Harry Schultz International Letter, Full Market Update

**Something interesting for Windows PC users. ZoneAlarm™ Pro v.2.6 is an award-winning personal firewall that automatically blocks known and unknown Internet threats, barricading your PC, and your network, from intruders and hostile attacks. A free version is still available for personal and non-profit use. Check it out at www.zonealarm.com.

**An unidentified source from German interior Ministry, warns European counterfeiters are expected to flood the 12 European countries that use the single currency with forgeries before the changeover to euro notes & coins. Police in Italy, which produces more fake notes than any other euro country, said criminals would distribute counterfeit lira before it comes useless. New euro notes & coins to be introduced into Euro union Jan 1, 2002, with legacy currencies ceasing to be legal tender 6 mos later. Evidence of euro related fraud has begun to emerge in France (FT 9/7). The French post office disclosed that fraudsters in eastern France have been calling householders & offering to sell them euros - in advance of the Jan 1 deadline - so they can "familiarize" themselves with the new currency. The callers identified their supposed company as 'Alto Performance' and said they were working for the post office. You can't say we didn't warn you!

**Here's something HSL exposed years ago! 'US Echelon spy network a fact, European Parliament told'. Virtually no satellite-bounced communication, e-mail, phone or fax, is immune to the US-run Echelon global spying network, European Parliament was told Wednesday after yearlong probe. The globe-girding Echelon system involving the US, Canada, Britain, Australia and New Zealand, a quasi alliance dating to World War II, sucks up airborne data "much like a vacuum cleaner," German MEP Gerhard Schmid told parliament in presenting the report. "Then it uses search engines that filter for key words relevant to intelligence services," he said. "We're not asserting this. We've got evidence, a link of indices which would stand up in court under oath". But he said most industrialized nations, including many in the EU itself, have comparable, if inferior, spying systems and that it is basically a case of spy-versus-spy. "Let's be honest," said Schmid. "The intelligence services in most of the EU member states use strategic telecommunications control...The purpose is usually relevant: fighting organized crime, terrorism, trafficking in drugs, human beings. That's fair enough." And he said Echelon, with some asides for commercial spying, appears (?) to be doing essentially the same. The US justifies electronic spying to gain contract procurement advantage for its firms "on the grounds of combating attempted bribery" by the European firms, he said. They said little about Britain, which as an Echelon partner harbors satellite listening stations on its soil. But German MEP Christian von Boetticher, who headed the investigating committee, told parliament, "Our British friends, because of their EU membership, are asked to put an end to American espionage activities and control the ones carried out on their land. "Otherwise," he said, "They are contravening European legislation." Source: AFP 9/5.
And, we are expected to believe this system isn't being abused? Even the European parliament had to spend taxpayer's money on yearlong probe to find out what was going on under their own roof!

**And just incase Echelon isn't 100% full proof, never fear, Big Brother is always inventing new ways to 'protect' us from organized crime, terrorism, money laundering & drug trafficking, etc - whilst surreptitiously eroding the last havens of privacy.
'Single-Number Plan Raises Privacy Fears'. A controversial technology under development by the communications industry that links Internet addresses with phone numbers has quietly picked up key government support [surprise, surprise!] as concern mounts among critics that the technology will broadly undermine privacy. The technology, known as e-number, or ENUM, would link phone numbers to codes that computer servers use to route traffic on the Web. The industry envisions a sophisticated electronic address book that would be able to direct messages to virtually any fax machine, computer or telephone, using a new 11-digit e-number. As a result, a fax could be sent to someone who lacked a fax machine but had an e-mail address [Whew!]. Likewise, cell phone users would only have to key in 11-digits to send e-mail, not a cumbersome alphanumeric address. But privacy advocates fear the system could [will] undermine online privacy and erode the security of the public phone system as well. They worry that the system would destroy a pillar of Internet privacy: the assumption by users that they enjoy anonymity in cyberspace. ENUM is likely to be voluntary, requiring users to sign up for the service. But privacy experts say it will not be worth the time and investment the industry is making in the technology unless it is widely used. So they expect ENUM will be aggressively promoted. "We believe that ENUM raises serious questions about privacy and security that need to be addressed before it's widely deployed," said Alan Davidson, associate director of the Center for Democracy and Technology, a privacy watchdog group based in Washington. "They are promoting this as a system that is going to make it really easy for people to find you in all kinds of ways. Well, we want to make sure that consumers can opt out [joke] if they don't want to be found." Today, vigilant Web surfers can maintain a high degree of anonymity because e-mail and other Web addresses contain little personal information. What's more, Web addresses under aliases can easily be created to cloak the identity of the sender. By contrast, a phone number has a wealth of personal information associated with it, including a street address, billing records and dialing data. Marrying such information to Web addresses would represent a leap in private data warehousing in cyberspace and dramatically increase the risk of privacy invasions, experts say. "Someone could write a program to query the ENUM database and obtain every line of your contact information and send spam [or monitor] every communications device you own," said Chris Hoofnagle, legislative director of the Electronic Privacy Information Center in Washington. Hoofnagle added that industry claims that consumers would be able to opt out of the system, or otherwise protect their private information, are hollow. "There could be coercion down the road by marketers [& govt] to push consumers to use ENUM to store their contact information. Absent legislation, there is likely to [will] be abuse." Source: Times - Jube Shiver.

