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Dear Futures Trader,
What follows is the first issue of FutureSource's newest service, "FAST BREAK." Each weekly issue contains a discussion of the markets between two well known analysts and contributors to FutureSource, Jim Wyckoff and Dave Hightower. In this issue, Jim and Dave explore stock indexes and bonds and share their views of where those markets are headed. David Hightower is editor of the "Hightower Report" (avail- able on FutureSource Professional and ProNet). Jim Wyckoff is a regular contributor to FutureSource.com. You are receiving this because you are a customer of Futuresource. HOWEVER, if you are no longer interested in the markets, and don't want to receive this free service, we respect that! Just scroll to the end, and click on the link. You will be removed from the "FAST BREAK" list immediately. ________________________________________________________________ F U T U R E S O U R C E ' S F A S T B R E A K Volume I December 20, 2001 Issue #1 ________________________________________________________________ The major U.S. stock index futures defied many so-called "market experts" this fall and exhibited solid rebounds from the September lows. Meantime, traders looking for action have certainly found it in the U.S. Treasury bond futures the past several weeks. Indeed, in November, nearby T-bond futures prices hit a new all-time high, only to come crashing back down. What's next for these major markets in the coming days and weeks? Let's get the opinions of these two seasoned and respected market analysts: To see news on the stock index futures, click below: http://www.futuresource.com/news/news.asp?search=stock,index To see news on bond futures, click below: http://www.futuresource.com/news/news.asp?search=bond FUTURESOURCE.COM: David, let's start out with the U.S. stock index futures. Give us the lowdown. HIGHTOWER: One has to be impressed with the stock market action, as prices gained while a number of commodity markets simply discounted the chain of better than expected U.S. economic reports. Even with the Congress doing everything they can to create ongoing recession conditions and the leadership of Al- Qaeda apparently escaping, the stock market maintained a positive tilt. However, we are concerned that the gains were simply holiday-related and that the reality of slowing will manifest itself in a consolidation of the S&P 500. We think the S&P will be restrained in a range bound by 1115 and 1176 until the corporate news or the layoff news begins to show consistent **************MESSAGE FROM A "FAST BREAK" SPONSOR*************** Optimize your short-term trading results with tips from the hot new trading manual, "Trader's Guide to Day-Trading." Features tips from three of the nation's top trading gurus, Jake Bernstein, Dr. Alexander Elder and Neil Weintraub. No cost or obligation. It will be snail-mailed to you ASAP. http://www.futuresource.com/ads/manfinancial.htm **************************************************************** signs of improvement. The fact that the initial claims figures have declined moderately could be a sign that the concern over the recovery timing is overdone. However, it would seem to be a tall order to get the US economy in position to recover prior to the second quarter, which we think is needed in order to surprise the market into a rally beyond 1176. If for some reason the recovery is thrown back beyond the second quarter, that could mean a temporary failure below the bottom of the expected trading range. The fact that Congress failed to rise to the occasion is a major failure, and with recent forecasts by the IMF warning of global recession or worse in 2002, one must continue to be skeptical toward the existing bull case. The projected consolidation range in the Dow comes in at 9691 and 1016. Will Japan avoid financial collapse, thereby spoiling the US recovery leadership? FUTURESOURCE.COM: Jim, give us your views on the U.S. stock indexes. WYCKOFF: Price action in the U.S. stock indexes the past couple weeks suggests they are "rolling over" from recent gentle uptrends into more sideways and choppy trading ranges. I do not look for dramatic rallies or dramatic sell-offs in the U.S. stock indexes in the near- to intermediate term. I heard on a TV business channel this week that traders can expect a "Santa Claus rally," or the "January effect" to support the U.S. stock market in the coming weeks. One analyst said this is one of the easiest plays in stock trading. While there is irrefutable evidence that there is in fact a Santa Claus rally or January effect in stocks nearly every year, I do not believe that catching and participating in these rallies is easy. Again, it boils down to that all-important timing factor in trading markets. I've been in this business long enough to have seen Santa Claus rallies that began in October and were finished before Christmas even arrived. In fact, that may be the case this year. I am not ruling out a January rally in the stock market, but technical analysis does suggest Santa Claus made an early visit to stock traders again this year with a moderate rally that began in late September and just recently stalled out. Stock index bulls will regain the initiative if they can push their respective prices above the December highs. If that does occur, then the fabled "January effect" could unfold right on time this year. FUTURESOURCE.COM: Okay, fellas, what about the T-bond futures market? HIGHTOWER: The rally in the U.S. T-bond market over the last week might be explained as a rally in a bear market. It is also possible that yields were high enough for some long-term players to decide to pull down some supply and lock the high rates of return. With the continued anxiety over the Japanese economy, it is also possible that some of the recent buying was flight-to- quality buying by investors concerned about a debacle there. The U.S. economic numbers released last week continued to foster the recovery mentality and that should eventually turn the bonds back down. In the past two corrections against the downtrend, bonds managed 3 to 4 points on the upside while the current correction just barely managed 3 points on the bounce. Therefore, one should not assume that the downtrend has been altered unless of course upcoming economic numbers repeatedly dash the theme of recovery. The bonds might end up being buffeted by the events in Japan, as a wholesale failure in the Japanese economy that resulted in repatriation could cause heavy selling of US Treasuries. Keep in mind that Japanese entities are massive holders of long term US Treasury debt. It is possible that the December unemployment report released in early January will not show as dismal of a condition as was seen in the November figures. However, we would not be surprised if the bonds launch another recovery bounce into that time frame, as that has been the pattern over the last three months. The "V" bottom recovery is not as likely, but recovery in the 2nd quarter of 2002 is an accepted reality in bond prices. Therefore, any serious charge against recovery could spark a larger than expected bond bounce. FUTURESOURCE.COM: Jim, give us your outlook for the bond market. WYCKOFF: A couple weeks ago the T-bond market shed more than five full points in three days! This week, the market tacked on about three points in three days. Now that's some market volatility! Indeed, this week, we did see a good short-covering bounce in bonds. However, this week's rebound is still just a good-sized technical correction in a strong bear market. A bear flag recently developed and played out on the daily bar chart, **************MESSAGE FROM A "FAST BREAK" SPONSOR*************** Today's trading tools for New Millennium trading success. Receive a FREE investor's package containing an insightful Special Market Report, "Turn of the Century", and your choice of an interactive CD-ROM tutorial, video or audiocassette on options investing in a volatile 2002. http://www.futuresource.com/ads/barkleyad.htm **************************************************************** basis March T-Bonds. The daily chart for the March contract shows a steep seven-week downtrend line still in place. Also, on a longer-term chart basis, a major double-top reversal pattern on the monthly continuation chart for nearby T-Bond futures has formed. March T-bond futures need to push above 104 even to give the bulls a solid boost. The good news for the bulls is that the monthly chart does reveal a strong support layer that did check the recent price declines. Should prices jab down below that support zone, however, the odds greatly increase that the bears will do some feasting in the year 2002, and the bulls will be on the run. My bias is that decent rallies in the bond market, like we saw this week, will be good selling opportunities and that the bear market will roll on--until technical considerations signal the bulls have picked themselves up off the canvas. FUTURESOURCE.COM: Thanks for your detailed analysis, Dave and Jim. Next week, we'll be taking your pulse on two more important futures markets. Stay tuned! _______________________________________________________________________ Powered by List Builder To unsubscribe follow the link: http://lb.bcentral.com/ex/manage/subscriberprefs?customerid=17884&;subid=2712A4F6B59AB596&msgnum=4
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