wmeubank@ocp.kcmo.com
INSIIDE TRACK.
Prepared by Jeneric Trading Corporation
Gold Is King...
For several years, I have researched the unique coincidence of earth-related cycles which begins in 1997/98 and extends through 2001.
And, for more than a decade, I have focused on the Jewish year (5758) which begins in October 1997 and encompasses most of 1998...and what it could mean for Israel and the entire Middle East. Each of these seemingly independent cycles I have treated as such. I do not like to correlate analysis until it is so obviously linked that it cannot be avoided (see Hadik's Axiom #5 on Correlations).
However, the implications of each, combined with the Maastricht Treaty deadlines of January 1, 1998 and January 1, 1999 (for qualification and implementation of European Monetary Union) begin to paint a picture of instability on the horizon. What is king during a currency crisis? Gold!
Now, add in the Y2K Millennium Bug--which should gain mainstream recognition by mid-1998 when some states have set the deadline Over the last several months, I have discussed the convergence of cycles which align in gold in early October. e for all corrections to be made--and you have the makings for a serious financial crisis. What is king during political crisis? Gold!
With war--or at least a conflict like in 1990--becoming much more likely in the next year (not assured, but much greater chance of it), what would benefit? And, what is king during war time? Gold!
Don't get me wrong. Gold has not always rallied during wars, but it has been a consistent haven during political and monetary crisis. Again, it is the synergy of events which spurs me to conclude that gold will be the investment of 1998. Most of all, it is my technical analysis--which would conclude the same thing even if all of the aforementioned fundamentals were not already revealing themselves.
Throughout history, the most consistent factor in bullishly impacting gold is monetary instability or crisis. Typically, at least one currency is favored by investors and this is where they keep their money. However, when a transition is taking place, or when all currencies lose favor at once (particularly when they are all fiat currencies with no gold backing)--gold takes over as a safe haven.
With this as the premise for the ensuing discussion, there are two factors which could have a very negative impact on currencies and a very bullish impact on gold in the coming 1-2 years. If so, it makes sense that a significant bottom would precede this (since news or fundamentals almost always hit after the market has turned and completed at least part of its move).
So, my ongoing forecast for a gold reversal by early-October may soon have some fundamental support. The interesting thing about these factors is that I can guarantee that one of the two occurs (although I cannot guarantee that the market reaction will be exactly as I describe).
The first factor is that European Monetary Union goes ahead as planned. The second factor is that it does not. One of the two must transpire.
European central banks have been selling gold and stockpiling dollars in an attempt to maintain
the illusion of low inflation and keep their own equity markets propped up (to assure entry into
EMU by meeting deficit and inflation criteria). If EMU takes place as planned, these banks will
begin to sell dollars with a vengeance in order to buy Euros (and perhaps, buy back some gold).
Both of these factors would have a very destabilizing affect on the dollar and world-wide equity markets. As a result, at least a temporary run into gold should transpire. (It may even be a case of gold remaining stable against the new Euro, while surging against the dollar. In either case, gold futures, priced in dollars, will benefit if this is true.)
The other alternative is that EMU collapses, or at least hits some serious snags. As a result, central banks--which had been selling gold to prepare for integration--would scramble to buy back at least some of those holdings. Panic could grip the gold market and propel it higher in a very short amount of time.
Regardless of which takes place, the technicals still need to confirm this to be the case. Gold has begun to reverse and I will be looking for additional signs of a bottom in the coming months. Since this is such a momentous time frame, traders should adapt to the market and not mistake minor deviations for major invalidations.
A few factors which have already indicated a bottom reinforce this conclusion. For starters, silver has acted in a very predictable fashion and done almost everything that has been expected of it...including reversing its weekly trend to up. After this took place, Weekly Re-Lay readers were advised (on 9/20/97) to buy 464-466.5/SIZ.
On 9/22/97, December silver hit 466.0. On 9/23/97, it hit 465.0 and reversed higher. And, on 9/24/97, December silver confirmed a 2 close reversal higher--which confirmed the long positions traders had already entered. Three days later, silver was catapulting through the highs and adding more credence to the developing bull market scenario. (What this could also be showing is that silver will spend the next three months working progressively higher, while gold struggles under the threat of more central bank selling. When this weight is lifted, look out!)
Another technical factor is the XAU (Philadelphia Gold/Silver Index) which is attempting to lead the way. This index is known for preceding moves in gold and appears to have put in a solid bottom in July. With all these factors, traders continue to ask why gold has not rallied more than it has. Which brings us back to EMU...
