BISHOP’S
MARKET
OUTLOOK, 3-15-02 CRB:
A number of significant breakouts from energies to
metals to grains, even coffee have combined to
generate a technically important breakout in the
CRB. ENERGY:
With recent breakouts, major bottoms are
confirmed and longer-term substantial upside is
likely. Near-term these symbols are generally
toppy with commercials moving to neutral and net
short from recent huge net longs. Long positions should generally have extremely tight stops,
looking for a brief pullback followed by further
upside heading into the peak late April/May
season. The
recent impressive breakout of Energy Stocks lends
further support to the bullish case for energy. HO:
The 3-05 breakout above .60 confirms a major
5-wave bottom in place as of Dec. 01. Short-term
commercials are at net short levels consistent
with recent tops. Keep very tight stops on any
longs. If hit, look for bullish re-entries as HO
is likely to angle higher into May/June. HU:
A short setup never developed and the upside
breakout on 3-01 seals the Nov 01 lows as a major
bottom. Short-term,
HU is very toppy with commercials moving net
short. Keep very tight stops on longs. Energy
pullbacks are likely to be shallow buying
opportunities heading into May/June. CL:
From 3-01: “…Keep very tight stops on any
CL longs. Look for a mild break above 1-07
high…” We got a strong break instead,
underscoring the basic strength of energies and
the likelihood that the Nov. 01 lows will hold in
any re-test. CL is now very toppy short-term and
commercials are further net short. Look for a
brief pullback (probably in concert with a stock
market breather) then higher highs heading into
the seasonally strong late Apr/May timeframe. NG:
from 1-31 (@2.15):”…Awesome bullish
setup…very attractive risk/reward profile.”
From 2-15 (@2.20): “…a favorite long for the
past 2 weeks”. From 3-01: …”Now at 2.357, keep tight stops on
longs at 2.28 or higher.
Commercials are moving to neutral from huge
net long. Let this rally go as far as it will,
cover, then look for re-entry after
retracement.”
Now at 2.92 (having broken 3.00), NG is
short-term toppy.
Longer-term NG remains very bullish. METALS:
Approaching seasonal weakness with short
commercials.
Longer-term, recent new highs confirm
technical bottoms in some markets. GC:
A favorite short on 2-15 (296.70), GC remains
short-term bearish.
Commercials are still net short, GC is
falling vs. all major Forex and the weak Apr/May
metals season lies ahead. SI:
From 3-01: “…Forming a major bottom in a
range-bound choppy sideways pattern.”
This view still holds. Commercials are very
net short so don’t expect much on the upside of
this range. HG:
A favorite short situation. The recent blip on
3-07 took out the 2-13 high and completed a 5-wave
Uptrend from the 11-07 low. HG is now at a
short-term top with very net short commercials.
See also the toppy LB contract.
Longer-term the bullish news is that recent
breakouts confirm Nov. 01 as a likely major low. PA:
A favorite short situation from 1-31. PA has
remained flat. A downside re-test with targets of
271-275 is the best chart interpretation.
A likely selloff in PL would reinforce
bearish tendencies in PA. PL:
From 3-01: “…A short-term blip to 514 is
plausible in the days ahead…” The blip hit 527
and may yet have one final brief upside leg short
term. HOWEVER, commercials are at their largest
net short position in over 12 months. BONDS/
NOTES: What
a difference 2 weeks makes!
Economic reports have generally been
supportive of the view that the economy is
strengthening and our “leaders” in Washington
managed to pass a fiscal stimulus. Add to that the
CRB uptick and a stalling DX. With this
combination the toppy bond and note charts backed
up easily. Where from here? US:
Target
93.50 to 94.50 basis June by early April. However,
Treasury yields $TYX have already hit post-October
highs and recently took out the Dec high,
completing an Elliott 5-wave advance from October
01. We note also the ominous Head & Shoulders
pattern developing (Oct ’01 as the Head)
longer-term.
