Safe-Haven Bond Buyers
| size=3 helvetica>CURRENT POSITIONS (AS OF 01/05/00) | |||||
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| size=2>Market | Helvetica>Date | Helvetica>Long/Short | size=2 Helvetica>Enter | size=2 Helvetica>Stop | Helvetica>Target |
Mar. 99 | helvetica>Flat | ||||
Mar. 99 | Â | helvetica>Flat | Â | Â | Â |
Mar. 99 | Â | helvetica>Flat | Â | Â | Â |
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The March bond contract [USH0>USH0]Â
was lower today after a higher stock market drove “safe-haven†bond buyers out
of the market and back into the stock market. This morning, the Commerce
Department reported that factory orders jumped 1.2% which was higher than
expected. This, along with the higher stock market, was enough to drive US H0 to
new lows for the recent down move.Â
| “I view this latest sell-off (in the S&Ps) as profit-taking after the incredible run last year.” |
The Fed meets next month, and with
continuing signs of economic strength, the market is starting to expect short-
term rates (Fed Funds) to go as high as 6% by March. Volatility levels have
increased as the market deals with a volatile stock market clouding the
interest- rate picture for this quarter.
Technically, the big hedge funds
are primarily short with big unrealized profits on their books. If the market
can trade and close above 91-00 area, I expect a short- covering rally to start.
That is were I will look to go short.
size=2>Currencies
March euro
futures [ECH0>ECH0]Â calmed down today after their biggest one- day move
in the last six months on Monday. The big up move yesterday was the result of a
weak US stock market and the capital that was leaving it. Today’s slightly
higher close was very bullish as even a higher stock market could not reverse
yesterday’s gains. The European Central Bank met today and they left rates
unchanged even as the German government reported that unemployment fell by
68,000 last month.Â
Technically, there was massive short covering on
Monday as funds covered their short positions once the market penetrated the
1.0300 area. The chart looks like there was a triple bottom formation formed
which is significant since many traders use these chart patterns to signal
trades. I will look to establish a long position in the next couple of
sessions.
size=2>Stocks
March S&Ps
[SPH0>SPH0] had a bounce today on bargain hunting and short-covering. I view
this latest sell-off as profit-taking after the incredible run last year.
However the recent downturn had a high degree of momentum and I expect this
recent down move to continue despite Wednesday’s bounce. The Nasdaq was down on
the day which further adds to my suspicion at today’s bounce.Â
Technically, today’s chart pattern
formed a reversal pattern with a lower low and a higher close. Although I view
this as bullish, historical studies on this pattern have proved it to be only
marginally predictive of tomorrow’s price action, which in this case is
bullish.Â
I am on the sidelines right now, awaiting a low-risk
entry point on the short side in the next couple of sessions. Ideally, I would
like to sell in the 1430 area but will keep flexible as volatility is very high
right now (VIX index is at 28 area).