The Central Banks of Europe are killing two birds with one stone. Each time they sell gold, they are raising more cash and preparing for the transition to the Euro. At the same time, they are discrediting gold and setting up the ultimate dependency on the Euro as investors become convinced that gold will never rally again.
Most of you should be familiar with the emphasis I have placed on Belgium within the coming European empire. With this in mind, an intriguing article appeared in the 9/16/97 Wall Street Journal. It stated:
"New reports of central-bank selling pushed gold prices lower yesterday...traders pointed to renewed apprehension that central banks could accelerate sales programs. Announcements of central-bank sales of gold to Belgium from the Netherlands have pressured the market in recent months.
"The market is awash with stories of fresh central-bank disposals...Since central banks hold about 25% of the world's gold, the market has been preoccupied with their activity for months...
European countries have been under pressure to cut deficits in a frantic rush to meet European
Monetary Union requirements, and gold sales, while not an acceptable method according to the
European Monetary Institute, are increasingly viewed as an option to increase returns on bank
reserves...since no bank has claimed responsibility for selling, the program may be continuing.
Central banks usually announce gold sales after the program has been completed."
The article went on to emphasize again and again the "psychological impact" that this selling has and concluded that:
"The 220 metric toms sold by central banks during the first half of the year fell only 19 tons short of net sales for the entire year of 1996." INSIIDE Track 10/01/97
Let me stop for a minute and paint a picture of some possibilities for the very near future. I am not saying that all of these factors will take place, or that the chronology or timing will be precise. I am merely attempting to convey how a little snowball could turn into an avalanche like in 1979-80. This is all hypothetical (for now)...
Suppose that a Middle East "skirmish" is seen--which sends up a yellow flag to investors. The astute, informed investors begin to park their capital (which has already been pulled out of the bond and stock markets) in gold to weather any potential storm.
Soon after this occurs (since it could commence as early as Yom Kippur on October 10/11th if similarities to 1973 continue), a few glitches occur with European Monetary Union. Germany and France do not meet the Maastricht criteria and a sharp rift opens up over who should be allowed in and who should not. Regardless of the outcome, the uncertainty sends more investors out of the financial markets and into gold.
As a result of these and other (technical) factors, the stock market begins to dive on its own momentum and is quickly exceeding a 20-25% "correction." More investors head for the sidelines and into gold (some into bonds and bills as well). As this plays out over the next 3-6 months, word begins to hit the markets that the Y2K dilemma is bigger than originally thought...or at least than revealed.
Now the exodus from stocks begins to accelerate and the gold rush accelerates. In the midst of all this, the U.S. is hit with even greater troubles as investigations into our top leaders also gain momentum and upset the cozy investment atmosphere which has prevailed in the '90's. Out of stocks, into gold.
As a result of the ongoing effects of El Nino (which is already confirmed and likely to be worse than 1982-83) and La Nina (which follows El Nino), crop production is severely curtailed in 1998--and complicates already depleted carryover stocks--and price inflation takes hold with a vengeance. Out of stocks and bonds, into gold!
If I may venture into the less predictable, but still very probable events, 1 or 2 strategic earthquakes or volcanoes could add to the instability and further complicate matters. As a result of a major volcano (Montserrat?, NW U.S.?, Japan?, Italy?), more crop production problems could occur--not just in grains but in many of the exotics (coffee, cocoa, OJ, etc.). Result: more inflation and more incentive to buy gold.
Seeing all these distractions as a perfect opportunity to strike (or unconsciously responding to an ungrounded environment), more Middle East skirmishes could occur and perhaps new terrorism around the globe...Out of financial assets, into gold.
I think I have conveyed my point. I will stop there, since many of you are already thinking "Gee, this guy's getting a little extreme" or "He's another one of the Chicken Little types that thinks the sky is falling." Before jumping to that conclusion, let me reiterate my purpose for this exercise. It is not to scare, although a little fear can be healthy. It is not to proclaim the end of the world (which would only be a transition, anyway). INSIIDE Track 10/01/97
It is simply to point out that each of these events is building momentum (yes, even the earthquake/volcano potential) and is soon to hit a parabolic stage.
As always, it is not the individual events which have meaning. It is the potential synergy which exists over the next 12-24 months that is startling. The combination of 6-8 events all reaching the acceleration phase at approximately the same time could be terrifying...unless you are informed.
Until this stage is hit, few investors will notice. Once it is, the masses will panic and overdo their reaction. Would you rather wait until the panic, or take precautionary steps, as the technical picture warrants, before chaos hits?
