BISHOP’S
MARKET
OUTLOOK, 11-11-02 ENERGY:
On Sat. Oct. 19th, we presented
the Energy Complex as one of our favorite
short-side ideas.
The entire group plunged from mid-morning
on Monday Oct. 21 for huge gains over the next two
weeks! The
energy season is now universally negative.
While we look for a brief upside blip rally
here, we would expect it to last for only a few
days then reverse to the downside and new post-Oct
lows through bearish Dec. / Jan.
Also, Energy is toppy in all major forex
indicating that any blip rally here is likely more
“dollar weakness” than energy strength. CL:
From 9-05:
“…position traders should keep very tight
trailing stops above the support line connecting
the Aug & Sep low pivot points….As a sign of
the top, look for the sleepy option volatility to
turn up first…” Indeed, the referenced support trendline was violated on Oct. 8,9,10,
providing ample warning of the selloff to come. Also note the volatility which has rallied strongly since
bottoming on Oct. 13th.
From the Sat. Oct 19th Striker Seminar:
“…the Energy complex is the single most
bearish group of contracts on the market…CL, HO,
HU are favorite short candidates”. On Monday CL opened
at 29.05 (basis Dec) and held for an hour before
starting a 14-day plunge that closed Nov. 7th
at 25.40 without a cent of drawdown!
9-24 completed a very
convincing technical top in the peak Sep/Oct
season. Bishop’s Supply-Demand Index (SDI) is moving to supportive
but not quite there yet.
Shorts should begin aggressively tightening
stops along the resistance trendline connecting
the Oct. 18th and Nov. 4th
pivot highs (currently at 26.75 or tighter, basis
Dec.). If
hit, move to the sidelines and look for short
re-entries. HO:
Again, our Sat. Oct. 19th short-side
call at the Striker Seminar proved prophetic as HO
opened Monday morning at 79.05 (basis Dec.) then
swan-dived to close at 68.85 on Nov. 8th
without a drawdown!
Our SD index points to further downside
after any brief blip to the upside here.
The Curvature Index (CI), volatility, and
seasonality all remain negative.
Shorts should max-tighten stops to the
parabolic resistance trendline connecting the Nov
4th and 7th pivot highs. If
hit, exit and look for short-side re-entry
opportunities. HU:
From 9-05: “… These are all early-top
warning signs. Keep extremely tight stops on any longs…
Note: a decline in energies would be
consistent with a top in the CRB, a final upside
pop in bonds, and a final stock selloff, all of
which we are expecting for independent reasons in
the late Sept/ Oct timeframe. ..” Indeed,
from 9-05, Bonds popped 2 points to top out and
the SPX dropped 76 (9%) to bottom on Oct 10!
After we called for HU shorts on Sat. Oct.
19th, HU opened Monday Oct. 21st
at 78.90 (Dec.) then plunged to close at 70.10 on
Nov. 7th. NG:
From 9-05 @3.93 basis Dec: “… we like
the short-term upside prospects for NG to takeout
its 8-27 high (3.7070 basis Oct,
4.1600 Dec) and target May’s “sideways
box channel high” in the 3.82 to 4.00 range
(4.25 to 4.40 Dec) by late Sept….” NG
rallied beyond our forecast to takeout the May
highs, hitting 4.610 (Dec) on 10-21.
We now see NG as mildly bearish with
prospects that are somewhat less clear than other
energies. ENERGY
STOCKS: As the OSX has tended to top and
bottom before CL in this cycle, its toppy action
is an inter-market negative for crude &
distillates.
Also, XOI looks likely to at least approach
it’s 10-29 low in the days ahead. METALS:
Gold is weak in all forex here.
The blip GC rally from late Oct. has
mirrored the Euro rally over the same timeframe.
Any GC upside is likely dollar weakness,
not metals strength. GC:
From 9-05: “… Gold has recently been flat
or declining vs. most global forex, confirming
that this year’s gold action remains primarily
fx-driven rather than being based on any supply /
demand issues…GC is at the mercy of the currency
markets right now…”
This picture continues to hold true.
