CRB: From 4-01 (@ 206.42 cash) :”… Near-term this index is now extremely toppy and ready for a pullback. Look for one or more major commodity groups to retrace near-term…” Now at 199.02, the future is murky.  While the CRB can rally technically, the extreme commercial net shorts in many commodities point to on-going weakness. One possible scenario: a series of “sideways bottoming channels” similar to the Silver pattern developing in these various commodities. We need to get through the April U.S. stock earnings season to have a clearer view of the macro economy and it’s implications for commodity demand.

ENERGY:  From 4-01: “…Near-term, commercials are moving to very bearish net short positions.  Will the Energy contracts pullback at least briefly prior to any final move to an Apr/May seasonal high?…”  We’ve since seen sharp selloffs across the board in the Energy Complex.  The continuing high level of commercial net shorting will put pressure on otherwise constructive Energy charts.

CL: Note the huge outside-day reversal bar on 4-03. At least a tradeable selloff here. Commercials are at 3-year record net short levels. Near-term targets in the 22.50 to 23.50 range. Still looking for at least a re-test of the 4-03 high after this forecast selloff.

HO: A mirror of CL. Still in a major uptrend but poised for continuation of the current retracement near-term. Targeting a test of the low 60’s in the days ahead.

HU: Will 70 hold on the downside?  Targeting 67.50.

NG: From 4-01: “…Technically poised for a pullback under 3.00 in the days ahead. NG may lead a short-term energy selloff…”  Still targeting under 3.00 in the current selloff. Given the extreme commercial shorts even a re-test of 2.00 cannot be technically ruled out at this point.  If so, we’re looking at a “Silver-like” sideways bottoming channel developing in NG.  Time will tell.

METALS: From 4-01: “…Commercials are at very bearish net short levels now. Play any short sales very tight as metals are likely in longer-term uptrends. Next 2 months is generally a bearish bottoming season…” This situation still holds.

GC: From 4-01: “…Expect 02-08 high to hold as commercials are very net short and bearish Apr/ May lies ahead…” Nothing has changed short-term.

SI: From 4-01: “…look for a swing short trade when and if SI hits the highs of the current channel in the 4.70 area…”  That’s exactly what happened. SI breaks 4.700, hitting 4.738 intra day on 4-02 then reversing and going on a 5-day selloff. Given the seasonal bearishness and the degree of commercial net shorts, expect this downtrend to continue with targets to 4.250.  The huge hedger net shorts even looks ominous for the Nov ’01 low at the moment.

HG: On the favorite short watchlist since 3-15, HG has performed beautifully. Starting with a textbook reversal bar failing to challenge resistance on 4-02 @ 77. Now at 72, Copper looks like lower lows ahead short-term. Targeting 69 or lower. Commercials remain net short ahead of the bearish May/June bottoming season.

PA: From 4-01 (@ 390.65): “…An on-going favorite short situation from 1-31…Favoring the short side with stop @401…”  Now at 365.50, even the Nov ’01 low in the 310 – 315 area looks vulnerable at this point.

PL: From 4-01 (@540.00): “…Remains short-term very toppy…” Now at 536.00, we’re looking for a selloff to continue to the 490 – 500 range.

BONDS/ NOTES:  Our 4-01 forecast for lower CRB, lower stocks and higher bonds has panned-out very nicely.  While this is a seasonal phenomenon it is also reflective of greater-than-understood economic softness.  Note the 4-12 March Retail Sales report at up .2%, a very weak number which is essentially flat after inflation. Compared to “market expectations” of a .4 to .5% increase.  Note also the on-going HUGE commercial net shorts in major inflation and economically driven commodities.  We wouldn’t see this degree of net shorting if there was demand consistent with a “strong recovery”.  Look for a muddled pattern in bonds to develop, joining muddled sideways patterns in the metals and energy.  Once the market has digested the April earnings, the impact of the Middle East turmoil, and revised it’s economic forecasts for the rest of the year, then we’re likely to see some trends re-emerge.