As I always emphasize, timing is everything. I could have discussed these issues months or even years ago, but 1998 was still too distant. Now, I am willing to get a little more dogmatic since the time to act is approaching...and the masses have been lulled into apathy and complacency.
Earth Update
Rome Is Rocking...
Unless you are brand new to our readership, you should be aware that I believe, and have documented why, several earth-shaking events will take place in the next 3 years (1998-2001). You should also be aware that my focus has been on the NW U.S., Japan, the Middle East and Europe--particularly Italy and Portugal.
I expect powerful earthquakes or volcanoes to be felt in these regions in the coming period. So, again, it should have been little surprise to INSIIDE Track readers when Italy was rocked by three sharp earthquakes last week. On September 26 and 27th, central Italy was hit by 5.9, 4.8 and 4.5 magnitude quakes which caused serious damage (estimated in the tens of millions of dollars) to the Basilica of St. Francis of Assisi. The quakes killed 10, left hundreds homeless and destroyed or damaged priceless artwork (frescoes) in the basilica.
Though maybe not that significant themselves, these quakes demonstrate that earth activity is increasing in the region--leading into a period when numerous volcanic cycles converge. Coincidence? Probably not!
Today (9/30) two quakes struck Honshu Japan--north of Tokyo. The first was a 6.4 and the second a 4.9. I have not heard damage estimates yet, but the period leading into mid-October appears to be becoming active...which forces me to reiterate last month's comment:
"It would not be surprising if Montserrat finally erupts with a vengeance (watch mid-October) and if other volcanoes follow, or coincide.
What areas this will affect if it happens remains to be seen. My guess would be N. Africa, S. Europe, the Middle East and perhaps India and China...just the areas where they need crop failures to further destabilize the population. But, that is simply speculation at this point. (But, isn't every thing we do?)" 9/02/97 INSIIDE Track
It is only a matter of time until a truly significant quake or volcano hits a strategic (economic) area.
STOCK INDEXES (INTERNATIONAL): Europe Not Ready To Unite...was the headline of a 9/11/97 IBD article quoting well-known economist Milton Friedman. He stated:
"Europe is not ready for currency union and risks serious economic damage and political discord if it goes ahead with the project...Europe exemplifies a situation that is unfavorable for a joint currency."
Of course, we already knew this. However, one quote was of particular interest to me.
It was the phrase that Europe "risks serious economic damage and political discord.". Now...what would both of these lead to? You got it!...a unifying figure rising up out of the turmoil and despair...a "white knight." INSIIDE Track 10/01/97
So, Monetary Union Mutiny (MUM) is not just from within but now is also appearing from the outside. Europe has little choice but to attempt this union, so that part of the equation is not in doubt. The question remains who will be in, who will be out, and who will end up leading after all the dust settles. Time will tell. In the interim, keep your eye on Spain and Italy (both of which have recently passed new budget agreements which allegedly will adhere to the 3% deficit target for monetary union).
From a technical standpoint, the international stock markets are still waiting for the collapse of the Nikkei before they become unglued. After giving a sell signal on July 25th, the Nikkei has dropped into the 17,000 range a few times and still needs a weekly close below 17,000 to usher in the collapse of the Japanese economy and create turmoil in the international financial markets.
Yes, this sounds extreme, but I have little doubt that time will vindicate this prognostication. 14,000 will be the first downside target, but will likely give way to much lower levels before anything resembling a bottom is possible.
One other factor to keep in mind is the earth cycles peaking in the 1998-2001 period, with Japan as the likely site of at least one major earth disturbance (quake, volcano, and/or tsunami). Mid-October is a potential time frame, but January 1998 has a higher probability factor for this event. If the Nikkei is already below 17,000 if/when this occurs--look out below. However, since this is not the type of analysis to use for trading--the chart action is the most important variable for now.
The weekly trend remains down in the DAX but needs a weekly close below 3906 to initiate another leg down...with targets of 3560 and 3170.
The trends remain up in the FTSE and in the CAC-40. It will take the following to turn these trends negative:
The CAC-40 needs a weekly close below 2770 and the FTSE needs a weekly close below 4950.
STOCK INDEXES (DOMESTIC): Most of last month's analysis -- including the chart which appeared as well--was fulfilled with the DJIA rally to 8035. To repeat from last month:
"One thing to keep in mind is the principle that the reversal of the trend (daily, weekly or monthly) is often the most likely time for a reaction against this newly established trend. The fact that today's close could not quite violate the previous low of August 18th shows that a rebound could be part of an a-b-c/flat correction and could reach as high at 8000/DJIA, or 945.00/SPU...