Our Supply-Demand Index (SDI) is not
supportive of a meaningful challenge to the Jun
highs. GC
lethargy ahead of the max-bullish Dec season has
us on the sidelines. SI:
From 9-05: “…Our best chart
interpretation is for a downside test of the 8/23
close (441.50 cash), targeting 436 by late
Sept…. SI is still plummeting in all forex, a
sign of no supply / demand pressure…” The
blip Sep rally failed and SI plunged to hit 430.50
cash to bottom on Oct. 10th!
The seasonal rally from 10-10 has a nice
pattern and could see additional upside heading
into the peak Jan/Feb timeframe.
470 – 480 is likely to be an outside
target. Longs
should keep tight stops along the upsloping
support line connecting the Oct. 24th
and Nov. 6th pivot lows.
The bottoming SI on most forex is also
mildly positive. Longer-term we’re not convinced that 10-10 was a major
bottom. A
re-test of the Nov. 01 lows cannot be ruled out at
this point. Time
will tell. HG:
The sharp drop in our SD Index suggests that the
current rally from the 10-10 low is likely to be
part of a range-bound pattern between the Nov. 01
major bottom and the 6-07 pivot high (80.40 basis
Dec). HG
position longs should keep stops above 70.00 here.
Now at 72.10, we’re looking for this
rally to reach the 77.00 to 80.00 area by the peak
bullish Jan / Feb timeperiod.
Longer-term a re-test of the Nov. 01 low
cannot be ruled out technically at this point.
The best argument against it is the nice
bottoming pattern in Phelps Dodge (PD) which put
in a believable major low on 10-10.
PA:
PA is fulfilling our long-held view that it would
re-test its Oct. 01 lows: From 3-15 (375
nearby) “…a downside re-test with targets of
271 to 275 is best interpretation…”
From 4-12 (370 nearby) “…even the Nov.
’01 lows look vulnerable at this point…”
From 5-31 (374) “...looks determined to
re-test the Nov. ’01 lows…”
From 7-8 (323) “…we look for a upside
rally here…followed by a re-test of the 7-01-02
and 11-01 lows…”
Palladium has now SHATTERED those Nov.
01 lows to close at 289.55 on 11-11, very close to
our 271-275 targets from March!
We’re keeping the tightest of stops here
to lock profits as PA is now in
technically-acceptable bottoming territory.
Position shorts should have stops at 305 or
lower. We
like parabolic trendlines and “yesterday’s
high” as stop themes here. Let it run as far as
it will, but don’t give much back. PL:
The
10-29 PL high (591.00 basis Jan.) is a very
believable technical top. Our SD Index is
extremely cautious, suggesting that 10-29 may be a
peak of intermediate or greater magnitude.
PA weakness (see) adds extra caution.
As of this writing, shorts should keep
stops at the Nov. 8th pivot high
(587.00) and look to tighten if the trade moves
our way. Platinum
stocks are a mixed picture. BONDS/
NOTES: From
9-05 (TYZ2 @ 113-200): “…While we expect a
short-term selloff, a final rally to late Sept /
Oct is still our favored outlook. As a new
development,
the commercial bond market behavior may be
revealing early signs of yield curve flattening.
Note that the most bearish commercial
positions are now at the front end of the curve!!
While 30/10 is still steepening, the 10/2
has been flat since peaking out in early August. We’ve correctly forecast a steepening yield curve since our
1-05-02 Cornerstone presentation.
Now it looks like this trend may be
reversing…”. Exactly as
forecast, TYZ2 sold off briefly to bottom on 9-11
and then rally to it’s current peak on 10-10 at
116-100. Also note that the 30/10 yield curve ratio peaked on 10-09, 4
weeks after our warning of “early signs of yield
curve flattening”. US:
Now at 112-31 (Dec.), US appears likely to
takeout the 10-10 high (115-04) and target 116 to
117 by seasonally strong early Dec.