US: On the favorite long watchlist from 4-01: “… look for a meaningful short-term rally (consistent with a stock market and CRB pullback) to develop within the longer-term downtrend.  Commercials are at 2-year high net long levels consistent with the 4 most powerful rallies of the past 24 months. Note also that interest rates (CBOE TYX) hit their short-term 5-wave target zone on 3-21 at 5.86%…”  Well, we’ve had a beautiful rally starting on 4-02. Keep tight stops on any longs as this market pattern reflects some confusion over the outlook for the economy, interest rates, and competing assets (stocks). Commercials are coming off of net long position but not yet to a point to cap the rally.

TY: From 4-01: “…Any short-term downside is likely to be over by 1st week of April and to hold above 12-17 lows.  This sets us up for a swing rally. Commercials are now at net long levels consistent with the May and July 01 bottoms…”  Well, the 12-17 low held and we’ve had a nice rally.  Commercials remain very supportive.  Bonds and notes appear to be in a sideways hiatus waiting for clarity on the economic and corporate earnings front. 

CORPORATES: We continue to like accumulation of mid-grade corporates in the face of credit quality spread improvement and what looks to be a “scramble for yield” by investors (note the rallies in the REITs and other yield-driven assets).

STOCKS:  From 4-01: “…Today I’m somewhat less convinced of the “2-20 lows hold” thesis, largely due to the lagging performance of the OTC & NDX. Some key factoids:  1) Commercials are very net short consistent with a substantial selloff in the weeks ahead.  2) April earnings season looms, always an inflection point (Oct was a bottom, Jan a top….April a bottom ?)  3) April often brings seasonal weakness and a bottom in stock indices…6) A stock market selloff in the next few weeks is consistent with a selloff in the CRB and a bond rally over the same period, both of which I’m expecting for independent reasons…”

The current stock index patterns are ripe with implications for many markets:

OTC/ NDX: From 4-01: “… the NDX internals favor the downside near-term…and the 2-22 lows look more vulnerable to an April pullback than do the other indices. NDX commercials moving to unambiguous net short levels…” Indeed the NDX took out it’s Feb low on 4-11!  I now believe that the OTC Composite is in an A-B-C Wave 2 retracement sequence from it’s 1-09-02 high. 2-22 was the A low, 3-11 the B top and we are now in the final Wave C downleg which is very likely to take out the 2-22 low. Ditto for the NDX which is counting down from it’s 12-06-01 high and has already taken out it’s Feb low.  Commercials are coming off their net shorts but are not yet at a level high enough to stop this selloff.

SPX: From 4-01: “…Can we rally in the face of the second highest net short commercial position in the last 3 years (Bearish Mar 2000 was the highest net short)?  About even money of the “quick blip” scenario to hit 1178 – 1190 by April 8th, then collapsing into mid April.  Again, this rally has to be swift and hold the 3-26 low…”  When the 3-26 low was cracked on 4-03, there was no hope left of a rally and the downleg was confirmed.  Also looking like an ABC pattern in a Wave 2 retracement from the 1-07-02 cash high. Commercials remain very net short so the challenge to Feb 22 is real.  After touching or taking out Feb 22 we will be well-poised for a summer rally if the commercials have reversed and gone net long at that point.

DOW: From 4-01: “…  We’ve had the blip rally and taken out 3-08 (by only 10 points !).  Not much near-term upside remains, if any.  The Dow may languish sideways here, waiting for a clear signal from the OTC…”  the 1-30-02 Dow low looks secure at this point.

RUT:  The post-911 power of the Russell is truly amazing, making a new high even during this April weakness.  Will wait for final bottoming in the OTC and SPX before resuming the uptrend heading into the bullish Summer season.

