BISHOP’S
MARKET
OUTLOOK, 1-31-02 ENERGY:
Recent huge
commercial net longs indicate that major bottoms
are not far off. However, new lows look necessary
to confirm these bottoms. Thereafter a broad-based
energy rally to the strong Apr/May timeframe may
be anticipated. HO:
From 1-04: (HO @58.59) “…recent rally is
likely a dead cat bounce. A major low likely to be
put in before upcoming bullish Apr/May
season…”
From 1-17: “…Heading to new low,
final downside target of 43 by mid Feb.” Currently
(HO @51.10), Dec lows very likely to be broken, w/
downside target of 43 – 47 by end of Feb. This
would be a MAJOR LOW. Note recent commercial
accumulation, very bullish longer term, and
supportive of a post-bottom rally into the bullish
Apr/May season. HU:
Awkward bearish H&S pattern forming after the
Nov to Jan downtrend rally. Nov 01 lows likely to
be seriously tested w/ downside targets in the 43
to 45 zone by late Feb/early Mar. Would be a major
low. CL:
A test of the Nov low (16.70) is likely over the
next 3 to 4 weeks. Worst-case downside targets
remain in the 13.50 to 14.00 range. NG:
Awesome bullish setup. This high open interest
market finds specs hugely short against the
highest net long Commercial position in 3 years! We may have a pinpoint bullseye bottom in both price and time
on 1-28 @ 1.85.
Is this the bottom of the slide from the
Dec 99 peak? Only time will tell but at the least
it’s a substantial rallying zone with a very
attractive risk/reward profile. METALS:
Approaching seasonal weakness with short
commercials.
New lows are generally needed to put in
major bottoms. NOTE the implications for the
economy: growth is likely to be weak at best! GC:
Sept 01 highs look secure. Poor trading pattern
favors the short side from this peak seasonal
timeframe. Note seriously net short commercials
and bearish Apr/May ahead. SI:
New lows very likely in days/weeks ahead. This
plunge should put in a MAJOR BOTTOM, perhaps
languishing sideways through April. From
1-04 Outlook: “Is a major SI bottom in or
just a dead cat bounce? …expect at least a minor
re-test of the lows before a final bottom…” HG:
Needs a little more time to make a final bottom.
Current downtrend rally likely to stall soon.
Technically bullish ascending triangle from the
Nov low belies an ominous net short commercial
position. Wave counts also point to a retest of
Nov. in the weeks ahead. Shorts present a good
risk/reward here: 2-cent downside vs. 8 cent
upside. PL:
A favorite short. The Wave 4 dead cat bounce
peaked in early Jan. Commercials are very net
short. Look for test of Oct 01 low with final
targets of 384-388 during the weak metals season
of April/May. Ditto for Palladium with targets of
271-275 by early April. BONDS/
NOTES: From
1-17: “I’ve been looking for a TOP in this
apparent Wave 4 bond rally for the past few days….One
day does not make a trend but today’s (1-17)
selloff is impressive.
Watch these markets intently for shorting
opportunities in the days ahead. “ US:
The next 3
months seasonally trend downward. Commercials are
moving net shorter and likely won’t go net long
until the Dec lows are broken. Currently targeting
97-98 by early March.
Note this would be consistent with a
knee-jerk rally in stocks over the same period.
The current blip rally from 1-25 lows is likely to
stall by 2-04, under the 1-16 high, then resuming
the downtrend from Nov 01.
TY:
Commercials are more supportive of the TY than the
US and the Dec lows look somewhat safer.
The shorter you go on the curve (5 years, 2
years, etc.), the longer the commercials and the
stronger the chart.
Further curve steepening in light of a
tepid economy? CORPORATES:
From 1-04: “Higher yield corporates have been
out of favor since early 1998…the credit quality
cycle is probably bottoming…look at HIS, CIM,
COY, KYT, DSU, CNN, VIT, DHF, PHY, ARK, VLT, YLT….favor
a reduction in the spread of Medium corporates
over treasuries.” As
a group these higher-yield closed end funds are
performing well. Charts have appearances of major
bottoms in Sept 01.
