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GREENWICH NATWEST FUTURES
311 S. Wacker Dr., Chicago, Illinois
(August 18, 1997) FINANCIAL INSTRUMENTS: TREASURY BOND FUTURES–September Treasury bonds settled at 113.20 on Friday, finishing up 30/32nds of a point from the previous week's close. The market remains in the midst of a downside correction within the major uptrend on the daily chart. This major uptrend is in question right now, as price has been trading on both sides of major support at the 113.09 area (its fifty-day moving average) for the last six sessions. Our short-term outlook remains neutral for now, until it becomes clear that either hat major daily uptrend has resumed, or a new major bearish trend change has begun. The chances of a significant several week directional move, either up or down, beginning from the 113.09 level are very good, however.
As mentioned in last week's report, the market's position at a major daily support level combined with short-term oversold conditions sets up an ideal technical environment for the major uptrend to resume, if still valid and in force. Consecutive strong closes put in on Wednesday, Thursday and Friday of last week hints that the major daily uptrend is attempting to resume here. However, this has not yet been confirmed.
The bullish symmetrical triangle patterns that exist on the weekly and monthly charts are still valid, despite the move lower over the last three weeks. In fact, the recent sell off has positioned price right on top of the upper parameters of each of these triangles. These are located at 112.28 for the weekly pattern, and 112.17 for the monthly. So, between the market's fifty-day moving average and the tops of these two bullish chart patterns, we have three very important support levels within 1.00 point of each other. This convergence of support levels makes this area especially important.
Another bullish longer-term technical indication can be found in the monthly MACD indicator, which has now crossed its “trigger line” to the upside after coming close to a test of its zero line. Major price moves often occur as the MACD is at or near its zero line, while “trigger line” crosses have caught most of the significant directional changes on the chart.
In addition to the aforementioned support levels, watch minor resistance at the 113.25 area carefully early this week. Price's reaction to it should be another good indication as to whether or not the major uptrend on the daily chart has resumed. This level must loosely contain price on the upside in order for the current downside correction on the daily chart to remain in force. (This level has loosely defined the session high for the last three days of last week.) However, we would view a close above the 114.00-114.16 area next week, on good volume, as a technical indication that the major daily uptrend has resumed.
John J. Kosar
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