            SPECIFIC STOCKS SHORT:  Our short sale selections open as of the 4-01 Outlook:  (entry price, current price, % profit, current stop) From 3-15: BEAS (15.29, 10.78, 29%, 12.34) PMCS (16.25, 15.32, 6%, 17.70) BRCD (25.54, 23.20, 9%, 26.10) FLEX (16.67, 15.60, 6%, 17.48) TLAB (11.13, 9.17, 17%, 10.20)  CHKP (32.17, 20.45,  35%, 23.50) From 4-01: ORCL (12.84, 10.94, 14%, 12.84) RATL (16.01, 13.35, 16%, 16.25) CSCO (17.52, 14.87, 15%, 16.60) BMET (26.40, 26.25, 0%, 28.70) BBBY (32.83, 34.63, -6%, 36.55) ICOS (46.74, out 4-11 @ 40.80, 12%)

SPECIFIC STOCKS LONG: Long selections open as of 4-01: (entry price, current price, % profit, current stop) from 1-25: SBUX (22.88, 24.92, 9%, 23.50) from 2-15: TXN (31.50, out 4-10 @ 31.60, 0%) UIS (11.95, out 4-08 @ 11.65, -3%) ADBE (35.69, out 4-04 @ 37.61, 5%) CDMS (10.75, out 4-08 @ 11.80, 9%) VVI (25.33, 28.69, 13%, 27.60) WDC (5.98, 6.45, 7%, 5.80) LION (7.45, 9.45, 26%, 8.90) OS (6.05, 7.73, 27%, 6.98) ROC (5.16, 4.95, -4%, 4.81) FPF (3.38, 3.30, -3%, 3.20) TTF (4.85, out 4-03 @ 4.15, -14%) TRF (20.00, 25.50, 27%, 24.63) EWS (5.61, out 4-08 @ 5.46, -3%) EWA (9.68, out 4-08 @ 9.60, -1%) COY (9.04, out 4-09 @ 8.65, -5%) KYT (8.13, 7.87, -4%, 7.83) From 4-01: DISH (28.32, 27.35, -4%, 25.75) DCN (20.90, 21.45, 2%, 19.70), BWA (62.39, 63.02, 1%, 59.85) CKFR (15.32, 15.38, 0%, 13.95) ITRI (30.40, 34.15, 12%, 30.40)

FOREX: We’re heading into the Apr/May period which is seasonally bullish for the US dollar. But the greenback has struggled to make a new high, perhaps as products invoiced in dollars are weakening (Energy).  The euro-currencies (EC, SF, BP) are likely forming major bottoms but short-term we observe heavy commercial selling and muddled patterns in these symbols.

            DX: From 3-15: “….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…”  The DX chart still looks like one final upside test ahead.

Euro: On the favorite short watchlist since 3-15. Note the series of “lower highs” in cash since 3-15 The bearish descending triangle developing on the weekly chart challenges the July ’01 and even the Oct ’00 lows. Huge commercial net short positions remain very bearish. Risk / reward on the short-side is excellent.

BP: Pattern somewhat unclear. Sideways range-bound perhaps? The commercial net shorts are very bearish, however. Favor the downside.

SF: An on-going muddled picture. Our best forecast is a test of the 3-15 cash high (6057) given the short-term ascending triangle. Commercials moving mildly net short so this rally will likely not go very far.

            JY: The Yen is likely in the final leg down of it’s bottoming long-term chart. Commercials are moving to net long but not yet at levels to stop the selloff started 4-10.  Likely to challenge at least the 4-01 cash low (7485).  We also expect an approach to 2-27 (7420) and even the 2-07 low (7376) before a major bottom is finally in.

ME: An on-going favorite on the short watchlist, has this brick finally topped? The 4-02 reversal bar and the lower-low on 4-11 look promising for the shorts. Position traders have stops at 10.99 basis June. Substantial further downside is very likely.

            AD: From 4-01: “… Short-term keep very tight stops on any AD longs as the commercials are selling heavily net short into the current rally from their supportive net long levels at the Jan. lows…” The rally from the Sept ’01 low looks to have peaked with a 5-wave completion on 4-02. This technical toppiness is accentuated by off-the-chart net short commercial levels. Favor the downside

            CD: From 4-01: “…A major bottom in sideways pattern continues to evolve…” This pattern continues with indecisive commercials.

MEATS:  The peak Feb/Mar season is behind us.  While May/June is a reliable bottoming season for Cattle, the late Spring/ Summer seasonality of Hogs is indecisive.