As we are also forecasting an uptrending
U.S. stock market over the same timeperiod, it is
an interesting re-synchronization of stocks and
bonds which have essentially been de-coupled since
late 1997 and the Asian contagion.
We don’t expect this matrimony to last,
but even in the short term it would provide nice
fuel to both rallies. TY:
A similar outlook to US but the technically
pattern is not quite as strong (curve
flattening?).
We’re keeping tight stops on longs at
114-220 basis Dec, and if hit will move to the
sidelines. ED:
Likely
on a last rally to a major top.
Position longs keep tight stops in the
98.520 area or higher (basis Dec.).
Declining volatility is also ominous.
If our outlook for curve flattening is
accurate, we would expect ED to be exhibiting
greater toppiness than TY and US. This is exactly
the case. STOCKS: A huge bullseye call from
9-05: “… All the indices look destined to test
their July / Aug lows in the weeks ahead… Such a
re-test would be consistent with re-tests on the
high side in bonds and many currencies.
In fact our technical outlooks for the U.S.
dollar, the CRB, U.S. notes and bonds, energy, and
forex are all consistent with a selloff in U.S.
stock indices bottoming in late September or more
likely, mid October…”
Indeed, all U.S. stock indices bottomed
between 10-8 and 10-10 and most landed squarely in
our target price zones! As of 11-12 (the date of our stocks outlook), most indices are in a
one-day blip rally we expect to fail and re-test
their early Nov. pivot lows by week’s end.
Thereafter our best guess is for resumption of the
uptrends started on 10-10, targeting fresh highs
in those uptrends by late Nov.
The longer-term view offers too many
scenarios and is not worth the contemplation.
When and if we reach our targets we’ll
re-evaluate stock prospects.
We can say in advance that we’ll closely
be watching: 1) the strength of such rallies into
late Nov. The
greater the strength, the greater likelihood of
further upside
2) The Nikkei.
3) Other global stock indices.
4) The US $.
5) Interest rates. The inter-market picture will rule the post-November
prospects. OTC/ NDX: Bullseye
calls from
9-05: “…With the NDX (Nasdaq 100) at 922.22
cash, we expect a selloff to test the 9-05 low
targeting 855-875 by week’s end.
After any ensuing blip rallies we see a
final major bottom being put in during seasonally
bearish late Sept / Oct in the 750 – 810 zone.
The 8-05 low (856.35 cash) is likely to be
taken out at this point….We see a similar
short-term selloff as likely for the OTC composite
also. We’re
targeting 1220 very short term and 1090 to 1140 by
early to mid Oct…” Both calls were accurate in price and time with the OTC
Composite bottoming at 1108.49 on 10-10 and the
NDX hitting 795.25 on 10-08!
We’re now looking for a resumption in the rally from the
10-10 lows, targeting 1440 to 1490 by late Nov. on
the Composite and 1090 to 1140 on the Nasdaq 100 (NDX).
At the Striker Seminar on Oct19th we forecast
further OTC upside, targeting 1600 to 1700 by late
Dec./ early Jan.
The prospects for this higher number will
depend in part on the variables listed in our
Stocks introduction.
We will re-evaluate those prospects when
and if we get to our Nov. targets. SPX/ OEX: From
9-05: “…The 7-24 SPX (SP 500) cash low
(775.68) is likely to be tested in the weeks ahead
but looks more likely to hold than the 8-05 OTC
and NDX lows….”
Ditto for the OEX (SP 100) which looks
slightly stronger yet than the SPX…” Indeed, the 7-24 was narrowly taken out, hitting 768.63 on
10-10 while the OEX held slightly above it’s
July low! At
this point we’re looking for the uptrends to
resume by week’s end, targeting 930 to 945 by
mid to late Nov.
At the Striker Seminar on Oct19th we
forecast further S&P upside, targeting 1040 to
1080 by late Dec.
