STOCK MARKET
ANALYSIS
As I indicated recently, everything seems to be going just "swimmingly" into election time. To top it off, the
Federal Reserve has even been increasing the money supply at an incredible 13% rate of growth in the
weeks coming into the election. The market moved up sharply for a while in post-euphoria trading
Wednesday, then lost much of its rally.
This type of trading action doesn't give us much grounds for additional conclusions, but it did serve to
temporarily break the market out above its August high, above its 200-day moving average, an ostensibly
in a break-out above resistance. However, our hourly and daily momentum oscillators did not confirm the
market's new high above the October 20 high, and we continue to count a Five-Wave advance from the
October 8 low, although the Fifth Wave itself has been extending for a few days now and seemingly has
no end in sight. This will, in the end, of course, prove untrue.
Look for a market peak, but we need further confirmation of that peak, such as with a brief decline in the
market that triggers sell signals in our indicators. Wednesday's 77 point Dow rally won't yet do the job
now that the market has broken above its August high.
But we are expecting a 50% to 62% retracement of the market's month-long rebound that would take the
Dow back to 8000.
STRATEGY
S&P and E-mini (Dec. futures "SPZ"): Hold short positions. If you sold the open Wednesday your stops are still
intact in the Dow, OEX, and the S&P since the high end of the open as 126.50 and the 8.00 point stop should not have
been triggered at today's' high of 133.50. These are just guidelines anyway, though, so we realize there is perhaps a
large diversity in entry points among traders. If short, hold short, if not sell short, and place stops a t 1135.10 on
Thursday.
Dow Jones Futures (Dec. futures "DFZ"): No question here. Sold short Dow futures at the open of 8830 and keep
stops at 8910. .
Options Traders: Use S&P parameters if you're still short or if you are selling short tomorrow morning. That means, sell
short and exit to cash if the SPZ moves above 1135.10.
**Mutual Fund Switchers Remain 100% in money market just for now until we get another signal to do a mutual fund
switch. This will not occur on strength like we saw Wednesday.
BONDS
ANALYSIS
Bonds were hammered Wednesday and traders should hold short as there is no change. Expect bonds
to move to next support at 124 16.
STRATEGY
December Bonds Sold short at 127-31 with stops at 129-02.
CURRENCIES
ANALYSIS
No trade suggestion just yet as next support at 59.87 in the DMZ lies not to far below the market.
STRATEGY
December D-mark: Stand aside.
December Swiss franc: Stand aside.
December Japanese yen: Stand aside.
December Canadian Dollar Stand aside.
PRECIOUS METALS
ANALYSIS
I indicate that a little more weakness in gold and our intermediate trend model will be back on a "sell," but
that didn't occur and the XAU index was up another nearly 9% and gold rebounded nicely.
STRATEGY
December Gold: Return to long Dec. gold at market with stops at 288.10
Dec. Silver Stand aside.
XAU: Hold long with stops at 67.40.
GMS SHORT-TERM TRADING MODELS AT A GLANCE***
Trading Model
Last Signal
Date of Last
Signal
Market Price
When Signal Given
S&P Futures model #1
(sensitive)
Buy
20-Oct-98
SPZ (Dec.) 1096.50
S&P Futures model #2
(less sensitive)
Buy
02-Nov-98
SPX (cash) 1111.60
SPX crossover model
(trending)
Buy
15-Oct-98
SPX (Cash) 1047.49
Russell 2000 Small Cap
Buy
19-Oct-98
Russell 2000 (cash) 352.45
Bond futures
Sell
02-Nov-98
127-15 (Dec.)
D-mark futures
Buy
28-Aug-98
DMZ (Dec.) 57.26
Gold futures
Buy
30-Sep-98
299.0 (Dec. gold)
XAU Index
Buy
03-Sept-98
XAU 58.27
|