Commercials are flat with low open interest
but lower prices should attract commercial buying.
TY:
Note the huge textbook H&S pattern developing
longer-term. Commercials more supportive of TY
than US. A
potentially interesting message from the markets:
1) Further yield curve steepening
2) Huge commercial shorts in energy, metals
and lumber 3) Commercials net long Notes.
Is the bullish economic consensus on Wall
Street suspect?
While we think 2002 will be as strong or
stronger than 2001 it will likely be more anemic
than generally believed. CORPORATES:
As the credit quality spread is at a 3-year high,
we still believe this price area is a good
accumulation zone for mid-grade corporate bonds
(directly and through exchange traded closed end
funds). STOCKS:
The
recent rallies from the 2-20 and 2-22 lows have
accomplished several things:
1) More bottoms are being put into NDX
stocks, especially larger caps
2) The major indices are behaving in
greater synchronicity than in anytime since the
9-11 disaster.
In hindsight we will likely find the 1-07
and 1-09 highs to be a major Wave 1 top, followed
by a major Wave 2 bottom on 2-22.
The current rally is likely to top soon,
followed by a pullback into seasonally bearish
April. However, this April pullback, if any, is
likely to HOLD above the 2-22 lows.
Very importantly this pullback would be the
first post-bottom test of many important marquee
tech stocks.
Assuming they pass the test such a pullback
would set us up for a strong Summer rally on the
back of the introduction of single stock futures. OTC/
NDX: Commercials
are supportive of higher highs short-term.
Currently targeting 1800 to 1850 on the Nasdaq 100
by late March.
Note the number of larger-cap NDX stocks
rotating from “final downturn” to
“bottoming” including: CMVT, PMTC, ATML, NXTL,
SANM, JNPR, QCOM, VRSN, CTXS, JDSU, HGSI, DISH,
LLTC, MOLX, NTAP, YHOO, CNET, AMCC, and ITWO. While numerous NDX stocks are still in downlegs, because they
tend to be smaller-caps their weightiness on the
index is lessened. SPX:
Currently targeting 1200 by late March/ very early
Apr. This
would be the early phase of a large Elliott 3-wave
heading into the Summer Rally. Look for this rally to then selloff into mid April with the
2-20 low holding and breadth improving. DOW:
From 2-15: “…the Dow Industrials and
Russell 2000 are in positive patterns vs. the less
clear S&P 500 and OEX. The NDX and OTC are
most bearish of the lot.”
From 3-01: “…Today the Dow pattern
remains very much to the short-term upside with a
target above 10,400 by mid March…”
Today the DJIA has likely one final blip
rally left to take out the 3-08 high and hit, say
10,700 plus by month’s end. RUT:
From 3-01: “…The Russell 2000 has an
orderly Elliott pattern with a clear turning point
bottom on 2-22.”
Currently targeting the 514 to 530 range by
early April.
SPECIFIC STOCKS SHORT:
Our short sale selections over the past
several months were largely stopped out for good
profits in the recent rally.
