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.


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.