Last Signal: 6/23/00, SELL
Dow: 10,404.75 OTC: 3845.61
The Ratio continued neutral and basically directionless as our indicators remain about as mixed as the markets seem to be. Perhaps they are simply reflecting that the markets truly aren’t sure what to make of the technical, economic and corporate earnings news that’s been coming out. We will wait until this confusion clears up before drawing any major conclusions.
FRIDAY, July 7, 2000: With the manipulations of the end of quarter window dressing period ending, the markets are refocused on economic and earnings reports. The evidence of a slowing economy continues, but the question will be is it enough? This morning’s June Employment report is the next bit of market moving information. Corporate earnings have been disappointing from what we can see. Of course many companies are on target and some have been better than expected, but what we think is significant is that many companies that have shown very reliable earnings are pre-announcing shortfalls. A slowing economy may be what the Fed would like to see, but it can’t be great for corporate earnings, especially as employment, energy and other raw material costs have surged while they have only shown modest success offsetting those higher costs by raising prices. While investors may temporarily cheer the slowdown, they may not remain so happy if a few more popular and widely held issues disappoint.
Technically, prices have been going no place fast over the past few weeks. The short term trend has been reduced to a very narrow band, with initial resistance at 10,600 and support at 10,340. Higher resistance is at 10,750 and 10,860, and lower and critical support is at 10,250. A resolution of this tight range will obviously lead to a test of the more extreme levels. A push either above or below the broader levels would confirm the market’s direction. We give either direction a 50/50 probability for now, as we wait for the picture to become more clear.
TREASURIES
Treasury yields quickly stalled out again after testing resistance at 5.85%, here too, as traders await this morning’s June employment data. If the rally is to resume, it is becoming important for it to push below this resistance fairly soon. While the market has been acting pretty well lately, a continued rally in the equities markets may draw attention and funds away from Treasuries, at least until there is more conclusive evidence that the economy is slowing and the Fed is finished tightening. A push through 5.85% would offer potential to the next resistance at 5.72% and then at the 5.65% April low. A rise above initial support at 6.05% would confirm a short term bearish reversal, with next support at 6.20 - .25%, 6.32% and 6.40%.
GOLD
The XAU & Gold remain submerged. Prices have dropped back to the low end of their recent range and support, on the sighted news that Saudi Arabia will be increasing their oil production by 500,000 barrels per day to bring the price down to $24-5. For some reason, the markets have decided to link the two prices together. If there were truly a correlation, gold would have risen by 300% in the past year and a half as oil rose from $11 to 34. The "fear" of lower oil prices seems only to be the latest excuse for the manipulators to keep gold under pressure.
Technically, the XAU remains bullish against key support from the 4/13, 54.24 low which is close to being challenged. A break of this level would suggest a test of the 8/31/98, 48.73 all time low. A move above 64 is necessary to resolve the current "high pole at the bearish resistance" (HPBr) short term chart formation, as well as to break out above the downtrend line drawn from the 92.72, 9/99 high. This would be significantly bullish. Higher resistance is at 69, 72 -3, and then 82. Cash gold is all the way back to support, just above $283 after a recent buy signal on our Point & Figure charts (at $292/oz.). A move below $283 would negate this and the $326 per ounce upside price objective.
PORTFOLIO CHANGES
FRIDAY
JULY 7, 2000: None today, but, our short on Adobe Systems (ADBE) is close to being stopped out (at 136), and we have several new trading ideas under consideration
Article contributed by Mitch Harris: President, Market Trend Realities & Editor,
The Reality Check Newsletter, and reprinted here with permission.
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