wmeubank@ocp.kcmo.com
THE WEEKLY RE-LAY
OVERVIEW: Bond traders were stopped out of 112-30 longs at 115-22/USZ for a gain of $2,750 per contract.
2CR traders in the D-mark–who were short from 56.52–covered 1/2 the position at 55.80-.87 and the other 1/2 at 56.21/DMZ for an average profit of $600+ per contract. Intermediate traders should have been buying 55.80-.87/DMZ and be holding longs with $1,550-1,600+ per contract gains. Option traders should also be long December 5700 calls from approximately 65 ticks and be holding these with almost 50% gains.
Silver traders should have bought 465-466.5/SIZ and be holding these longs with profits of $775-850 per contract. 2CR traders should have bought gold at 323.1/GCZ–a trade which is ahead by almost $600 per contract.
2CR traders could have bought November crude at 19.94–a trade which is over $900 ahead.
2CR traders were stopped out of November soybeans with losses of $150 per contract. Option traders are still holding calls with losses of $200-$250 per option.
(2CR stands for 2 close reversal–a proprietary price pattern explained in Eric Hadik's Tech Tip Reference Library. 2 close reversal is a trademark of Jeneric Trading Corporation.)
STOCK INDEXES: The S&P fulfilled the next phase of the ideal scenario–which involved a test of 943.00-944.00/SPZ before a final surge. A rally back to the highs is expected. To reiterate from last week:
“Another bearish factor is the divergence between the indices. The DJIA could not even give a weekly neutral signal (from a down-trend) and gave two daily neutral signals without reversing the daily trend to up..” while fulfilling projections for a rally to 7970-8023.” (9/20/97 Weekly Re-Lay)
Dec. S&P (SPZ) DJIA Weekly Trend: Up Down Weekly Resistance: 966.55//973.90 8022-8051 Weekly Support: 936.70-939.85 7822-7840 Daily Trend: Up/Neut. Up/Neut. Daily Resistance: 957.80 7959 Daily Support: 948.60 7885
The DJIA rallied to 8035 and quickly dropped 200 points before rebounding after dipping below the 9/02 high.
The higher weekly close, following a bounce from the month opening high, combined with cycles aligning in early- October and the potential for higher monthly resistance in the new month–give me more reason to believe that this rally is not quite complete.
Trading Strategies–The ideal scenario involves a daily close above 953.60/SPZ on Monday, followed by a pullback to 953.20-953.60 early Tuesday. If this were to happen (and this support level coincided with the daily SPS), aggressive traders can buy 953.20-953.65 on Tuesday, placing stops 1.20 below Monday's low or at 946.95 (whichever is higher).
INTEREST RATES: Bonds continue to confirm projections for a rally to 117-08 by early-October. The pullback in the middle of this past week reinforced this possibility by “killing some time” so that bonds did not reach their objective too early (since several factors were already pointing to an early-October, instead of late- September, high).
Dec. Bonds (USZ) Mar. Euros (EDH) Weekly Trend Up Up Weekly Resistance: 116-15//117-18 94.15-94.16 Weekly Support: 114-18 to 115-05 94.07-94.08 Daily Trend: Up Dn/Neut. Daily Resistance: 116-02 94.13 Daily Support: 115-14 94.09
This correction was enough to trigger sell stops on 112-30 longs and traders should have been exiting at 115-22–when trailing stops were hit. (This also confirmed comments from last week that the latest 2 close reversal buy signal was not a very powerful one–leaving the ensuing 1-3 day trend in doubt.)
The new monthly SPR for October should help to filter the upside objective and could project 117-08 to 18 if the monthly close (9/30) is around 115-00 to 10/USZ.
If it is higher, bonds could still spike a little beyond their major objective (which is not the least bit unusual, since a target of this magnitude is best judged on a weekly-close basis).
As stated last week, “An early week low around 115-04 to 07/USZ would strengthen the probability for an intra-week rally to 117-04 to 12.) Another bullish factor for this next week, and potentially the one to follow, is the 2 close reversal signal given last week.”
Instead of hitting this support early in the week, bonds waited until the end. This still projects a weekly LLR or 117-18, but shows that it should be hit sometime in early- October.
Another factor which could reinforce this is if the coming week sets a high around the weekly SPR (116-11/USZ). If this were to occur, the following week's LHR would be around 117- 12...and provide magnetic synergy at this level.
