Financial Futures Insight

 

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_size=2>Bonds
face=”arial, helvetica” size=2>The March bond contract
[USH0>USH0]  is drifting
slightly lower at this time (2:40 p.m. ET) on very light volume. Tuesday’s Fed
meeting produced no change in their policy and the central bank further stated
that it has a neutral bias in its outlook for future rate hikes. When the market
heard of the Fed’s neutral stance, it briefly rallied and then sold off heavily
as traders figured that the Fed will surely raise on February 1, 2000. The
inside day we had on Monday proved to be a good indicator of the bearish
mentality the market currently has. We have tested the lows on the contract and
I think we are due for a bounce. All of the overbought/ over sold indicators are
still very over sold, which should start attracting some technical
buyers.

However, next week will be the slowest
week of the year due to the holidays. As a result, I am stepping aside because
the usual participants in this market will not be around and I expect any moves
we have will be short- lived and hard to trade. 

color=#008000>Currencies
March euro futures
[ECH0>ECH0]  continued their
downtrend as capital continues to move into the US stock market. It is
perplexing, however, to see the weak bond market and its inability to drag down
the US dollar as it has historically done. This is just another example of
historical relationships not holding up and is a lesson for us to heed. Traders
who make such assumptions can be sorely disappointed as the relationships
between markets keep changing. The market is still very short, but with a dry-
up in liquidity we are exiting our short position on the close at 1.0153.

color=#008000>Stocks
March S&Ps [SPH0>SPH0] face=”arial, helvetica” size=2>rallied Tuesday after the Fed came out with its
neutral stance on future interest rate hikes. The market had a relief rally as
interest rate worries temporarily subsided and the contract closed at the upper
end of its range. The Nasdaq is still holding firm as of this writing (2:52 p.m.
ET). Since our profit target still has not been met we are going to exit the
position today near the close at the 1453 area. Chartwise, you may notice that
the classic “head and shoulders” pattern was forming, but that seems to have
been negated with Tuesday’s price action. The momentum traders have also been
buying as we have broken out of the recent congestion zone. Stay
tuned.