Once this upward correction is complete, the market will be ready to resume its new downtrend and unfold in a dynamic 3 wave lower. At that point, the bulls should run for cover as anything goes. The first downside target will be 6900/DJIA and 800.00/SP, while the next objective would be 6240-6360/DJIA and 723-733.00/SP. Until a weekly close below 7600/DJIA and 893.15/SPU occurs, it is premature to be discussing this analysis--so file it away for future reference.
As I have focused on for several months...the S&P had major objectives...and the Dow had similar targets at 8256-8286 and 8362/DJIA...The high close in the DJIA was 8259...This fulfilled major upside objectives and removed any remaining bullish influence on stocks...7970-8023 is resistance for the Dow...Investors should also consider liquidating longs at this level, if they have not done so already." 9/02/97 INSIIDE Track
Why repeat so much of the last two months' analysis? Because little has changed and the accuracy of these forecasts should add credibility to the following:..
The S&P could not turn its weekly trend down and is poised to see new highs in early-October and could set a spike high by the 7-year anniversary of the beginning of this bull move (October 11, 1990). The DJIA is unlikely to see new highs since the weekly trend has turned down in the Dow Industrials.
Mid-month, traders were advised to look for "943.00-944.00/SPZ before a final surge to new highs.". The drop to 945.50 fulfilled this forecast and traders were just told to look for a daily close above 953.60/SPZ on Monday (9/29) followed by a pullback to 953.20-953.60/SPZ on Tuesday (9/30)--where long positions could be initiated. The S&P closed above 953.60 on 9/29, then corrected to 952.70/SPZ on 9/30--fulfilling this analysis and setting the stage for a final surge into the first few days of October.
Substantial resistance awaits the Dow at 8100-8177 and the S&P at 980.75-985.50/SPZ. If these levels are tested by October 6th, there is a strong chance they will hold (particularly if it coincides with bonds testing 117-08 to 117-18 or slightly higher). If these resistance levels hold, I would not be surprised to see an outside month reversal lower and a test of 6900-7100/DJIA by mid-November.
Intermediate traders can buy November or December put options if the aforementioned scenario unfolds and risk a daily close above 996.00/SPZ. INSIIDE Track 10/01/97
INTEREST RATES: Since mid-July, the bond market has begun to show signs that it may be stronger than I originally anticipated. The first subtle clue of this came when minor cycles and trading patterns signaled a sharp drop into mid-August. This was recognized and responded to quickly and traders had a chance to triple or quadruple their investment in put options in a very short amount of time.
The fact that this sharp drop came before the upside objective was reached altered some expectations and spurred me to project an extension of the rally into late-September-early-October. This has been the case and traders who followed the recommendations from the intra-month hotline updates should have been buying December bonds at 113-02 to 07. This trade was stopped out at 115-15/USZ--with profits of about $2,250 per contract--but still has the potential to reach 117 to 118-00 in October.
The reason I am recounting this progression is to explain the following conclusions: bonds have the potential (and I emphasize the word potential) to continue this rally into the early part of 1998...mid-January, to be exact.
Though this is by no means confirmed or assured, it needs to be considered when attempting to trade this market. This does not mean that a top at 117 to 118-00 will not be seen. Nor does it mean that an early-October peak could be seen. But, it might not be the final top, so any short trades need to perform quickly and confirm an intermediate trend reversal to be bearish.
One of the primary reasons for this is the drop which was seen in early-August. Having preceded the test of critical resistance, this drop alleviated any overbought conditions and gave the bond market a chance to regroup and build new momentum for another surge. What this means is that when bonds test 117-00, it will only be the mid-point of a rally which began around 112-00 only a few weeks prior--rather than the exhaustion part of a rally which commenced at 106-12, 6 months earlier.
Another factor has to do with the intra-year pattern. Through June of this year, bonds had been unable to break above the January 1997 high (intra-year open resistance). In July, this finally took place and bonds have since retested this level twice--in August and September--only to be pushed higher each time. Since the yearly SPR is at 121-02, this action could spur another rally back to major highs by the end of 1997/beginning of 1998.
If this scenario is to unfold, what might it look like? One possibility is that bonds rally in early-October and test 117-00 to 117-18, before setting a minor peak. (This would likely coincide with the S&P setting new all-time highs, while the DJIA falls short of its August high.).
