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BISHOP’S
MARKET
OUTLOOK, 4-26-02 CRB:
In a sideways box from 185 to 201, it’s very
curious that the CRB actually FELL on 4-26 when
the big first quarter GDP report was released. As
if to say “What economic strength?”. The weekly CRB technicals are screaming for a re-test of the
10-01 lows before a bottom on the selloff from the
10-00 highs is complete.
See also DX because a DX rally would also
soften the CRB. ENERGY:
One more kneejerk peak season rally failure
may be in the cards but these symbols are
otherwise boxed in wide sideways channels. CL:
From 4-12 (based on 4-11 close): “…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…” I didn’t expect it
all in one day as CL hit 23.31 on 4-12. Note the
declining open interest, symptomatic of position
unwinding. The odds of a re-test of 4-03 have
dwindled somewhat and now stand at even money.
HO:
From 4-12 (based on 4-11 close): “…
Targeting a test of the low 60’s in the days
ahead…” How about the next day as HO hits
59.95 on 4-12.
HO looks weaker than CL technically, and is
very unlikely to take out the 4-03 high. Erratic
pattern precludes inclusion on the favorite short
watchlist but otherwise bearish. Keep very tight
stops on any HO longs. HU:
The technical pattern is too erratic for clear
interpretation but Elliott favors a re-test of the
4-02 high (86.85 basis June). Commercials
lightening up on net shorts, in a phase consistent
with falling prices. Note the bullish reverse
H&S pattern forming on the weekly chart w/
left shoulder Jul ’01, head Nov ’01.
But the peak season is upon us.
I’m standing aside from this mixed
picture. NG:
Very very toppy.
The rally from the 4-12 low has slightly
better than 50-50 chance to re-touch or break the
4-23 and 4-02 highs. Meanwhile the commercials are
hugely net short ahead of an imminent top. Keep
very tight stops on longs and look for short entry
opportunities.
A standout “sideways” channel in an age
of sideways channels. METALS:
Sideways channels.
Welcome to uncertainty. GC:
Excellent risk-reward on the short side of this
trade. GC takes out it’s 2-08 high on 4-25 and
thus completes a 5-wave advance from the April
’01 low. Commercials
are hugely net short with top-like technical
resistance in the 311-314 range. SI:
Expect the 4-02 high to contain the current rally.
Commercials are very net short and likely
to box SI into what is now a 16-month sideways
price channel. HG:
A mixed picture. Weekly technicals point to an
upside test of the 4-02 high. The daily chart is
less constructive. Meanwhile commercials are net
short ahead of bearish May/June. Best to stand
aside. PA:
The negative pattern in a sideways slide from the
Dec ’01 high has not yet technically bottomed.
Failure to participate in the current
speculation-fueled metals rally is more bearish
confirmation. PL:
On a spec-fueled sucker rally. Likely to stall and
re-trace in the days ahead. The power of the
current rally points to a re-test of the 4-19 high
(565 basis July) after any retracement.
Commercials adding to net shorts. BONDS/
NOTES: From
4-12: “…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 that 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 true industrial demand
consistent with a “strong recovery”.
Look for a muddled pattern in bonds to
develop, joining muddled sideways patterns in the
metals and energy...” Bonds and notes remain
a very mixed picture, consistent with confusion
over economic prospects. Is the market focusing on
4-26’s rear-view-mirror bond-bearish headline
jump in 1st quarter GDP
OR more recent bullish declines in housing
starts, building permits, durables orders, new and
existing home sales and the flat retail sales
numbers? The
failure of notes and bonds to selloff on 4-26
points to the latter conclusion. US:
On the
favorite long watchlist from 4-01, keep tight
stops as bonds are poised for at least a brief
retracement in the rally from 3-15. Beyond a mild retracement I look for US to break 5.5% in
yield and target 104 – 105 before this rally is
capped. TY:
We’ve liked the long side of notes from
4-01. Keep tight stops on any longs as we approach
the Feb highs (106-12 basis June). Commercials
remain very supportive. 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:
The
good news for the bulls is that a bottom is in
sight and well above the 9-21 lows.
But we’re not quite there yet. OTC/
NDX: From
4-12 (OTC 1756): “….we are now in the final
Wave C downleg which is very likely to take out
the 2-22 low (1696)…”
Now at 1663, there’s good news for
panicking OTC bulls: the bottom is near.
Look for a heartening kneejerk rally to
develop this coming week then fail with a sharp
crash to re-test today’s lows and put in an
important bottom in mid to late May.
