CPI and PPI Have Little Effect; Waiting for Clearer Signs
| PREVIOUS POSITIONS | ||||
|---|---|---|---|---|
| Market |
Long/Short |
Enter | size=2 color=000000>Exit | size=2 color=000000>P/L (per contract) |
| Sep. 99 T- bonds | Short | 115-23 | 115-06 | $531.25 |
| Sep. 99 S&Ps | Short | 1412 | 1403 | $2250 |
| Sep. 99 Swiss franc | Long | .6380 | .6390 | $125 |
CURRENT POSITIONS (AS OF 7/16/99) |
|||||
|---|---|---|---|---|---|
| Market | Date | Long/Short | Enter | Stop | size=2 color=000000>Target |
| Sep. 99 T-bonds | – | Flat | – | – | – |
| Sep. 99 S&Ps | 7/16/99 | Short | 1429 | – | – |
| Sep. 99 Swiss franc | – | Flat | – | – | – |
Note: All price levels are approximate.
T-bond futures
The September futures [USU9>USU9] continue to trade in a tight range. PPI and CPI failed to break the market out one way or another, and today’s Industrial Production figures showing a .2% increase in June did little to convince the market about a direction as well.
The bulls got a slight edge over the bears, however, as tension between China and Taiwan gave them a reason to buy. We view this tension between the two as only temporary, and still consider prices at the high end of their range and will look to sell any rallies on Monday or Tuesday. Longer term we see the market in a state of equilibrium as bonds have already adjusted to a stronger economy. Volatility levels should fall further from here.
S&P 500 futures
The September contract [SPU9>SPU9] had another good day. Rising bonds and a seasonal summer rally helped the bulls today. Volatility is still very low and we established a short position at the 1429 area. We estimate there is a good probability of a pullback early next week as the market is becoming very complacent. This is usually not good for the market in the short term.
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| Figure 1. September S&P futures (SPU9), 15-minute bar. Source: Quote.com.
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Currency futures
The September Swiss franc [SFU9>SFU9] and Euro [ECU9>ECU9] were little changed today. Political jawboning by European Central Bankers of raising interest rates to firm the Euro were shrugged off by the market. As we have been stating recently, we believe the chances that the ECB will intervene is increasing. We will view this as a selling opportunity if it happens. These latest comments are just a sign of the mounting pressure the ECB is starting to face in light of the weakening Euro. Stay tuned.
Next scheduled update: Monday, July 19, 1999
(Check “Today’s Schedule” every day on our home page to find out about additional updates.)