CURRENCIES: The mark has become one of the most cooperative, or predictable, markets in recent weeks and followed the projected scenario almost to a “tee.” To recognize how precise the Mark has been, some review of last week's comments are necessary:
“After reversing the weekly trend higher, the mark gave a weekly key reversal lower and could/should test 2nd close support at 55.85. This just happens to also be the weekly HLS (55.84/DMZ) and very near the 9/02 high (55.74/DMZ)–making for a magnetic support zone.
The mark also gave a daily 2 close reversal lower on Thursday (9/18)–signaling a 1-3 day sell-off–which could test the 55.85 level. The August monthly close is 55.65, so this represents the lower end of support–which should not be violated on a closing basis.
The bottom line is I expect a pull- back to 55.65-55.85/DMZ followed by another surge to new highs. Of additional interest is the fact that the yen is also setting up for a low and could begin to move in synch with the mark.
...Once this reaction is complete, the anticipated D-mark surge to 60.00 by November should take hold and also spell trouble for bonds and the S&P.” (9/20/97 Weekly Re-Lay)
Dec. D-Mark (DMZ) Dec. Yen (JYZ) Weekly Trend: Up Down Weekly Resistance: 57.74-57.97 84.48-84.72 Weekly Support: 56.26-56.37 81.86-82.20 Daily Trend: Up Down Daily Resistance: 57.41 83.68 Daily Support: 56.81 83.10
The mark hit 55.80/DMZ, while the yen spiked down to 82.23/JYZ, and both reversed dramatically. The yen needs a daily close above 84.60/JYZ if it is to reverse the daily trend to up. Since this is also near the weekly SPR for the coming week, this resistance is critical.
The upcoming weekly SPR in the mark (57.97) coincides with my intra-month target for this rally, so this too could come into play.
Trading Strategies–Intermediate traders should have bought the December D-mark at 55.80-55.87, and should raise sell stops to 56.49/DMZ. Traders who bought December 5700 call options (at about 65 ticks) can use a daily close below 56.55 as the risk.
Traders can take partial profits on mark longs if 57.85-57.99/DMZ is tested by mid-week...and look for a 1-3 day pullback to test 56.60/DMZ. If/when this resistance is tested, raise remaining sell stops to 57.08/DMZ.
PRECIOUS METALS/ENERGY: Gold/Silver–Silver is confirming that its reaction lower is complete and a new rally is underway (which should quickly test 493-495.0/SIZ). As stated last week, silver “has conformed to the outlook with uncanny precision and is presently bouncing from the weekly HLS. This was tested during a double-neutral signal on my trend indicator (the most likely time for a low and reversal higher).
The trend could not turn down and extreme support held–both confirming the underlying strength of silver...buy 464.0-466.5/SIZ and risk 454.5–looking for a reversal higher almost immediately (and preferably a 2 close reversal buy signal).” (9/20/97 Weekly Re-Lay)
Dec. Gold (GCZ) Dec. Silver (SIZ) Weekly Trend: Down UpUp Weekly Resistance: 333.0-334.2 490.0-495.0 Weekly Support: 323.4-325.0 470.5-473.0 Daily Trend: Down Up Daily Resistance: 330.0 486.5 Daily Support: 328.0 478.5 Nov. Crude (CLX) Weekly Trend: Up Weekly Resistance: 21.57-21.90 Weekly Support: 19.84-20.17 Daily Trend: Dn/Neut. Daily Resistance: 21.18 Daily Support: 20.56
Silver hit support on Monday, reversed higher on Tuesday and gave a 2 close reversal buy signal on Wednesday–fulfilling all aspects of this trade–which should have been entered at 465.0- 466.5/SIZ.
At the same time, gold also gave a 2 close reversal buy signal (323.1/GCZ) and then hit the LHR level on three successive days, while also testing the weekly LHR...and held on all four counts.
Trading Strategies–Silver traders should raise sell stops on 465-466.5/SIZ longs to 473.0 OCO 475.5 SCO. Take 1/2 profits at 491-495.0, if tested by mid-week, and raise sell stops to 1.0 below Monday's low OCO 484.0 SCO at that point. 2CR traders could have bought gold at 323.1/GCZ. If so, raise sell stops to 327.3 (and to 328.9 if 330.3 is hit).