Financial instruments could quickly turn lower and bonds would then decline into the first week of November. If this much of the scenario unfolds, then I would expect a low in early-November, followed by a rally into early-January. This rally could reach the yearly SPR (121-02) by the end of December, and spike up to new all-time highs (122-06) by mid-January.
The bearish scenario is almost the same...until the potential November low. If/when a decline materializes, the primary question will be "does the weekly trend reverse to down?" If it does, the preceding high will likely be the final one and there will be little chance of a continuation of the rally. If it does not turn lower, it will be a clear sign that bonds have underlying strength and should rally further.
Another sideline to the bullish scenario. The mid-October to early-November potential decline could usher in a sharp drop in stock indices--which would be another bullish factor for bonds (and perhaps for gold). If stock indices begin to drop on their own momentum, both bonds and gold could rally in synch for some time. When gold finally goes into a parabolic rally, then bonds would likely turn lower (mid-1998?...somewhere around April/May??).
One final note regarding the more bullish scenario...if--and only if--bonds do begin another rally into the end of the year, the projected early-January peak could also be an intermediate one and a major top could extend all the way to April. This is nothing but potential at this time and should not be used for current trading strategies. It is only conveyed to identify a developing possibility for the next 3-6 months...and a potential surprise for many traders.
Intermediate traders can still buy puts, but use the December 116 puts instead. Buy these puts if/when December bonds test 117-08 to 117-18, but only if it occurs in the first half of October. Look for a quick drop to 112 to 113-00 if this occurs. Use a daily close above 118-16 as the risk.
INFLATION MARKETS: The recent surge in precious metals and crude is adding some credibility to recent comments:
"Crude and gold are very near critical lows. It is only a matter of time before events explode in the Middle East...we are entering a critical time period when war is possible and major reversals are poised to take place in several markets.
Confirming my technical outlook, the silver market 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. INSIIDE Track 10/01/97
Trading Strategies--Aggressive and intermediate traders should look for a daily 2 close reversal buy signal off weekly support in gold to initiate long positions (risk 1.50 below the existing low or a daily close below it). Silver traders (aggressive and intermediate) can 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)." 9/13/97 and 9/20/97 Weekly Re-Lay
...the downside potential is minimal and the upside risk is growing...Gold call options could be a prudent purchase in the next 1-2 weeks." 9/24/97 INSIIDE Track Hotline
"Silver is confirming that its reaction lower is complete and a new rally is underway (which should quickly test 493-495.0/SIZ)...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 ½ 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)." 9/27/97 Weekly Re-Lay
This is a sampling of the comments made over the last 2-3 weeks, when silver and gold began to confirm that a rally was imminent. Though cycles indicated that a slightly lower low in gold was possible, trading signals said otherwise and quickly led to the dramatic rallies seen over the last few days (with gold spiking above 340.0 and silver above 530.0).
Gold still has a ways to go before it can confirm a weekly reversal higher, so some volatile trading is likely in the upcoming weeks. Silver is confirming its new weekly uptrend and is unlikely to see a reversal down anytime soon. I have provided my cyclic analysis over the last several months (explaining why a bull market would be underway by October of this year) and provide some fundamental possibilities in the opening comments.
One cautionary note is necessary at this time...
As I have identified for several months, some key cycles align in early October. Until the middle part of September, these cycles looked like they were going to be slightly lower lows (gold) or secondary/higher lows (silver). These cycles may have come early or could have inverted and gold could be seeing a high during the current week. To reiterate:
"...includes a recent 10 week cycle--which topped on 3/07/97, again on 5/16/97 and again on 7/25/97. The next occurrence is the week of 10/03/97...
Corresponding to this cycle is a 30 week cycle which divides the two recent peaks on 8/09/96 and 3/07/97. The next occurrence is also 10/03/97...The month of October is 30, 60, 90, 180, 210 and 240 weeks from significant turning points in gold. This is a notable alignment of Gann/geometric cycles.
And, there is yet another cycle pinpointing early-October as a potential turning point in gold. It is a very consistent 31-34 week cycle which has perpetuated for at least 3 ½ years. This cycle last bottomed on 6/28/96 and again on 2/14/97...projecting another low most likely on 10/03/97 (though it could come as early as mid-September).
So, for those of you who have been wondering when to start buying gold on a long-term basis-- October 1997 may be the opportune time." 8/01/97 INSIIDE Track
The next few weeks should clarify this, starting with whether the aforementioned Weekly Re-Lay trades are stopped out or not. I will update this in the 10/13 hotline.