Very interesting for both trading and
accumulation.
I expect a “scramble for yield” to
develop as investors tire of paltry stock returns
over the next few years. STOCKS:
The key
technical factoid for the stock markets is that we
are working through a likely major bottom that
began on 9-21.
The period following major tops and bottoms
(Elliott Waves 1 and 2) is generally categorized
by excessive choppiness and volatility.
We’ve
done a fairly good job staying head of the twists
and turns to this point: From 1-04: “…what
seems most clear is that the top of the rally from
the 9-21 lows is just ahead…”
From 1-17: “…SPX 1-07 high (1176)
looks safe with downside target of 1070 – 1100
[hit1081 on 1-30]… OTC downside targets 1820
to 1900 [hit 1851 on 1-30]. From 1-25: “…
SPX look for short-term drop to take out 1-23 low
(1117) by 1-29 [hit 1081 on 1-30]. The
uncertainty of the moment is whether the indices
will take out their 1-07 and 1-09 highs on any
follow-through of the bounces begun on 1-30 or
whether these will be rally failures followed by
new post 1-07 lows.
From the 1-25 Outlook Update I was
confident of bottoms on 1-29/30 and a
follow-through to take out the Jan highs in all
indices. At
this point, 5 days later having gotten the bottom,
the follow-through to new post 9-21 highs remains
murky. Looking
at each index will provide some clarity:
SPX:
While commercials were net short at the Jan top,
they have not yet moved back to a sufficiently net
longer position to support a clear bottom on 1-30.
Chart-wise 1-30 looks like a bottom that
can hold, however.
Weekly, daily, and 60 min upside targets
all cluster in the 1195 area between Feb 15 and
early Mar. Should
this pattern materialize, we’d look for serious
commercial shorting at that top, followed by a
plunge into the bearish Apr timeframe as the
spring earnings season looms like cold water in
the face. On the weekly chart, the 1-07 high would
become Wave 1 from the 9-21 low, and the 1-30 low
Wave 2. The Apr pullback would be a minor wave low
within a larger evolving weekly Wave 3. Score
one for the short-term bulls. OTC
COMP:
Commercials spiking to net short at the 1-09 top
are now nearing a neutral level they reached at
the Apr 01 lows. Not raging bullish but enough to
support a rally follow-through.
A blip downside rally, IF ANY, over the
next few days should hold above 1840.
Afterwards a rally to 2170 – 2230 by mid
Feb to early March seems in the cards.
Score another for the short-term
bulls. DJIA:
Charts favor a rally to the 10450 – 10500 area
by late Feb/ early Mar.
Commercials are in unsupportive mode now
and likely to be distinctively short at the top of
this forecast rally.
Vague, less clear than SPX or OTC
Comp RUT:
Commercials
moving in mildly positive direction after net
shorts at the 1-09 top.
1-30 low qualifies as double bottom (post
1-09) on the charts.
Rally targets: 510 to 516 by late Feb.
Score 3 for the short-term bulls. NDX:
The NDX has retraced from its 12-06 highs to
predictable support levels on 1-30.
Rally targets: 1870 to 1890 by late Mar. 4 for the short-term bulls. OEX:
Has retraced from 1-04 high to predictable
support. Rally
target: 612 by late Feb.
5 out of 6 for the short-term bulls. As
a final note on stock indices: This forecast rally
is likely to be characterized by narrowing
participation and a deteriorating advance /
decline line. FOREX:
Note that we are leaving the Nov/Dec timeframe
that 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.
DX: US Dollar is in final wave
up, likely to take out the Jul 01 high marginally,
say 123 to 125 by mid April. Euro:
From 1-17 (ECU Cash @ 881.00)
…”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.” Currently,
very high open interest finds Specs long vs. short
Commercials.
The months ahead favor the DX seasonally.
Sharpened downside targets: 790 to 815 by
mid Apr to May. HOWEVER, keep tight stops on any
current shorts as ECH2 is approaching a short-term
Wave 3 rally zone from which a countertrend pop to
880 – 890 by mid Feb is plausible.