As with the OTC< the prospects for this
higher number will depend in part on the variables
listed in our Stocks introduction.
We will re-evaluate those prospects when
and if we get to our nearer-term Nov. targets.
We note that the SPX rally through Nov. 6th
was weaker than the OTC.
We will need a broadly-based pickup in
strength across all U.S. stock indices if we’re
to stage rallies into the targets we presented at
the Oct. 19th Seminar.
We’ll be watching closely for that. DOW: Currently
targeting 8860 to 8950 by mid to late Nov. RUT:
Targeting 395 to 405 by late Nov. VALUE LINE: From 9-05 (@ 1019.22): “…This important broad
and un-weighted index appears likely to re-test
and even money to take out it’s 7-24 low (905.45
cash). If
7-24 fails to hold, we are targeting down to the
845-870 area by mid October…” Indeed the Value Line bottomed on 10-10, exceeding our selloff
estimates and hitting 824.77.
At this point we’re targeting 1050 to
1065 by late Nov. DOW TRANS: From 9-05 (@2257.07) “..We’re targeting 1980 to 2030 by mid
October…”.
Indeed the Transports bottomed right on cue
at 2008.31 on 10-10! DOW UTILS:
From
9-05 (@234.56 cash)”… best guess is a break
below 200 to re-test the 7-24 low (186.49
cash)…” The
Utilities crashed through 200 to hit 162.52 on
10-10! We are watching the current DJU weakness
suspiciously as it is a negative sign for future
stock performance at this point. FOREX:
Most major currencies are in a final rally
likely to top out soon in the Nov/Dec timeframe, a
classic bottoming season for the greenback.
See also Metals which are primarily
FX-driven at this point.
Importantly, the Nov. plunge in DX is
largely due to falling US interest rates.
At some nearby point the falling US dollar
will begin to pressure US rates (and soften
foreign rates).
In turn, as US rates back up, they should
help put in a bottom on the dollar. DX:
The 9-05 DX comments have proven to
be one of our very best forecasts: “…After
making a wave 3 technical bottom on 7-19, the
dollar index made a picture perfect rally to fail
just under the historically important 110 area.
The selloff from the 8-06 high looks
distinctly 5-wave and destined to take out the
7-19 low (104.75 Dec).
Now at 106.65 (basis Dec), we’re
targeting the lower 102 area before this move is
over….The bottom re-test hypothesis for the DX
is also consistent with high re-tests in numerous
other currencies…”
Well
the DX finally cracked it’s 7-19 low on 11-08.
We’re adjusting downside targets to the
102.00 – 103.00 range by mid to late Dec.
This would coincide with mirror
intermediate tops in numerous major FX.
Euro:
From 9-05: “…Now at .9932, we’re
targeting a takeout of the 7-19 high (1.0156) to
hit 1.0250 – 1.039 cash by early Oct. We see
this move as part of the “fall re-testing
trio”: a topside test in FX & US bonds and a
downside re-test of U.S. stock indices…”
Indeed we got the upside in US and the downside in
SP (both on 10-10), but EC remained indecisively
flat. EC has subsequently rallied and looks well on its way to our
targets by late Nov.
We would consider such a top to be at least
intermediate in significance.
The EC rally as a classic technical pattern
with interest-rate driven fundamentals in the
max-bullish Nov-Dec season.
Add to this a toppy volatility and SDI.
Position longs should keep the tightest of
stops (at .9938 or higher cash) and consider
reversing to short if hit with an attractive entry
pattern. As
mentioned elsewhere, this FX rally is a primary
driver of any metals rally. BP:
From 9-05: “…Now at 1.5678 cash, we expect
on-going upside to test the 7-25 high (1.5811) and
target 1.5900 to 1.6100 by early to mid Oct.
It took a couple weeks longer than we
forecast but BP hit a high of 1.5914 on 11-11!
It’s now a similar situation to EC.
Nearing at least an intermediate top to the
rally from the Jun ’01 major bottom.
