Bearish Signs Continue

T-bond futures

Short-term perspective: We liquidated our long positions in the March contract
[USH9>USH9] at the 123 20/32 level. The market bounced back as the oversold condition corrected
itself, and it also got support from the
Japanese government’s decision to cut back their bond supply on Monday. This triggered a rally
in the JGBs (Japanese
government bonds) that supported the U.S bonds as well.

Long-term perspective: Bonds are still in a downtrend. We have stops in at the 125 level
in the March futures. Continued evidence that the U.S. economy is
strengthening has made investors wary of buying bonds for the long
term right now.

The Producer Price Index (PPI) number comes out Thursday. Look for clues of
further economic acceleration in this report.

Currency futures

Deutschemark and Japanese yen:

Short-term perspective: The March D-mark [DMH9>DMH9]
still has not presented any short-term opportunities.

Long-term perspective: The D-mark is still in a downtrend. Fear of interest rate increases
in U.S. has made the dollar more attractive. We have our stops in at the 5900 level.

The March Japanese yen [JYH9>JYH9] made a big
down move after the Japanese government made it clear they favor a weaker yen vs. the dollar.
We got short around the 8900 level and have break-even stops in right now.

S&P 500 futures

The ongoing aimlessness in the stock market means the March contract [SPH9>SPH9] has still
no low-risk trading opportunities.
The market has been very
difficult to read; there has been no follow through on any moves lately.

Overall, last Thursday’s (February 11) big rally followed by Friday’s sell-off was very
disappointing. I sense (just a hunch) the market is at a short-term top

Next scheduled update: Friday, February 19, 1999

(Check “Today’s Schedule” every day on our home page to find out about additional updates.)