PPI and CPI may be catalysts for next upmove
Insight
CURRENT POSITIONS (AS OF 01/10/00)
Market
  Date
Long/Short
  Enter
  Stop
Target
Mar. 99
T-Bonds
Long
90-16
89-16
91-25
Mar. 99
S&Ps
Â
Flat
Â
Â
Â
Mar. 99
Euro
Â
Flat
Â
Â
Â
Bonds
The March bond
contract (USH0)
pulled back Monday after Friday’s gains, giving us the pullback we were looking for. The market came under pressure from a higher stock market again today. This negative correlation has been going on for a while now and I don’t see any end to it
for now.Â
I established a long position at the 90-16 area with a stop at the
89-16 area and a profit target at the 91-25 area. We have PPI and CPI coming out
this week, which could give us the catalyst for the next upmove in the market.
If we look at the Fed Fund futures, we can see that the market isn’t as sure
about another rate hike as it was early last week, This could give us the
beginning of the rally we are looking for.
Technically, there is not
much of a change from last Friday. I see the potential for immense short
covering at these levels.
Currencies
“The (bond) market came under pressure from a higher stock market again
today.”
(ECH0) were
under some pressure today on the higher US stock market. I am still waiting for more of a pullback before establishing a long position but expect it very soon. As with the bonds, there is a negative correlation going on here with the stock market. It would be nice to be able to trade on this alone and sometimes it is very tempting to do so, but the problem is that the correlation factor comes and goes. What I look for instead is a confluence of factors to increase the probabilities of being right. In this case I am looking at momentum,
retracements, as well as correlation factors.
Stocks
March S&Ps (SPH0)
got a boost today on the AOL-Time Warner merger, the biggest in history. This was viewed as a vote of confidence by AOL on the future of e-commerce and thus the economy.Â
Technically, the market has continued to be strong, blowing past the 1443 area. I am getting somewhat bearish again but did not establish a short position as I did not see enough of an “edgeâ€
(refer to
my Jan. 7 commentary) to warrant the trade. The VIX continues to trend lower after Friday’s big drop, which makes me somewhat bearish.
A
big drop signifies bullishness in the market coming back very suddenly. Historically, such rapid moves can be faded with a decent probability of making money. Stay tuned.