The power of the current selloff tells us
the bottom will be rocky but likely to hold
between 1550 and 1600. SPX:
From 4-12: (@ 1111 cash) “…When the 3-26
low (1131) was cracked on 4-03, there was no hope
left of a rally and the downleg was
confirmed…[and] the challenge to Feb 22 is real. After touching or taking out Feb 22 (1074) we will be
well-poised for a summer rally if the commercials
have reversed and gone net long at that
point…” Now at 1076, the “drifting
sideways” technical pattern is difficult to
read. However, the very short commercials clearly
point to further downside. We might see a blip
rally here but afterwards somewhat lower lows are
very likely.
For a bottom that can springboard a summer
challenge of the Jan highs, look for a double
bottom in May, between 1025 and 1050. DOW:
Look for a seasonal bottom in the area of the 1-30
low (+/- 9500) in May. RUT:
A nice selloff has finally begun on the
most bullish stock index. Look for an on-going
selloff to bottom above the Feb lows (457 area) in
May. SPECIFIC
STOCKS 1ST QUARTER PERFORMANCE:
For the period beginning 1-18 and ending 4-26:
Shorts: Closed shorts average 4.07% over 25 day
holding period. 5 open shorts with average 17.6%
profit. Longs: Closed longs average -.45% profit
over 35 day holding period. 6 open longs average
13.5% profit.
Baselines: S&P down 4.5%, OTC Composite
down 13.8%
SPECIFIC STOCKS SHORT:
Our short sale selections open as of
the 4-12 Outlook:
(entry price, current price, % profit,
current stop) From 3-15: BEAS (15.29, out 4-15 @
13.00, 14%) PMCS (16.25 out 4-17 @ 17.75, -9%)
BRCD (25.54, out 4-16 @ 26.25, -3%) FLEX (16.67,
out 4-16 @ 17.50, -5%) TLAB (11.13, 8.71, 14%,
9.50) CHKP (32.17, 17.65, 45%, 20.15) From 4-01: ORCL (12.84,
10.47, 18%, 11.45) RATL (16.01, 13.75, 14%, 15.65)
CSCO (17.52, 14.21, 18%, 15.50) BMET (26.40,
27.07, -3%, 28.70) BBBY (32.83, out 4-23 @ 36.60,
-12%) SPECIFIC
STOCKS LONG:
Long selections open as of 4-01: (entry price,
current price, % profit, current stop) from 1-25:
SBUX (22.88, out 4-26 @ 24.25, 5%) from 2-15: VVI
(25.33, 30.73, 21%, 29.25) WDC (5.98, out 4-24 @
6.30, 5%) LION (7.45, 10.30, 38%, 9.70) OS (6.05,
out 4-24 @ 7.25, 19%) ROC (5.16, 4.98, -4%, 4.90)
FPF (3.38, out 4-24 @ 3.07, -9%) TRF (20.00, out
4-12 @24.50, 22%) KYT (8.13, out 4-15 @ 7.83, -4%)
From 4-01: DISH (28.32, out 4-25 @ 27.05, -5%) DCN
(20.90, 20.57, -2%, 19.70), BWA (62.39, out 4-18 @
59.80, -5%) CKFR (15.32, 19.02, 24%, 17.60) ITRI
(30.40, 31.68, 4%, 30.40) FOREX:
This peak season is the last stand for the dollar.
Note the likely rollovers in EC, BP, SF,
AD, and even JY.
Kneejerk rallies in energy would also help.
DX: Very high open interest is
likely to unwind in the direction opposite of the
current price trend (a selloff from the Jan.
high). Commercials are moving to constructive net
long position but may need to accumulate for
several weeks. Also, the technical pattern from
the Jan high points to at least a re-test of
current levels before a meaningful rally can
begin. Note
the peak bullish season for the greenback dead
ahead in May and the confirming commercial
shorting in EC, BP, SF, AD, etc. Euro: We like the “swing channel” pattern in EC. As cash approaches it’s Dec ’01 (9044) and Jan ’02 (9059) highs, commercials are hugely net short. Look for a reversal to develop in the area of these prior channel highs in the next few days. Downside targets are to the lower support zones in the channel (8850, 8750, 8600). Excellent risk-reward on the short side. BP:
As the BP rally heads toward the top of its
channel in the 1.470 – 1.475 area, keep tight
stops and look for a sharp reversal to the
downside. Commercials are short and getting
shorter. SF:
From 4-12 (@ 6001 cash): “… Our best
forecast is a test of the 3-15 cash high
(6057)…” Now at 6152, keep tight stops on
longs as layers of channel resistance lie just
ahead. We’re
placing SF on our early alert short watchlist as
commercials add to their net shorts.
JY: A very interesting mixed
picture. We can accept a major bottom on 2-07 on
the weekly chart from the major high in Jan ’00.
