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Strategies & Market Trends : Bonds, Currencies, Commodities and Index Futures

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To: Patrick Slevin who wrote (641)	1/3/2001 9:01:26 AM
From: Chip McVickar	Read Replies (1) of 12410

FOREX:1/3 OVERNIGHT CHANGE to 4:15 AM:$ -43,YEN+4,DM+59, BP+72 DOLLAR: The Dollar should be smashed as the once infallible Fed has made a mistake. The fact that US slowing might now be much slower than the Fed wanted to orchestrate could mean that economic differentials go positive in favor of the Euro zone as early as the 2nd quarter 2001. Furthermore, its possible that the interest rate differential narrows to even by the second quarter. In short investors should go where the 90 day outlook is the most favorable and that isn't in the US! The slate of US economic news is heavy all week long and that probably means more of what was seen Tuesday. Next downside target for the March Dollar is the June 2000 consolidation down at 105.90. EURO: This morning equity markets in Europe softened because of the fear of residual slowing from the US and that tempers the upside potential in the Euro. The jobless rate in the Euro zone was unchanged today at 8.8% which is a positive only because the US expects to see a minor uptick in its unemployment at the end of the week. A German economics firm suggested that the Euro zone should cut rates 50 basis points right now in order to head off the US ignited slowdown, its a little too much to expect the ECB bureaucracy to act this early. We see the Euro being limited once the weekly Euro touches 98.00. YEN: Evidently the slowing threat is great enough that the BOJ felt the need to comment on a possible return to zero interest rates. It's possible that the Japanese economy will stand up to the latest burden but it hasn't been very impressive in most other encounters. There was a report that November chip sales were higher than the prior month but the slowing really picked up pace in December. We pick a low around 86.90 off the weekly chart. SWISS: Safe haven, decent growth and solid support just under the market leaves the Swiss the best long play in the current environment. Dips to 62.50 on the weekly should be bought looking for an eventual move to 65.00. POUND: Top of the next upside consolidation comes in at 152.34 on the weekly. We are using a lot of weekly price points because the Forex markets appear to be in a big adjustment phase. We think the UK economy is strong enough to initially withstand the US impact. CANADIAN: The Canadian is being tested by fire as the US economic situation could have been a major problem for the Canadian currency. However, the Canadian has to weather a jobs report right ahead of the US report so we would suggest that short term traders be ready to take profits later today or early Thursday. #CURRENCIES: SENTIMENT TOWARD THE DOLLAR IN A CAPITULATION PHASE * MARKETS: The key in trading now is to stay with the trend but realize when the bearish sentiment is overblown or encompassing the worst case scenario. With the S&P and Dow still above the last 12 month lows it would not seem like we have hit rock bottom yet. Given the slate of news today and Thursday another probe down is likely but shorts should be placing exit points under the market, making sure all shorts are lifted before the opening Friday morning. Would be longs should keep to the sidelines until some change is noted! #STOCKS: FEAR AND ANXIETY ARE RULING THE MARKET MORE DOWNSIDE ACTION

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