Seasonal S&P Rally Expected after Tuesday’s Selloff
CURRENT POSITIONS (AS OF 11/24/99) |
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|---|---|---|---|---|---|
| Market | Date | Long/Short | Enter | Stop | size=2 color=000000>Target |
|
Dec. 99 T-Bonds |
Flat | ||||
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Dec. 99 S&Ps
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11/24/99 | Long | 1414 | 1395 | 1430 |
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Dec. 99 Swiss franc
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11/08/99 | Short | .6478 | .6590 | – |
Bonds
The December T-Bond [usz9>usz9] was down Wednesday on an upwardly-revised gross domestic product report. The Commerce Dept. reported that
third-quarter GDP grew at a 5.5% annualized rate from a previously reported 4.8% rate. This was not good news for the bond bulls and we traded down to the
112-21 level which stopped out our longs. Furthermore, the Labor Dept. reported that first-time unemployment benefit claims fell 13,000 to 274,000. This again was a surprise. Since wages are the biggest part of corporate costs this was seen as significant. We have moved to the sidelines for now but do have a bearish view for the next couple of sessions.
Stocks
The December S&P contract [spz9>spz9] is slightly up at 1:45 p.m. ET. We expect a modest rally here after
Tuesday’s selloff due to seasonal factors and are going long at the 1414 area. Stops in at the 1395 and profit target at the 1430 area.
Tuesday’s selloff took some of the pressure off of the overbought condition. It is also impressive that the market can rally despite the selloff in bonds. This is a bullish sign. Stay tuned.
Currencies
December Swiss francs [sfz9>sfz9] continued to decline as the U.S. economy continues to outpace the European one. The combination of the revised GDP report this morning and a lackluster demand for European bonds was enough to push the market to new lows. The German government had an auction this morning for their bonds and investors demanded higher yields on the bonds which drove the price of existing bonds down. This was bearish for the European currencies as the bonds are denominated in those currencies.
Next update: Friday, November 26, 1999.
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