wmeubank@ocp.kcmo.com
TECHNICAL DATA MARKET REVIEW
Interest Rates
SEPTEMBER BONDS: While this week has seen bonds stage a minor recovery to the mid-114 area, we hold on to our bearish bias. The daily chart maintains its pattern of lower highs and lower lows, and daily MACD is making an attempt to cross below the zero line. The zero line will act as temporary support, but a break here would be significant, occurring for the first time since March 3. The weekly chart has yet to turn bearish, but the double top mentioned last week provides a valid argument. Maintain a sell strength strategy against the August 19 high of 114.14. A break below the April 28 trendline at 112.30 will confirm further weakness with targets at 111.21, the 50% retracement of the April 14 low (106.12) to the July 28 high (116.31).
DECEMBER EURODOLLARS: December Eurodollars also recovered last week, trading shy of our 94.21 sell point, reaching 94.19 on August 8. However, the contract is currently trading at 94.12, dead center of a wide range between 93.95-94.19. We prefer to stand aside. Daily MACD has generated a buy signal on last week's strength, and with Euros back above the 94.10 20-day moving average, aggressive traders may look to place new longs here for another attempt at the recent 94.23 highs.
Commodities
DECEMBER GOLD: The symmetrical triangle identified on the daily charts two weeks ago has provided no directional conviction, and the contract remains confined to a large range between 332.9 and 322.4. The weekly charts maintain their bearish bias, and daily MACD is turning over as well. Therefore, look to play the recent range from the short side. The weekly trend will be bearish until the November 11, 1996 trendline at 336.3 is taken out.
OCTOBER CRUDE OIL: We maintain a bullish bias for crude oil as long as the June 20 trendline remains intact, coming in this week at 19.64. Weekly MACD continues to rise after generating a buy signal last week, and the daily chart holds onto its pattern of higher highs and higher lows. While daily MACD is bearish, look at weakness to 119.75-20.00 as an opportunity for new longs. Target a break above the August 5 high of 21.02.
DECEMBER WHEAT: We return to wheat this week due to an interesting development in the August 12 Commitments of Traders data. This week's report shows commercial traders at their most bearish levels since April 22. At that time the contract peaked at 473.4 on April 21 and suffered heavy losses for 3 months. Daily MACD has already generated a sell signal, and the contract has broken below the July 21 trendline, putting an end to our bullish bias. Traders can sell against the bottom of the trendline at 381.0. Look for a break below the August 5 low of 363.0 for confirmation, and target the July 21 gap at 355.0.
NOVEMBER SOYBEANS: We also bring attention to a huge development in soybeans. This week's COT data shows commercial traders at their most bullish position since February 1995! The last time commercials were this bullish resulted in almost 20 months of higher prices! This suggests that the contract is coiling for a large move, and we prefer to side with the smart money. With daily MACD negative, look to buy further weakness against the July 7 trendline at 606.4. Target a run at the March 10 trendline at 658.4.
Dollar
SEPTEMBER YEN: September yen continues to consolidate around the 8500 level following last week's sell-off, and is having a difficult time climbing above the 8542 20-day moving average. While daily MACD is turning bullish and suggests potential strength, the weekly studies are turning over bearishly. Therefore, with the pattern of lower highs and lower lows intact, look to sell against the June 11 trendline coming in this week at 8721. Target a break of the August 6 8406 low.
SEPTEMBER DEUTSCHEMARK: September D-mark performed well last week, exceeding our 5520 target on August 18, reaching 5548 before falling, currently trading at 5436. While the weekly trend remains bearish, the daily chart will maintains its pattern of higher highs and higher lows until the August 12 low of 5357 is taken out. Therefore, with daily MACD still bullish, we prefer to buy further weakness to 5400 as the D-mark makes another attempt to rally. Target new highs to 5600.
SEPTEMBER CANADIAN DOLLAR: The bear trend is clearly intact for the Canadian Dollar, reaching new relative lows of 7175 on August 21. Continue to sell strength as long as the July 15 7214 trendline holds. Weekly MACD has generated its first sell signal since February 17, and our downside targets remain the April 28 low of 7155.
Stocks
SEPTEMBER S&P 500: The September S&P 500 continued its sell-off last week, but failed to see much follow-through below 900.00. The contract recovered just as quickly, breaking above the August 7 trendline at 917.43 on August 19, putting an end to the short-term bearish move. More importantly, we return to the August 12 Commitments of Traders Report that shows a startling development. Commercial traders are at their most bullish positions since November 1995, essentially the start of the bull trend. We recommend aggressive longs on weakness, and look for a move above the 20-day moving average at 941.27 to confirm further strength. Target new highs to 972.73.
August 21, 1997 Roman I. Dutkewych
Technical Data
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