**Unemployment rate in 12-eurozone countries was 8.3% in July, unchanged from June, but down from 8.8% in July 2000 & 9.8% in July 1999. An estimated total of 11.3 million were unemployed in July. The lowest jobless rates were recorded in the Netherlands 2.3%, Luxembourg 2.5%, Austria 3.8%, Ireland 3.8%, and Portugal 4.3%. The highest jobless rates were registered in Spain 13%, Italy 9.5%, Finland 9.0%, France 8.5%, Germany 7.9%, no data for Greece (economy.com). Risk of sharp spike in unemployment looked to be temporarily fading in euro zone, as economic activity offering timid signs of firming, but recent unemployment surge in US raising new red flag for global economy.

**Research from the Confederation of Japan Automobile Workers Union & Mitsubishi Research-Institute predict Japan's motor industry to bear brunt of economic decline, with up to 143,000 job losses by 2005. Main causes outlined as greater foreign competition, shift in overseas production & increased foreign ownership (ie, western style management techniques that favor share holder value rather than misplaced responsibility/loyalty to employees). Recent acquisitions of controlling stakes in 3 manufacturers already being felt, with Renault holding 38.6% stake in Nissan Motor announcing 21,000 job cuts, Daimler-Chrysler holding 37% stake in Mitsubishi Motor announcing 9,500 cuts, & Ford holding 34% stake in Mazda also making sizable cuts. World's 2nd largest economy moving closer to cliff edge.

**Reserve Bank of Australia (RBA) reduced benchmark interest rate ¼ % point to lowest level for over a decade. Bonds had biggest 1-day loss in 3-years, as investors bet cut in overnight lending rate to 4.75%, 4th this year, will be the last - because rising consumer spending & housing construction boom may ignite inflation. RBA justified cut as necessary buffer against weaker global growth, but it could well be a rate cut too far. Tony Pearson, NAB Ltd, says "We see it adding fuel to an economy that is already ablaze". RBA signaled inflation likely to temporarily rise above its 2 to 3% target band. Borrowing costs now match lowest levels since RBA began announcing policy changes in 1990. RBA has cut total of 1.5% points this year, unwinding 5 rate increases between Nov 1999 & Aug 2000. Source: Bloomberg.

**More from www.lemetropolecafe.com by Adam Hamilton.
'The JPM Derivatives Monster.' "Even more provocative and outright frightening is the ratio of the notional value of JPM's derivatives positions to its shareholder capital. Per JPM's latest 10-Q quarterly financial report filed with the US Securities and Exchange Commission available at www.jpmorganchase.com/pdfdoc/jpmchase/10Q2Q01.pdf,
JPM reported a stockholders' equity balance of $42b. $42b is a lot of capital and is nothing to scoff at, but when compared to an outstanding aggregate derivatives position with a notional value of $26,276b, JPM's implied leverage on stockholder equity is utterly mind-blowing. For every dollar that JPM's shareholders own free and clear, JPM management has pyramided on almost $626 worth of derivatives exposure in notional terms to the highly risky and highly volatile derivatives market! 626 to 1 implied leverage?!?".
New rumors circulating that a major hedge fund is in trouble (a la LTCM). Fed & global economy in much weaker position to deal with problem - and investor's nerves frayed. This bomb will go off - it's just a question of when.

**From Chris Cadbury, top S&P500 mkt timer: Capital continues to pour out of the stk mkt (according to trim Tabs). The equity funds lost a net $10.2bn during week ending 8/31, while US equity funds lost net $8.1bn. Net liquidity for the stk mkt shrank by $6.9bn during the week. In past 12 weeks, US stk funds have had net outflows of $13.6bn & net stk mkt liquidity has plummeted a whopping $51.8bn. Moreover, net liquidity has dropped on a regular basis, falling in 10 out of last 12 weeks.

