10/02/99 – As stated last week, “A minor high could take hold by -- or on -- Monday, particularly if Bonds fail to close above 115-23/USZ. If this takes place, I will look for a pullback to 113-31--114-08/USZ -- where solid support is building. In addition to minor cycles aligning and intra-month resistance being hit, this possibility is increased by the daily trend reversal to up -- which usually ushers in a quick correction.

In order for Bonds to extend this rally, one bullish scenario would unfold if they reversed lower and headed down into Wednesday (intra-week V), held 113-31--114-08/USZ, and then reversed higher into the end of the week...Until this takes place, however, the weekly trend remains down and will attempt to exert its influence every chance it gets.”

Bonds pulled back quicker than the ideal scenario and tested minor support a day early. This allowed for support to be broken as the decline entered September 29th (time & pricing squared). It also reinforced -- and was likely caused by -- the intermediate analysis calling for a decline into -- and low around -- October 4th with strongest support at 111-24--111-30/USZ.

The coming week’s support extends this range down to 111-13/USZ, while the monthly LLS

is at 111-23/USZ. The monthly raw SPS for October is 112-14/USZ, so a low could come at any point -- even if only a double bottom at the 9/14 low of 112-16/USZ. The most bullish scenario would occur if Bonds spike below 112-16/USZ on Monday but close above 112-18.

Why is this such a critical time period? October 4th will complete a 77-day decline, precisely matching the preceding 4/09--6/25 77-day drop. October 4th is also the completion of a 20-day high - low/low-low cycle progression. It is also the completion of a 27 trading day high-high/high-low cycle stretching between 7/19, 8/25 & 10/04.

October 5th is the 1-year anniversary of the major high at 135-08 in 1998 while October 6th will complete a 180-day decline from April 9th. The week of October 4-8th is a plethora of similar weekly cycles, including a 16-17 week low-low-low-low sequence, a comparable 12 week decline (two previous declines have been 11 & 12 weeks in duration) & a 6-week high-high/high-low cycle.

Trading Strategy: Short-term traders could have bought 113-31--114-09/USZ and been stopped out at 113-15. Intermediate traders should buy December Bond 114 and/or 116 call options when Dec. futures hit 112-16 and average in down to 111-13/USZ… and hold for now.