Position longs are trailing stops to 1.5700
or higher.
Let it run as far as it can but BP is very
toppy so look for stop and reverse situations to
develop in this seasonally peak Nov/ Dec.
timeperiod. SF:
Our
9-05 view still sums it up: “…On a likely
final rally in the uptrend from the July ’01 and
Jan ’02 lows.
Long position traders have stops currently
near 6690 cash.
Short-term we’re targeting a takeout of
the July 19 high, to hit 7020 to 7120 by mid
Oct….” We’re
adjusting the timeframe to late Nov / mid-Dec at
this point. Position
longs keep tight stops at 6790 or higher. JY:
The JY rally is technically somewhat shakier than
other major FX.
The Nikkei has preceded recent pivot turns
in the JY. Note the EWJ top on 6-03 and bottom on
10-09, both ahead of similar moves in the JY.
The EWJ is currently on a downmove from a
technically important pivot at it’s 11-06 high.
Can a top in JY be far behind? Also, the JY
pattern has below 50-50 probability of doing more
than touching the 7-19 high (8660).
Longer-term the developing H&S pattern
on the weekly chart (LS: 4-6-01, H: Feb ’02 RS:
Oct ’02) is bullish for a major bottom in as of
2-07-02. ME:
Technically we expect the peso to drift, waiting
for greater clarity from the major FX.
The 9-23 cash low (.9420) looks solid at
this point. AD:
Super-vulnerable after this final rally from the
8-06 pivot low.
50-50 chance to break the 6-24 cash high at
.5774 with outside targets of 5850 – 5925.
AD will likely follow the EC & JY
trends. Keep
the very tightest stops on any AD longs. CD:
A
favorite technical short pattern with attractive
risk / reward.
Now at .6393, position shorts have stops at
.6452 and targets to .6175 - .6260 by mid/ late
Dec. GRAINS:
Generally bearish. W:
A great call from 9-05: (393 basis Dec)
“…a clear warning that the wheat
parabola has reached short-term blowoff peak
levels. Long position traders should keep the tightest of trailing
stops at 384 or higher (basis Dec) to lock in
profits…” Wheat
managed to rally just 2 more trading days to top
out at 440 on 9-09 in the peak Sep/Oct season!
Wheat was presented as a “favorite
short” at the Striker System Trading Seminar in
Chicago on Sat. Oct. 19th.
It opened Monday Oct. 21st at
412, hit a high of 418.75 on 10-30 and closed
11-11 at 383.50.
That’s a 4.5 to 1 upside/downside ratio
in the action following the Seminar!
The 9-09 high looks very safe at this
point. Bearish
seasonality looms ahead.
Position shorts adjust stops to 396.50 or
lower, and look for further downside after any
blip counter-trend rally. S/
SM/ BO: The
bean rally from the 1-02 major low is on its last
legs. We expect a successful test of the 9-11 high
(593.5 basis Jan) with outside targets in the
600.0 to 620.00 range.
Meanwhile the SDIndex is becoming very
bearish. Longs
should keep very tight stops & look to
reverse, especially after the 9-11 high is taken
out. We’re
watching changes in our Curvature Index (CI) and
volatility for clues that the S top is at hand.
Oil is particularly toppy and its rally has
widen the spread vs. weak meal.
Although we expect further Meal downside,
we would look for the Oil Meal spread to begin to
firm up. C:
A major bullseye call from 9-05 (280.75 Dec):
“…Corn is technically on it’s final blip
rally to take out the 8-15
high (288.5 Dec), targeting 292 – 296 by
late Sept. However,
this picture is an awesome bearish
setup….Position longs should keep the tightest
of stops above 274 and look to stop and reverse to
short if taken out…” Indeed,
C topped even faster than we expected, hitting
exactly 296 on 9-09 before reversing for an
orderly 2-month slide!
Now at 235.75, we look for a downtrend
rally to commence shortly, lasting a few days and
reaching perhaps 250 – 255.