November soybeans continue in no-man's land but are showing a near-term downward bias after attempting to rally on several occasions.
The convergence of three successive weekly HLS's (605-609.0), combined with the rising 8MARC (which means that a drop below 626.0/SX will turn the channel lower), and the daily trend turning lower this past week–tell me that a sharp drop is likely in the coming week.
Traders holding call options should risk 625 1/2/SX on an intra-day basis. Traders should also buy November 625 puts (about 11.0 cents) and risk a daily close above 639½/SX. If 605.0 is tested by mid-week, take 1/2 profits on put options and lower buy stops to 619 1/2. Otherwise, hold into the following week for a probable test of 577.0 and/or the October SPS.
Crude–Crude–like silver–began to show the first clues of a developing bottom last week, spurring me to warn traders to “be on the alert for a 2 close reversal off weekly support (19.24-19.34/CLX). If this takes place, enter longs and risk 19.11 or a daily close below 19.24/CLX.” (9/20/97 Weekly Re-Lay)
November crude could not even make it to weekly support (a sign of underlying strength) and gave a daily 2 close reversal higher at 19.94/CLX...which has since followed through. Friday's close also generated a delayed weekly 2 close reversal higher.
A daily close above 20.92/CLX will turn the daily trend higher and confirm that an intermediate low is intact. Just as crude began to rally 3-4 weeks before the invasion of Kuwait, this could be the first sign that upheaval is imminent in the Middle East.
Trading Strategies–2CR traders could be long from 19.94/CLX. If so, raise sell stops to 20.44 and look for a daily close above 20.92/CLX to confirm.
End 9/27/97 Weekly Re-Lay
Beginning 10/01/97 Alert...
“The Last Hurrah!”
The S&P had to fulfill certain criteria for this final rally to continue. The first was a daily close above 953.60 on Monday (to turn the daily trend up). This occurred as anticipated. Traders were told to buy a pullback to 953.20-953.60/SPZ on Tuesday which had to hold Monday's low and occur near the daily SPS. This was also fulfilled with yesterday's correction to 952.75/SPZ.
A final rally should follow and today's action began to confirm this. Traders who bought 953.20-953.60 should raise sell stops to 956.70 and look for a quick rally to 980-985.50 in the next few days–where 1/2 profits should be taken. One negative factor is that the S&P jumped straight to the weekly SPR (966.55/SPZ) and initially held.
Bonds are also following forecasts and completing their rally to 117-08 to 18 (with a chance of briefly spiking above 118-00). The only change in strategy is to use December 116 puts–not 115 puts–for the strategy discussed this past weekend. Though a pullback is still expected, today's INSIIDE Track discusses the possibility that this market could head higher if key support levels hold into early- November.
D-mark traders should still be long from 55.80-.87/DMZ, but near sell stops. Traders should lower these stops slightly to avoid a whipsaw and place them at 56.33 for now. If today's low holds (closing basis), another rally should carry up to 58.50 in the next few weeks.
The yen gave a rare double-key reversal higher yesterday and should see upside follow-through immediately. 2CR traders could have bought yesterday's close or today's test of 2nd close support (83.53), while all other aggressive traders can buy current levels and all longs should place sell stops at 83.09/JYZ.
Gold and silver have taken off after giving minor/intermediate buy signals last week. Traders should still be long silver from 465-466.5 and should now raise sell stops to 506.5 or a daily close below 511.0/SIZ. 2CR traders should still be long gold from 323.1 and can now raise sell stops to 332.4 or a daily close below 333.0/GCZ. The current week is still a critical cycle convergence–which could now be signaling a high rather than a low.
Soybeans triggered stops on call options and traders should have also entered put options for a decline to 605.0/SX. Reduce the risk on these puts to a daily close above 630.0/SX. The lack of any positive confirmation could also lead to a drop to new lows if 605.0 is violated.
2CR traders received confirmation to crude longs (from 19.94/CLX) and the daily trend is now up. Raise sell stops to 20.69 or a daily close below 20.87/CLX.
End 10/01/97 Alert
October 1, 1997 Eric S. Hadik
Jeneric Trading Corporation
P.O. Box 2252, Naperville, Illinois
Copyright 1997, by Consensus Inc. All American and Pan American rights Reserved. editor@consensus-inc.com
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