Market Not Waiting for February Hike; Selling Now

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size=3 helvetica>CURRENT POSITIONS (AS OF 12/17/99)
size=2>Market	Helvetica>Date	face=Arial, size=2 Helvetica>Long/Short	face=Arial, size=2 Helvetica>Enter	face=Arial, size=2 Helvetica>Stop	Helvetica>Target
Mar. 99 T-Bonds	12/16/99	Flat
Mar. 99 S&Ps	12/16/99	helvetica>Short	1446	1470	1419
Mar. 99 Euro	12/8/99	helvetica>Short	Â	Â	Â

_size=2>Bonds
face=”arial, helvetica” size=2>The March bond contract ( href=”https://fast.quote.com/fq/tradehard/quote?symbols=USH0″>USH0) stopped
out our longs on Thursday after putting in the biggest losing week in 10
months. The market seems to be going down very easily as the bulls have
totally stepped to the side. The market got a little boost this morning on the
Housing Starts report which showed that it fell again to a six month low.
However, this was just an opportunity for the bears to sell into the rally;
they are in firm control as of now and I will look to join them in the next
couple of sessions.

The market is fully expecting a rate hike in early February, and would have
expected one next week were it not for the Y2K issue. As a result, the market
is not waiting around until February for the rate hike, they are selling now.
I will wait for a short covering rally which I suspect will be coming–I will
look to short into it. I see a retest of the 91 0/32 area in the next two
weeks.

“The Nasdaq continues to give the rest of the market the fuel to keep rallying, and we don’t see this pattern changing in the near future.”

color=#008000>Currencies
March euro futures ( href=”https://fast.quote.com/fq/tradehard/quote?symbols=ECH0″>ECH0) continued
on its downtrend today as the stronger US stock market continued to attract
capital. However, it is interesting to note that the US bond market has been
very weak but this hasn’t been enough to reverse the trend. The market did
rally on Thursday, but that was very encouraging when you consider that the US
bond market has gotten hit hard. I still have my short position but will keep
a close watch on it if the market trades down to the 1.00 area.

color=#008000>Stocks
March S&Ps ( href=”https://fast.quote.com/fq/tradehard/quote?symbols=SPH0″>SPH0)
is currently up at 1447 (10:50 PST). The Nasdaq continues to give the
rest of the market the fuel to keep rallying, and we don’t see this pattern
changing in the near future. It looks like the market wants to break out of
its recent trading range and I am tempted to go with it, but I cannot. With
the bond market being so weak, I am instead getting bearish, as a weak bond
market and a rallying SP is a low risk entry point that I like. This is not
even to mention what I consider an overbought Nasdaq. These are the types of
factors I like to see when I make a trade. I went short at the 1446 area, with
a stop in at the 1470 area, and profit target at the 1419 area.

Next update: Monday, December
20, 1999.