(entry price, current price, % profit,
current stop) from 1-18: TLAB (15.95, out 3-04 @
11.75, 26%) BRCD (35.36, out 3-04 @ 25.50, 27%)
JNPR (17.00, out 3-04 @ 10.75, 36%) JDSU (8.18,
out 3-04 @ 5.55, 32%) AMCC (10.41, out 3-04 @
9.00, 13%) CIEN (13.54, out 3-04 @ 8.88, 34%) VRSN
(33.95, out 3-04 @ 27.20, 20%) from 2-15: ICOS
(44.70, out 3-04 @ 46.25, -4%) BEAS (16.00, out
3-05 @ 14.70, -8%) CHKP (29.80, out 3-04 @ 31.70,
-6%) MOLX (29.04, out 2-27 @ 30.16, -4%) CNXT
(11.38, out 3-04 @ 11.30, 0%) NTAP (18.84, out
3-04 @ 18.50, 0%) CMVT (17.46, out 3-06 @ 17.50,
0%) ADLAC (19.97, out 3-04 @ 23.50, -18%) RFMD
(17.50, out 3-04 @ 17.15, 2%) SANM (12.60, out
3-04 @ 11.25, 10%) SUNW (8.90, out 3-07 @ 9.40,
-6%) MOT (12.74, out 3-04 @ 13.90, -9%) INFS
(17.00, out 3-04 @ 18.65, 10%) RSH (27.59, out
3-04 @ 28.60, -4%) HWP (20.36, out 3-04 @ 21.30,
-5%) CPB (26.58, 26.29,
–1%, 26.84). SPECIFIC
STOCKS LONG:
The recent stock rallies have lifted our long
selections as follows: from 1-25: MO (49.90,
52.39, 5%, 51.40) LTD (17.16, out 3-07 @ 17.25,
-1%) SBUX (22.88, 23.72, 3%, 22.35) from 2-15: SBC
(37.12, 39.09, 5%, 38.12) TXN (31.50, 33.95, 7%,
31.70) CCU (48.90 out 2-27 @ 46.30, –5%) XRX
(10.00 out 2-20 @ 9.49, -5%) NSC (21.30, 24.01,
13%, 22.70) UIS (11.95, 12.30, 3%, 11.60) G
(33.23, out 3-06 @ 33.35, 0%) DD (44.90, 48.39,
7%, 46.69) HD (50.52, out 3-04 @ 49.50, 2%) INTC
(32.29, out 2-28 @ 29.17, -9%) IDTI (30.88, out
2-27 @27.42, -11%) AMZN (13.41, out 3-14 @ 14.70,
9%) ADBE (35.69, 39.24, 10%, 36.59) AMAT (47.20
out 2-21 @ 43.72, -7%) OPWV (6.21, 7.00, 12%,
6.30) SEBL (32.86, out 2-22 @ 28.71, -12%) SRI
(8.40, 10.49, 24%, 9.70) ABAX (6.34, out 3-05 @
6.10, -4%) CDMS (10.75, 11.30, 5%, 10.85) VVI
(25.33, 26.95, 6%, 25.60) WDC (5.98, 6.01, 0%,
5.60) LION (7.45, 7.75, 4%, 7.30) OS (6.05, 6.68,
10%, 5.90) ROC (5.16, 4.87, -5%, 4.65) FPF (3.38,
3.27, -3%, 3.17) TTF (4.85, 4.93, 0%, 4.58) TRF
(20.00, 23.35, 16%, 21.80) EWS (5.61, 5.78, 3%,
5.50) EWJ (7.27, 8.47, 16%, 8.00) EWA (9.68, 9.68,
0%, 9.50) IFN (10.82, 11.00, 1%, 10.82) HIS (3.70
out 2-21 @ 3.45, -7%) COY (9.04, 8.90, -1%, 8.65)
KYT (8.13, 7.96, -2%, 7.83) DSU (6.56, out 2-28 @
6.53, -1%) FOREX:
Heading into the Apr/May period where products
invoiced in dollars (Oil, Grains, etc.) rally,
pushing up demand for the greenback.
Numerous currencies (JY, AD, CD, etc.)
likely forming major bottoms.
DX: Getting very toppy in this
approaching peak season. Commercials getting very
net short. The DX will likely struggle to barely
take out the July 01 high on any seasonal peak
rally here. Euro:
A developing favorite short situation. Currently
in a Wave 4 blip rally from the 1-28-02 cash lows.
Commercials moving very net short. Targeting .8500
short-term. Over the next few months the EC
continues to look vulnerable to a test of the 7-01
and even the 10-00 lows. BP:
Commercials supportive.
