CRB: This important inflation and commodity price gauge remains technically bearish with the price under the 1-09 high. Best technical projection is a test of the 10-01 low with targets to 177-181.

ENERGY: Likelihood of major bottoms in is increasing. After current murkiness clears, a broad-based energy rally to the strong Apr/May timeframe may be anticipated.

HO: In process of forming a major bottom. Short-term mixed picture. Bullish: commercial net longs and technical weekly Wave 5 completion. Bearish: still in weak Nov/Dec/Jan timeframe and daily chart with bearish triangle would benefit from final plunge to test 12-00 lows.  Final downleg should be over by mid-March. Best to watch HO from the sidelines for a bullish setup to support a rally into Apr/May.

HU: Again a mixed picture. Bullish: Ascending triangle, daily technical Wave 5 completed. Commercials neutral.  Bearish: Seasonal bottoming, weekly technicals resemble a counter-trend rally.  Most likely is a short-term rally to take out the Jan 01 highs in days ahead.  Thereafter the picture turns murky. Keep tight stops on any longs.

CL: Further short-term upside is likely in days ahead, to take out the Jan high. Likelihood of major low in 11-01 is increasing but still inconclusive. 

NG: A favorite long situation for the past 2 weeks. Daily and weekly technicals align with a massive net long commercial position. 

METALS: Approaching seasonal weakness with short commercials.  Recent new highs confirm longer-term technical bottoms in some markets.

GC: Taking out the 9-01 highs confirms a longer-term major rounding bottom in place.  GC is now very toppy on short-term basis. The rally from the 2-01 low has completed a 5-wave sequence (with the 2-06 engulfing bar) in the peak Dec/Jan/Feb timeframe. Commercials are now very net short and the bearish Apr/May metals season lies ahead.

SI: In a long-term bottoming zone, with 11-01 looking more like a major bottom as time passes.  Technicals point to sideways choppiness bounded by the recent Nov lows and Dec/Jan highs.  The commercial net short position is short-term bearish.

HG: Recent takeout of the 11-01 high points to the daily and weekly chart Wave 5 completions on 11-7-01 as a likely major low.  Keep tight stops on any longs as HG is short-term toppy.  Note the bearish ascending pennant pattern and the Wave 5 upside completion on the daily chart in the peak Feb/Mar season.  Commercials very net short.

PL & PA: A favorite short situation. The PL pattern remains bearish if PL remains under the 12-31 high.  Commercials not yet supportive. PL often peaks in early Feb with weakness prevailing from late Feb to late Apr.

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 indecisive. Both weekly and daily technicals point to near-term downside. However the extended rally from the 12-17-01 low points to greater than expected economic weakness and the failure to pass a Federal stimulus package. 

TY: Ditto from 1-31: …”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: As the credit quality cycle favors a narrowing of the corporate / treasury spread, the majority of higher-yield corporate closed end funds (with double-digit yields) continue positive patterns: HIS, COY, KYT, DSU, CNN, VIT, DHF, PHY, ARK, etc. 

STOCKS: From 1-31: …”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…” My erroneous conclusion on 1-31 was that the weight of the evidence supported the first scenario. In retrospect the “missing indicator” was the INTERNAL weakness of the indices, and in particularly the influential OTC and NDX.  On 1-31 there was a large group of NDX (Nasdaq’s Top 100 stocks) in very clear final downlegs from their 1-07 / 1-09 highs.  This group included many of the “Kryptonite Tech Stocks” presented reviewed as downside-vulnerable on 1-04.  There just simply was no similar “block” of bullish NDX stocks on 1-31.  Ditto for the OEX (the S&P’s Top 100 stocks).  Today the stock market picture remains mixed with the Dow Industrials and Russell 2000 in positive patterns vs. the less clear S&P 500 and OEX.  The NDX and OTC are the most bearish of the lot.  The indices are likely to remain somewhat out-of-sync through the next wave of earnings reports in the seasonally weak April timeframe.

            SPECIFIC STOCKS:  I’ve favored individual stocks over end-of-day directional index bets for the past few months.  See current lists of Favorite Long and Short Situations at the beginning of this Outlook.  Previous selections have performed reasonably well as follows:


SHORTS        1-18                2-14                % Change                  Status


                        TLAB              15.95              13.01              18.43%                       stop @14.10 

                        BRCD             35.36              32.64              7.69%                         stop @ 35.40

                        MLNM             21.11              20.29              3.88%     (hit 16.72)   out 2-11

                        QCOM            44.95              40.05              10.90%   (hit 34.59)  out 2-11

                        RFMD             18.82              18.10              3.83%     (hit 16.00)   out 1-28

                        SLB                49.62              55.26              -11.37%                     out 1-24

                        PHA                39.15              40.45              -3.32%    (hit 36.67)  out 2-08

                        JNPR              17.00              10.92              35.76%                       stop @ 13.60

                        JDSU              8.18                6.08               25.67%                       stop @ 6.77  

                        AMCC             10.41              8.86               14.89%                       stop @ 10.00

                        CIEN               13.54              9.12               32.64%                       stop @ 11.65

                        SPOT             20.80              21.50              -3.37%                        out 2-14

                        ATML              7.59                7.75               -2.11%                        out 2-13