JY: From 1-04: “ … in
final nosedive…”
From 1-17: “Further short-term
downside remains as the Yen is in its 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.” Currently,
hedgers are going further net long and the chart
is in bottoming zone on weekly basis, but not
quite yet bottomed on daily basis.
Look for a blip rally to 7580 by early Feb,
followed by a final bottom plunge to 7380 – 7390
later in the month.
The Nikkei bottom is OVERDUE. Note the
bottom reversal bar in EWJ (Japan WEBS) on 1-30
ME: the Peso is one of the
most bearish charts today. Note the toppy pattern on both weekly and daily charts and
the MASSIVE commercial net short position.
AD: A messy pattern in the
process of forming a major low from the Dec. 96
top. AD may need to yet put in a final bottom.
Target 44 to 46 by late April.
CD: Near term, CD likely to
head higher (in sympathy with DX?) from its 1-18
low in the bearish Dec/Jan season.
Expect choppiness. Commercials mildly
supportive of the rally thesis.
Was 1-18 a major low?
The picture is inconclusive at this point
and a retest of the 4-01 lows may yet be needed. MEATS:
Keep tight stops on longs. The peak Feb/Mar
season approaches. LC:
A favorite long
for the past month, keep tight stops.
From 1-04: “…short-term bullish
setup” From 1-17: “…LC continues to
rally as we forecast 2 weeks ago…the peak Feb
season is approaching...”. Currently, keep tight stops on longs as
we’ve had a nice rally and want to preserve
profits. Commercials moving to serious net short.
Bears will want to watch LC and LH closely
as these rallies will likely come to “stop and
reverse” type tops in this peak season.
Subsequent downside action will likely take
out the Nov 01 lows. LH:
Keep tight stops (above 54.60) on longs during any
final Feb-Mar seasonal upside.
Commercials are moving to pre-top net
short. See LC comments. GRAINS: W:
From 1-17 (@ 300.75) “…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…”
Currently (@285.25), expect a brief
countertrend bounce followed by lower lows.
Commercials remain bearish and the season is not
supportive.
S: Our 1-17 comments appear
premature: “…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.”
We’re
sticking with our view of 1-04: “… nearing
a major Wave 5 bottom…”
While the decline from the Apr 00 high is
in the process of bottoming, the Oct 01 (419), Jan
(415) and even the 1999 lows are not yet secure.
A final plunge to the 393 area by mid to
late February now looks more likely.
Thereafter look for a rally into the
Apr/May planting.
C: Commercials flat. Wait
awhile to let a pattern develop. SOFTS
/ FIBERS:
CO: From 1-03: “…bearish
setup developing…charts very toppy in peak
season, commercials net short…”
From 1-17: “…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.”
The toppy CO chart is pregnant with basic
technical patterning.
See the reversal bar on 1-10 and the
bearish mini-pennant developing from the 1-15 low.
Commercials will need lower prices to go
net long.
SB: From 1-17: (SB @ 7.48) “…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.”
Currently (SB @ 6.38) commercials remain
very bearish. Revising downside major bottom
targets to the 5.00 – 5.65 range in the bearish
May/June season.
Keep tight stops as a rally near the 6.15
– 6.10 area (Oct 01 lows) is likely.
KC: The extended final
downleg from Dec 99 has not yet bottomed. The
recent rally was another commercial head-fake.
A major bottom still seems nearby with a
target of 38.60 – 40.00 by mid to late Feb.
Then rallying into the seasonally stronger
Mar/Apr/May timeframe. OJ:
Hitting the Dec/Jan low on an Uptrend correction.
Commercials moving to rally-supportive. Keep very
tight stops on any shorts and look for a rally
beginning in the days ahead.
Target high: 95 to 102 by late Mar/ mid
Apr. LB:
A messy pattern. Commercials moving to net short
as the peak Feb/Mar season approaches. Keep VERY
tight stops on longs. CT:
Likely heading for a major low to take out Oct 01.
Bottom targets: 22 to 25 by mid to late Mar
thereafter rallying into the bullish Apr/May
season. Commercials
are very bearish and shorts have great technical
risk/reward: 2.75 downside vs. 10 to 12 on the
upside.
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