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BISHOP’S
MARKET
OUTLOOK, 4-12-02 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. 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. SOFTS
/ FIBERS:
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.
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