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COMMODITY INSIGHT
152 Ennis Lake Road, Ennis, Montana
(October 12, 1997) FINANCIAL INSTRUMENTS: After peaking on October 3, at 118-18, bond prices have been on the defensive with prices slumping this week to a low of 114-17. In the short space of six trading days, bond prices have dropped four full points. It has been a rough six days for the bulls in the bond pit.
The S&P, on the other hand, has held up rather well. At least is has over the past six trading days. While bond prices have been hit hard, stocks are only off a bit. Actually, I was impressed with how the S&P held up both Thursday and Friday. That could change quickly however, depending on how bond prices perform early in the week.
If bond prices continue to slump, I would guess that stocks are not far behind. That is especially true with October being the most bearish month of the year for the mighty Dow Jones. However, even if the Dow does not “crack” this month, my work continues to suggest that a major top is near. Nothing in my work suggests that the Dow will rise above the 8600 level on this run without a 10% break. And thus far, the high for the Dow set back on August 7, has been 8299. This week high was 8181. Based on how the S&P ended both Thursday and Friday, I am guessing the Dow will make another run at the 8299 level and higher. But I will view any rally here in October, as a selling opportunity. Many times, shorts well placed in the months of October have turned out to be huge winners. Time will tell.
Jerry F. Welch
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