SOYBEANS: November/January soybeans could not fulfill the necessary criteria for reversing to an uptrend and a bear market remains in force. I recently advised Weekly Re-Lay traders to buy Nov. 625 puts for a quick drop to 605.0/SX with a possibility of seeing new lows (below 577.0/SX) in the coming weeks. If January. beans are still around 620-630.0 when this is received, INSIIDE Track readers should buy January 600 puts and risk half the value--or a daily close above 633.0/SF. Take ½ profits if new contract lows are hit (below 583.0/SF).
U.S. DOLLAR//CURRENCIES: The German Mark reversed its daily trend to up and continues on its quest to test 60.00 sometime in November. If the 10/01 low holds during the first several days of October, look for a rally to 58.50 within the month. The Japanese Yen just gave a daily double key reversal higher--which should spur some follow-through buying and a rally back to the September highs. INSIIDE Track 10/01/97
As conveyed last month, "The most bullish scenario would occur if the mark set a low in the first week of September, by spiking below 54.85/DMU and closing the week above 55.33. This would trigger a weekly 2 close reversal higher and project an intra-month rally to 57.65-57.84...A rally back to the 60.00 level, by early-November would be the likely result...A down-turn in the dollar is still likely to be the straw that breaks the back of a global bull market in equities. However (consistent with opening comments) it does not matter as much whether it is a cause or effect. It is just very likely that the two will coincide." 9/02/97 INSIIDE Track
The mark did precisely this, spiking down to 54.41/ DMU during the first week of September and closing the week at 55.52/DMU (55.85/DMZ)--triggering the projected weekly 2 close reversal buy signal. The mark needs to see a daily close above the 10/01 high to initiate additional buying and an intra-month surge to 58.50-59.00. This high could occur by as early as October 17th.
Intermediate traders can add to long positions on a daily close above the 10/01 high and risk a daily close below the 10/01 low. The same applies to the yen. ½ profits should be taken in both if monthly resistance is tested around mid-month.
ENERGY COMPLEX: As warned last month, "Crude traders were stopped out of long positions with about $1,000 per contract in profits and this market has gone nowhere since. A retest of 18.60 is still possible, but I see little downside potential below that.
I will be watching crude for any signs of a low as we enter this critical period in the Middle East...particularly the first two weeks of October. Long term traders can be buying crude call options if 18.60-18.80/CLV is tested by mid-month." 9/02/97 INSIIDE Track
Crude failed to reach this support (another indication of underlying strength) and gave a daily 2 close reversal higher on September 24th--providing the first clues that a low was intact. As conveyed in the 9/24 hotline, Nov. crude needed dual daily closes above 19.98 to confirm this reversal, which occurred in the ensuing two days.
A weekly close above 21.00/CLX will be the next confirmation that a bull market is taking hold and crude is poised to accelerate higher. If this fails to happen on October 3rd, intermediate traders can look to buy a pullback to 19.83-20.20/CLZ into mid-month (January call options can be purchased as well). Risk a daily close below 19.41/CLZ.
"The chart pattern (natural gas) is also a bullish one--with an extended consolidation/correction, which has finally turned back up. This could be a very positive sign for another intermediate or major rally into the end of 1997" 8/01/97 INSIIDE Track
Heating oil will likely be the next one to move--having nearly completed an extended 10.00 point consolidation." 9/02/97 INSIIDE Track
These were the comments from the last two months--preceding an unprecedented 50+% run-up in natural gas prices (approximately $10,000 per contract) and a more recent 12-15% rally in heating oil since September 11th. Intermediate traders can attempt to buy December heating oil on a pullback to .5650-.5730 and risk .5340. Ideally, a low will be set around October 10-13th and a 3 wave higher will commence.
Re-Cap
Basis INSIIDE Track and the intervening hotline updates, S&P traders were stopped out of shorts with $3,500-$4,000 per contract profits, while bond traders were stopped out of longs with about $2,250+ per contract gains. Silver and soybean options were liquidated with $200-$300 per option losses while the mark long positions remain intact with growing gains. Yen put options were liquidated early in the month with approximately 200% gains.
If traders bought gold call options (per the 9/24 hotline), I would recommend taking profits on ½ the position and holding the rest--risking a daily close below 329.0/GCZ. Otherwise, see specific sections for all other analysis.
Early-October is still expected to see several intermediate or major reversals, so the next 3-7
days are important.
October 11, 1997
Eric S Hadik, Editor
Jeneric Trading Corporation
P.O. Box 2252, Naperville, Illinois
Added to the WWW 10-17-97
Last updated on 10-17-97
Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com