The June 01 lows now more likely to be a
major bottoming price level despite the technical
pattern that still says “test the lows”. SF:
Commercials moved up to net long to support the
recent 2-26 low. Look for this rally to continue, perhaps to test or takeout
the 9-21 high. JY: A favorite long on 3-01 (cash .7509). Now at .7749 the JY is short-term a mixed picture. The technicals are short-term toppy with the bearish Apr/May season ahead (however JY has poor seasonal reliability). A re-test of the Feb low is plausible on short-term charts. However, the strong commercial levels and supportive weekly bar chart indicate that JY is definitely forming a major bottom. We’ve pointed out for several months the linkage between JY and the Nikkei. Note the on-going strength in EWJ (the Japan WEBS), which definitely appears to have bottomed. ME:
From 3-01: “… Our best guess is that 2-13
saw the high in Peso cash. Commercials go further
net short. Very bearish…”
Well the 2-13 11.064 cash high is still
holding. If
the commercials go any further net short the
chartbooks are going to have to re-calibrate the
scale!! One
final blip rally (in conjunction with DX?) might
still be left in this thing but it’s as toppy as
ever.
AD: The rally from the Sept
lows is very much a mirror of the Sydney stock
exchange. We’ve highlighted the on-going rally
in Aussie and Asian stocks and the apparent major
bottoms forming in many of these markets. While
Australian stocks look short-term toppy (EWA,
Aussie WEBS), the AD congests sideways.
CD: A major bottom in
sideways pattern continues to evolve. MEATS: The peak Feb/Mar season is behind us. LH:
Commercials flat with bearish seasonality ahead.
The length of the selloff from the 2-05 high basis
April makes the downside more likely from here. GRAINS:
Bullish
seasonality ahead. W:
Commercials are net long, supportive of the rally
from the 3-11 low. Technically look for the
current May Chicago W rally to hold under 295 then
selloff into a May/June bottom.
S: A favorite long situation
on 1-04 and 2-15 (441 basis May).
From 3-01 (@ 451) “….forming a major
bottom… commercials very supportive… bullish
Apr/May season ahead….” Now at 468, keep
very tight stops on longs. I expect a brief
pullback then a final rally into Apr/May. C:
A favorite long situation with a nice 5-wave
bottom from the July 01 highs, basis May. Very
bullish commercials are net long ahead of the
Apr/May peak season. SOFTS
/ FIBERS:
CO: This favorite short from
1-04 (1386) is looking like it belongs in our Hall
of Shame for bad calls. But we’re still bearish.
The current move from the 1-15 Wave 4 bottom is
predictably less powerful than the Wave 3 move
from the Oct 01 Wave 2 low. Commercials remain
hugely short and the peak Feb season is behind us.
Very bearish.
SB: A favorite long on 3-01
(@ 5.97), now at 6.27, keep very tight stops.
While SB is rallying from a bounce assisted by
momentary commercial net longs, the bearish
June/Jul season is still ahead. The commercials
are selling this rally and moving to neutral.
Also, the plunge from the 1-09 high looks like it
has one more Wave 5 downleg with a major bottom
target in the 5.25 area. OJ:
Maintaining our technical target zone of 99 to
102. Keep tight stops on longs. Bullish peak
Apr/May season is still ahead. CT:
Looking better. Reliably bullish Apr/May lies
ahead. Commercials are moving to neutral from net
short to support the 2-21 low. Favor the upside
short-term. Longer-term, one final plunge to test
the Oct low may still be in the cards. KC:
From 3-01: “….Setting up for at least a
brief rally. Commercials going net long with chart
at a technical bottom….” More short-term
upside is likely in this bullish peak Apr/May KC
season. We
look for a few days of pullback to the lower
50’s followed by some higher highs. Commercials
are moving to neutral however so keep tight stops
on any longs. The real key is the appearance of a
major rounding bottom and the 3-11 breakout above
resistance. This sets the stage for powerful
upside moves in KC in the coming year. LB:
The reliable peak lumber season (Feb/Mar) is
passing. Commercials are net short ahead of a
likely impending top. One final blip is likely on
a technical basis to suck more long specs in. May
soon become a favorite short situation. Keep
extremely tight stops on any longs.
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