However, the daily chart from the 9-19-01
high has yet to conclusively confirm the weekly
bottom. Meanwhile the JY commercials are mildly
bullish. One clue: The Nikkei has mirrored JY
turning points within a day! As the Nikkei looks
technically bound to take out its’ March highs
in the next week or so, the JY will likely go
along for the ride. But thereafter we’re
probably looking at a major JY selloff to put in
that elusive bottom on the daily charts. Bears
note also the growing commercial Nikkei net
shorts. ME:
From 4-12: “…An on-going favorite on the
short watchlist, has this brick finally
topped?…Substantial further downside is very
likely…”
Keep tight stops on shorts as at least a
blip rally is in the cards. Thereafter lower lows
are very likely. Commercials are still very net
short but lightening up a bit.
AD: Keep extremely tight
stops on any AD longs. Both the AD and the Aussie
stock market (see EWA
WEBS on the AMEX) are at important
resistance and have completed 5-wave advances from
their April ’01 (AD) and Sept ’01 (EWA) lows.
Commercials are massively net short the AD. Great
risk/reward potential.
CD: From 4-01: “…A
major bottom in sideways pattern continues to
evolve…” The upside breakout on 4-17 to
take out the 3-22 high basis June is further
confirmation of the bottom in the CD. MEATS: Hogs look interesting. LH:
From 4-12: “…An early-alert addition to our
favorite long watchlist…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…” This
is precisely what we’re seeing. LH rallied from
4-12 to 4-19 (the kneejerk) and is now in the
final downleg of a double bottom. Now less that
50-50 odds of taking out the 4-12 low (50.40 basis
June). Commercials now hugely net long. Keep VERY
tight stops on any shorts and look for long-side
entry opportunities. See also bullish PB. PB:
Keep tight stops on shorts. In the final downleg
of the selloff from the March high. Commercials
are moving to a very constructive net long
position ahead of a likely bottom. See also
bullish LH. GRAINS:
Peak seasonality ahead. W:
From 4-12 (@279 basis Jul): “…W appears
determined to get the downside over with
now…Targeting a seasonal bottom in the 262 –
265 range by late April...” W
has sold off nicely to hit 266 on 4-26. The easy
downside money has been made and a bottom is near.
Commercials are adding to net longs. The strength
of the collapse from the 3-28 high points to a
rally and final re-test of 4-26 before the selloff
from the 1-14 high is over.
S: From 4-12 (based on
4-11 close): ‘…the current downleg from the
3-28 high is over…one more speculative rally is
needed to complete a nice 5-wave sequence from the
1-02 low...”
Beans
actually bottomed on 4-12 (@ 456.5 basis July)
then rallied to 484 in the next 2 weeks. We’ve had a great run in S since turning bullish on 1-04.
There may be another final leg up but this is the
peak season and the commercials are acting
erratic. Best to stand aside. C:
Huge recent volume, net long commercials, a
completed selloff from the Jul ’01 high and the
4-12 spike low all point to at least a tradable
rally here. The only blemish is a possible mini
descending triangle since the 4-12 low. If so we
might see a final downside test of 4-12. SOFTS
/ FIBERS:
CO: We’ve been bearish and
dead wrong on CO since Jan. Again, we prefer to
look for shorting opportunities. The bottoming May/June season is ahead and CO is technically
poised to selloff, at least testing the 4-10 lows
(1425 area), if not lower.
SB: An early alert on the
4-12 long watchlist at 483, now at 509, SB is a
market to watch on the long side.
A major bottom is forming on the selloff
from the Oct high. SB may grind sideways for a
while given the weak June/ Jul season ahead. Note
the sideways bottoming channel developing with
support at the Feb and April lows and resistance
at the March and April highs. OJ:
Erratic, unclear pattern. Commercials are trading
a rangebound sideways pattern from 85 to 95.
We’re standing aside. CT:
A major bullseye for our otherwise lackluster 4-12
Outlook: “…A favorite short on 4-01 (@
38.41 basis May, 40.00 Jul), CT sold off rapidly
to 36.86 May. Now at 37.37 May, 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…” Now at
33.55 May, 35.27 July, CT is due for a blip rally
in the days ahead before continuing to lower lows.
Technically CT could put in bottoms on selloffs
from ALL its major highs (4-95, 7-98, and 12-00)
if the front month at least tests the 10-01 low
(28.20 area). KC:
Another great short call: From 4-01: “… Now
at 57.20 May, keep VERY tight stops on any longs
as the rally-ruining KC commercials are moving
sharply to 3-year record net short levels…” and
From 4-12 (@53.20 May, 55.50 Jul): “… 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…” Now
at 49.70 May, 52.15 Jul, we expect a blip rally.
However, commercials remain very net short,
signaling that a re-test of support at 50.00 and
below basis July is not out of the question. Keep
tight stops on shorts and let KC run as far as it
will go. LB:
From 4-12 (@285.90): “…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…” Well
LB cracked to hit 267.10 on 4-16. We’re now
mildly bullish LB with at least 50-50 odds of
testing the 3-22 high (330 basis May) in the next
few weeks.
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