains a pattern of lower highs and lower lows, and we look to sell against the June 11 trendline at 8522. Target the September 22 low of 8223, but keep stops tight as a break above 8522 will end the bear trend.
DECEMBER DEUTSCHEMARK: The D-mark established a new relative high of 5792 as of this writing, currently trading at 5760. The daily chart continues a bullish pattern of higher highs and higher lows, and the trend will remain intact until the August 6 trendline at 5648 gives way. However, we have one note of caution. The new highs have not been confirmed by a higher high from daily stochastics, suggesting a potential bearish divergence. Therefore, we remain cautious against the July 7 high of 5801, and recommend profits at current levels. Reenter longs against 5648.
DECEMBER POUND: The British Pound stopped us out on October 3, reaching 15940 only to make new contract highs of 16266 on October 9. The outlook remains constructive, and we look to reenter long positions against the 15940 low. The potential bullish divergence identified on the weekly charts still exists, and our upside targets remain at July 31 high of 16340.
DECEMBER CANADIAN DOLLAR: The Canadian Dollar made a break above the may 21 trendline on October 2, but failed to hold onto the 7335 gains, currently trading at 7300. However, the weekly outlook remains bullish, and we look to stay long or buy weakness to 7264-83. Daily stochastics have crossed bearishly and will likely keep the contract under pressure in the short term. However, we maintain targets at the July 12-15 highs between 7380-84. Stop on a close below 7264.
Stocks
DECEMBER S&P 500: December S&P's established a new relative high on October 7, reaching 992.25 before Greenspan's hawkish comments spoiled the party. Nonetheless, this price action validates the April 11 trendline at 939.37, and continues a pattern of higher highs and higher lows. Buy further weakness against the 20-day moving average at 961.82, and target new highs. The technical picture will remain constructive as long as 939.37 provides support.
October 9, 1997 Roman I. Dutkewych
Technical Data
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