                        VRSN             33.95              25.61              24.57%   (hit 23.93) stop @ 30.00

                                       SPX change: -.27%, OTC –4.51%

                                                            Average short:           11.29%

             LONGS 1-25             1-28

MO                  49.90              51.00              2.20%                        stop @ 49.75

LTD                 17.16              18.08              5.36%                        stop @ 17.25

SBUX             22.88              21.74              -4.98%                        stop @ 20.60

TMPW            43.01              35.55              -17.34%                     out 1-30

NVDA             67.99              62.16              -8.57%                        out 2-05                                                                                 

Average long:            -4.67%

                                    Average all:                7.09%

Other short-sale NDX setups presented 1-04 in the “Kryptonite tech stocks vulnerable in any OTC sell off included: CNXT, NTAP, ERICY, NXTL, CHKP, VRTS, VTSS, BEAS, CSCO, ITWO, CMVT, SANM, YHOO, ADLAC, MOLX, SUNW, SEPR, ADCT, and DISH.  It is precisely because such a tight group of stocks are moving in unison to test their post 9-11 lows that the OTC has favored the downside since 1-09!  The OTC will put in a significant low when the majority of these stocks begin to bottom.

Also from the 1-04 Outlook, the high-yield corporate bond closed-end funds mentioned in Bonds above have performed positively as have the Global country funds mentioned.  The Globals deserve particular attention as those funds with the most bullish patterns highlighted on 1-04 have continued to do well: Taiwan (ROC), Philippines (FPF), Singapore (EWS), Australia (EWA), Thailand (TTF), Russia (TRF), and India (IFN).  The long drought in Asia beginning with the “Asian Contagion” meltdown in Oct. 1997 is definitely over.  Note further evidence with the likely bottoming of the Nikkei (EWJ) on 2-05 as mentioned under JY (Forex) in this Outlook.                 

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: Still looking setup for a final burst to take out the 1-02 high and test 7-01.

Euro: From 1-31…”a countertrend pop to 880-890 by mid Feb is plausible…thereafter look for downside to 790-815 by mid Apr-May”

The countertrend pop may have peaked at 8783 cash on 2-11. We now resume our downside bias with current targets of 7900 to 8170 going into the bearish Apr/May season.

            JY: From 1-31: “ … Look for a blip rally to 7580 by early Feb, followed by a final bottom plunge to 7380 – 7390 later in the month.”  The current blip rally is now likely to reach 7700 – 7800. Net long commercials are supportive. Technically, a final low is still in the cards. Bearish Apr / May would be seasonally perfect for a major JY bottom. NOTE that the Nikkei is behaving very positively. From 1-17: …” Look for a rally in the Nikkei (which may not materialize until the S&P strengthens) to precede any stabilizing in the Yen.”  EWJ (the Japan WEBS traded on the AMEX) completed a weekly, daily, and 60-minute bottom on 2-05 and 2-06 at 6.71, 2 days prior to the recent JY low.

ME: The stubborn Peso hangs in the air while commercials go further net short. Very bearish.

            AD: Setting up for a plausible final bottom. Likely to sink or swim with GC (which is short-term very toppy). Commercials not yet supportive. Favor the downside.

            CD: The 1-18-02 cash low is looking more like a major bottom with 5 wave technical weekly and daily completions within a large weekly bullish descending pennant.  Look for additional blip upside in the days ahead. Commercials remain supportive.

MEATS:  Keep tight stops on longs. The peak Feb/Mar season approaches.

  LC: At a short-term top.  While more upside is possible on the daily chart, commercials are moving to seriously net short in this peak season. Most likely is a modest pullback followed by a final blip rally that should present some good short side opportunities aiming towards the bearish May/June bottoming season. A previous favorite long (1-04 and 1-17), keep very tight stops on any longs.

LH: In a nice pullback with one final Wave 5 rally to Mar seasonal highs likely. Net short commercials also setting up for a top.


W: A favorite short on 1-17 (W @ 300.75), now at 280 in sideways hiatus. Blip downside continuation likely in the days ahead. Keep tight stops on shorts as commercials are moving to flat from net short.

            S: In a multi-year process of completing a major bottom. Bullish: commercial buying, the Nov/Dec bottom season is past, Wave 5 bottoms on short-term charts. Bearish: Weekly Wave 5 bottom not yet completed.  Best to be patient and let current murkiness clear up while looking for bullish setups as the peak Apr/May season lies ahead.  Technicals and commercials both strongly favor Oil over Meal here.


            CO: A favorite short situation for the past month. Feb (Valentines Day) is peak season for CO. Commercials are selling massively with 5-wave upside completions on both weekly and daily charts

            SB: A favorite short from 1-17 (SB @ 7.48), now testing 6.00.  Commercials are moving to mild net long. Keep very tight stops on shorts.

OJ: A favorite long situation.  Note the reverse H & S pattern developing around the “H” of the 1-31 reversal bar. This comes at the bottom of an apparent Wave 4 counter-trend pullback in the bearish Jan season.  More bullish Apr/May lies ahead. Most importantly, commercials are at a very supportive net long position.

CT: A brief blip rally to take out the 12-07-01 high is possible.  This rally if at all is likely to precede a final plunge to test the 10-01 low and put in a major bottom to the long slide from the 2000 highs.