Watch for Bounce In S&Ps As Bonds Sell-off
| CURRENT POSITIONS (As of 4/30/99) | ||||
|---|---|---|---|---|
| Market | Long/Short | Entry | Stop | Target |
| June T-bonds | Flat | – | – | – |
| June S&Ps | Long | 1337 | – | – |
| June Swiss franc | Long | .6600 | .6550 | .6630 |
Note: All price levels are approximate.
S&P 500 futures
The June S&P [SPM9>SPM9] was strong early in the day but finally caved in as the bond sell-off proved too big to ignore. The sell-off’s velocity suggests a good possibility of a bounce on Monday or Tuesday.
We put on a long position at the 1337 level. However, we’re trading only half the normal position size because we will use very wide stops. We will look to add to this position if the market gaps down on Monday morning. Check back Monday for stop levels and a possible exit target.
Figure 1. June S&P futures (USM9), 15-minute bar. Source: Quote.com.
Currency futures
The June Swiss franc [SFM9>SFM9] and Euro [ECM9>ECM9] both dropped slightly today. The contracts declined on the strong U.S. economic data, but not as much as one might have expected. This, combined with an oversold condition, indicates the strong possibility of a bounce early next week.
We established a long position today at the .6600 level in the franc. We will try for approximately the .6630 level on the position, with our stop in at the .6550 level.
Figure 2. June Swiss franc futures (SFM9), 15-minute bar. Source: Quote.com.
T-bond futures
The June futures [USM9>USM9] collapsed today in response to the strong GDP number. Yesterday’s gain on the back of the Employment Cost Index (ECI) was totally erased today as our fears of a stronger economy are starting to show up in the data. We had part of our position stopped out today but, then rode the sell-off down and covered at the 121 08/32 level for a small profit.
The 4.5% growth rate in the first quarter was much larger than expected. Today’s sell-off could be the start of a downward trend for a while, as interest rates could keep rising and bonds falling. We are on the sidelines for now.
Figure 3. June T-bond futures (SFM9), 30-minute bar. Source: Quote.com.
Next scheduled update: Monday, May 3, 1999
(Check “Today’s Schedule” every day on our home page to find out about additional updates.)