Thereafter our best guess is for a downside
re-test before staging any seasonal climb towards
Apr/May planting season.
Position shorts should have very tight
stops, at 243.50 or lower, and if hit move to the
sidelines for possible short re-entries. RR:
A
very interesting short situation.
Now at 4.130 (basis Jan), we look for rice
to takeout the 10-22 low (3.850), and target
3.710 to 3.780 by early Dec. MEATS:
Current rallies are on their last
legs. LC:
Position longs
should keep the tightest of stops (74.50 or higher
basis Feb). The
snoring volatility looks like a possible
complacency trap!
Note the severely bearish SDIndex.
Our tech model is a bit more bullish but
given the SDI reading, we’ll tighten stops &
move temporarily to the sidelines if hit. LH:
One final upleg
is likely after any pullback here.
Position longs raise stops to max tightness
on at least partial positions to 45.20 or higher. SOFTS
/ FIBERS: CO:
Mixed factoids.
Technically we expect a re-test of the
11-04 pivot low in this weak Oct/ Nov season.
Beware however the sky-high SDIndex &
stronger Feb / Mar ahead.
Shorts keep very tight stops in this
speculative selloff.
One clue: look for volatility to subside
& our Curvature Index to precede the bottom. SB:
From 9-05 (@6.05 March): “…As of it’s
June 21st lows, sugar likely made a
major bottom in the selloff from the Oct ’00 and
Jan ’02 highs.
The satisfactory wave-5 bottom was put in
during the Jul / Aug bearish season and has since
formed the right shoulder of a near-textbook
H&S bottom.…Given the long-term bullish
pattern, we’d move to the sidelines and look for
long-side re-entry setups if our stops are
hit…” Now
at 7.34, our solidly bullish position has panned
out nicely. We now expect that SB is on the verge of its strongest
pullback in the rally from the June Lows.
After any such pullback, the uptrend is
likely to continue with one more upleg to the
Jan/Feb peak seasonal timeframe.
But Sugar is hugely speculative at this
point. Position
longs should take partial profits and tighten
trailing stops. OJ:
A mixed
picture. The
long rally from the 11-00 major low looks
technically toppy & likely to have peaked in
August. If
not, one blip to re-test Aug. is the best
prognosis. Seasonal
factors are not favorable as weak Dec / Jan lies
ahead. We’re
standing aside. KC:
A great call from 9-05:
“…Now at 57.55 (basis Dec), coffee
looks destined to test the Apr highs (64.15) over
the next month or so.
We would expect a bit of backing and
filling in the next few days before a resumption
of this uptrend…”
Indeed, KC rallied to hit a high of 73.50
with maximum drawdown to 54.00 since 9-05!
A favorite short setup presented at the
Oct. 19th Striker Seminar,
coffee opened Monday Oct. 21st
at 65.10. Now
at 66.10 we especially like the short-side entry
trigger presented by a violation of the support
trendline drawn along the pivot lows starting on
Oct. 29th.
SDIndex is hugely bearish. CT:
After bottoming in seasonally weak Oct., cotton is
in a sharp rally, which technically is in need of
a breather. We
consider a failed re-test of the 11-05 high the
most likely near-term scenario.
We note the very toppy SD index also.
Longs adjust trailing stops to max-tight
and move to sidelines if hit. LB:
“Likely
on final downleg to takeout the 9-19 low (228
basis Jan) Shorts should keep tight stops & target perhaps a final
plunge to the 210-212 area by early Dec.
We’d consider such a bottom to be
intermediate or even major and look for a
subsequent rally into seasonally strong Feb/
Mar.” The preceding was written after the 11-08
close. On
11-11 we plunged to hit 220.
We’d be lightening up on this weakness
and tightening position stops to 230 or lower.
If stops are hit with interesting patterns,
we’d reverse to long, otherwise exit to the
sidelines and look for long side entries. As this
downmove is very aged.
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