  LC: From 4-01: “…A bullseye favorite short on 3-15 (@ 7235 basis April). We now look for a blip rally to, say 7150 followed by a continuation of the downtrend started in Feb. Longer-term the Nov 01 lows may be tested as commercials are still very net short and bearish May/ June lies ahead…” Well, our blip rally lasted 2 days, hit 72.60, then crashed to take out the November low! While we expect another blip rally shortly, the 4-11 low (65.92 April, 61.00 June) still looks vulnerable given the commercial net short levels.

LH: An early-alert addition to our favorite long watchlist.  LH is nearing a major 5-wave down completion from the July ’01 highs. The final leg down from the 2-05-02 high (68.20 basis June) likely has not yet completed but rising commercial net longs say the bottom is in sight. Keep very tight stops on any LH shorts in order to lock-in profits.  LH will likely begin forming a final bottoming pattern, probably a kneejerk wave 4 rally failure in the days ahead, followed by a double bottom attempt in the area of recent lows in the next few weeks.

GRAINS:  Peak seasonality ahead.

W: On the 4-01 favorite long watchlist, the W rally has not materialized. Now an early-alert long as W appears determined to get the downside over with now. W is seasonally due for a bottom in May and the commercials are moving to a constructive net long position. Since early 1998, W has been in a long sideways channel of 225 to 300 on the continuous front month. Technically W is in a final Elliott Wave 5 downleg from the Jan ’02 high (309.5 basis June). Keep tight stops on any shorts here. Targeting a seasonal bottom in the 262 – 265 range by late April. Outside targeting 250 – 255 worst case.

            S: From 4-01: (@475.75 basis May) “…Beans are short-term very toppy. Expect another pullback lasting a few days with major support @ 459 and 455…” Now at 461, having hit 453, the current downleg from the 3-28 high is over or should bottom in the days ahead between 450 - 453. Keep very tight stops on any shorts.  Technically one more speculative rally is needed to complete a nice 5-wave sequence from the 1-02 low. As the peak May timeframe approaches, however, note the bearish net commercial shorts developing.

C: On the favorite long watchlist since 3-15, C continues to grind lower. Keep very tight stops on any shorts as a 5-wave down sequence from the July highs is complete and commercials are seriously net long.


            CO: Further downside is likely as commercials are nowhere near the net long levels necessary to stop the slide from the 3-13 continuous high. Note rallies on 4-05 and 4-08 were unable to close above the March highs basis May. Also note the lower low on 4-10.  1400 then 1250 are the next obvious technical targets for the bearish May/June seasonal bottoming timeframe.

            SB: On the 4-01 favorite short watchlist (@ 5.77): “…One more downleg remains likely with a major bottoming target around 5.25 in the April 9 – 15th timeframe…” Now at 5.51, SB is switching to an early alert on our favorite long watchlist.  Sugar need only touch the Feb low to complete a selloff from January basis May. Such a bottom would also complete a weekly sequence from the Oct ’00 continuous high! Keep very tight stops on any shorts as the commercials are net long ahead of this May SB bottoming season.

OJ: The 4-01 forecast of higher prices is bound for our Hall of Shame for bad calls. We’ve likely seen the seasonal high in OJ. Not a favorite short due to the erratic pattern, but otherwise bearish.

CT: A favorite short on 4-01 (@ 38.41 basis May), CT sold off rapidly to 36.86. Now at 37.37, the downtrend should remain under the 4-10 outside bar high of 39.10. Commercials remain bearishly net short and the possibility of a MAJOR move to challenge both the Feb ’02 and Oct ’01 lows gives this situation great risk/ reward.

KC: A bullseye short call on 4-01: “… Now at 57.20, keep VERY tight stops on any longs as the rally-ruining KC commercials are moving sharply to 3-year record net short levels…” and “…likeliest candidates for retracement include KC…” (from CRB comments).  The shifty KC commercials are dizzingly net short now, indicating the downside move is not over. Look for a test of 50.00 – 51.00 at this point.

LB:  On the favorite short watchlist from 4-01 @ 295.70 basis May. Now at 291.80, the selloff from the March seasonal high does not yet look complete. Next price target zone: 270 – 275. Note the persistent commercial net shorting.