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.

  LC: From 4-12 (@ 62.125 basis June): “…the 4-11 low (65.92 April, 61.00 June) still looks vulnerable…”  the 4-11 low was taken out on 4-19, eventually hitting 59.33 on 4-25. LC now looks like a couple days of rallying then a resumption of the downtrend which is very likely to take out the 4-25 low.

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.


            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.