The Chart du Jour

Buy Euro/JPY; Sell Mortgages

April 27, 2000

By, Barclay T. Leib

We put out a strong suggestion on April 25th that 2.1620, within our 2.1104 to 2.1811 target range for USD/DEM, would be a logical place to take a stab at the short side of the dollar. It's pretty violent out there, but we still feel very strongly that a sudden reversal in DM (euro) weakness will occur shortly from around these levels. This is confirmed by the picture in EURO-JPY below that looks like an almost-complete 5-wave decline. Get ready to buy this one too!


Chart produced using Advanced GET End-of-Day

Meanwhile mortgage-backed futures look like a classic 4th. wave rally is about done, and this market should shortly make a 5th. wave decline. Since the January lows, this market has made up very little ground while at times U.S. Treasury bonds were partying. Regardless of the excuses people may make for this type behavior, this is a classic negative sign for the fixed income markets in general. Look for a 5th wave decline to at least 86.05.


Chart produced using Advanced GET End-of-Day

And if the euro is soon to bottom, and mortgage-backed bond futures fall, what should one think for stocks? Well, there's a tremendous amount of noise out there at present, but in normal circumstances it would certainly not be bullish. Amazon remains the most clear chart pattern...a rally back to the neckline should soon be replaced with renewed weakness. Sell. The jig is up -- it's just that the average guy out there doen't know it yet.


Chart produced using Advanced GET End-of-Day

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