ENERGY: Further weakness in HO and HU is likely to spill over to CL shortly.  Any late winter bottoms are likely to be MAJOR bottoms, however, from which a rally to the strong Apr/May timeframe may be anticipated.  Recent huge commercial net longs indicate that major bottoms are not far off.

            HO: Heading to new low, final downside target of 43 by mid Feb.

            HU: Likely peaked on 1-07, target of 44 by early Feb.

            CL: With weak HO and HU, CL may take out Nov lows and hit 13.80 by early Feb

METALS: Keep tight stops on any longs.  Commercials are shorting ALL metals going into this seasonal peak period.

BONDS/ NOTES: Iíve been looking for a TOP in this apparent Wave 4 bond rally for the past few days.  The over-extension of the rally from the December lows is impressive and likely reflects:  1) weak economic expectations  2) failure of Congress to adopt a fiscal stimulus  3) the stock market selloff from 1-09.  One day does not make a trend but todayís (1-17) selloff is impressive.  Watch these markets intently for shorting opportunities in the days ahead.  IF today is a rally top, our targets are:  US 95, TY 100, and FV 102 by mid to late Feb.  Note, this would probably be consistent with a final upside pop in stock markets which complicates the outlook (see stocks).

STOCKS: The stock index picture is VERY MIXED and inconsistent.  One view is right, one is wrong.  Question is, which ?

SPX: the 1-07 high (1176.97) looks safe with a downside target of 1070-1100

OTC: the 1-09 reversal bar high also looks solid w/ downside targets 1820-1900


DJIA: the Dow pattern is supportive of a short-term low on 1-16 to be followed by a rally to take out the 1-07 high. Target 10640 by Feb 6.  The 1-16 lows must hold to support this view.

RU2000: Ditto, with targets to 510 by 2-04.

NDX/ ND Future: the NDX and March ND EITHER topped on 1-09 with the broad OTC Composite or have one final rally short term to the 1776 level.  Which is it ?

The strength in the DJIA, RUT, and apparent bond selloff are all supportive of a final NDX rally.  The weakness in the OTC, SPX, the commercial net shorts and the seasonal toppiness all support the thesis that the NDX highs are in on 1-09. I narrowly favor the latter view.  If the stock markets have sold off during earnings season, what will suddenly support a strong rally in the face of the commercial shorts ?

On the intermediate term, recognize that this is a Peak season for stocks, and the bearish April timeframe lies ahead.

A more certain position is to look at specific stocks.  Even if the markets may short-term new highs, the advance-decline picture is likely to deteriorate with fewer stocks participating.  Some favorite SHORT PATTERNS: MLNM, QCOM, RFMD, SLB and PHA.  Also see: JNPR, JDSU, AMCC, CIEN, SPOT, ATML, VRSN, TLAB, and BRCD.

FOREX: Note that we are leaving the Nov/Dec timeframe which is typically WEAK for the U.S. dollar and heading into the Apr/May period where products invoiced in dollars (Oil, Grains, etc.) rally, pushing up demand for the greenback.

            Euro: This is becoming a favorite short-sale candidate, coming out of the peak Nov/Dec timeframe and heading into the bearish Apr/May zone.  Note the commercial net short position and the pattern which projects taking out the Oct 2000 lows and heading for a final downside target range of 75-80 by late March.

            JY: Further short-term downside remains as the Yen is in itís final downleg.  Keep tight stops on shorts as the bottom is likely not far off. Look for a rally in the Nikkei (which may not materialize until the S&P strengthens) to precede any stabilizing in the Yen.

            ME: the Mexican Peso one of the most bearish charts today.  Note the toppy pattern on both weekly and daily charts and the MASSIVE commercial net short position.

MEATS:  LC continues to rally as we forecast two weeks ago.  Keep tight stops on any longs as the peak Feb/Mar season approaches.


            W: Beware the very toppy Chicago W chart.  Commercials are taking a pre-top net short position and the peak Oct/Nov season is behind us.  Look for short-sale opportunities to develop soon.

            S: the entire Soy complex is very bullish as we forecast two weeks ago. Commercials are still supportive of all contracts (S, Meal, Oil) and the bullish Apr/May period lies ahead. 


            CO: Cocoa remains very weak.  Two weeks ago we were looking for a final blip rally and top.  It looks like we now have it and substantial downside is likely, heading into the May/June bottoming timeframe.

            SB: Sugar now looks VERY TOPPY.  Commercials are moving to very net short in this peak Jan/Feb season.  Look for this market to turn south with a downside target under the Oct 2001 lows, say in the 5.75 range by May.