**An exaggerated reaction to US National Association of Purchasing Managers (NAPM) report last week, sparked a 224-point sentiment driven rally on the DJIA - but most of the gains were lost by day-end, with DJIA closing at 10,045 (+95pts). NAPM announced its monthly index of factory activity rose from 43.6 in July to 47.9 in August. This was the 13th consecutive month of decline in manufacturing industry, but is the highest the index has been since last November. The manufacturing sector generates approx 1/6th of US economy's output & employs 1/7th of its workforce, & the NAPM index is considered a leading indicator of the industries health. NAPM index indicating the manufacturing sector is still contracting, but that rate of contraction is slowing. This is 1st month since slump hit manufacturing sector that has seen improvements in majority of NAPM's component indices. With new orders index now above 50%, the health of industry may continue to show improvement - but we are far from a sustained turn around.

**Figures last Friday showed significant deterioration in August employment situation, with jobless rate surging to 4.9% from 4.5% in July, as companies cut 113,000 jobs - far more than consensus estimate of 33,000. Main bulk of job loses coming from manufacturing sector. The unemployment rate rose by 40 basis points, even though people left the labor force, suggesting true unemployment rate is even higher. The increase was expected as seasonal adjustment factors have distorted unemployment rate during past few months, but even if seasonal factors are taken into consideration, employment has declined on average by 44,000 jobs during past 6 months.

**US jobless claims fell to 402,000 last week from revised 405,000 one week earlier, but continuing claims reached a new high during week ending August 25, at 3.207 million, highest level since 1992. So, even though new claims have held steady since May, workers are having difficulty getting themselves back into the workforce.

Our General Market Comments:

Manufacturing industries in developed world now in deep recession. Economic growth in seven largest economies virtually stagnant, with unemployment rising in US, France, Germany & Japan.

Performance of US economy remains reliant on continuing consumer spending, as corporate outlook remains depressed - but consumer confidence now reaching breaking point, as escalating layoffs (& many more in the offing) intensify unemployment risk.

Immediate danger for US is slowdown will become self-feeding cycle before corporate sector has chance to consolidate. Further declines in asset prices & ongoing unemployment fears likely to mean consumer retrenchment to kick-in at faster rate than possible economic recovery.

Economically sensitive commodities offering few signs of encouragement. Cotton at new contract low & copper re-testing contract lows in 12-month downtrend. Lumber continuing to build symmetrical triangle in ST up trend, and must rally from these levels to maintain upside momentum. Bonds still close to recent highs despite down spike on NAPM news. Above commodities clearly not anticipating economic recovery in near future.

Mkts seem to be on cliff edge, but have been in similar position many times - only to make surprise comeback. More downside likely before climax sell-off to finally cap this down leg - but likelihood of knee-jerk (suckers) rally from March/April support remains wild card.

Trade aggressively with close stops as major selling climax (or ST knee jerk rally) unlikely to reverse major downtrend with significant strength. Place mkt orders to avoid missing fast moves. If you hesitate - you'll probably miss it!

NYSE

The NYSE Composite Index closed Friday Sept. 7 at 566.17 ie, 59.98 points below its 200-day moving average.

NYSE composite weekly breadth figures show advances beat declines (1,694 - 1,379), new highs almost doubled new lows (107 - 55), but declining volume outpaced advancing volume by a ratio of 2.43 to 1.

NYSE Composite weekly chart - line on close.

MT trend up. ST trend down. The 40-week MA (green line) in continuing downtrend. Momentum clearly negative with price having retraced all of prior rally & more, & having broken below a major support zone. Bearish, Up wedge pattern (with downside target of 486 approx), playing out in textbook like manner, with February breakdown having given clear early warning signal of weakness to follow.

The fast %K (red line) in Stochastics (not shown) closing in down trend, & in lower range of oversold zone at 6.36. MACD confirming ongoing downside momentum. MACDMA (blue vertical lines = length of exponential average of FastMA - SlowMA) increasing rate of descent into negative territory.

NYSE Composite daily chart - line on close.

ST trend down. Price in sharp down leg testing March lows & lower boundary of ST downtrend channel. 25 & 40-day moving averages in ongoing downtrend with increasing rate of descent. Fast %K line in Stochastics (not shown), closing in lower level of oversold zone at 7.28. MACD clearly negative, showing increasing downside momentum, confirmed by MACDMA (blue vertical lines) advance into negative territory.

Upside resistance 572, between 594 - 600, 623, 640, 660.
Downside support at 565, then little historical support before 515 - 485.

NYSE Advance/decline line - daily.

Price closing below 533 confirming false breakout from mini trading range. Bearish Up wedge pattern remains valid (as shown). Strong reversal needed if NYSE to hold March/April lows.

HSLP-NYSE Composite daily.

HSLP-NYSE continues to lead downside action, offering no signs that downside momentum is easing. Based on HSLP-NYSE, the NYSE Comp will not hold above its March/April lows.

Trader's Guidelines:

Choppy trading of prior few weeks finally giving way to more tradable action. As per FMU 8/20, 4th test of intermediate 600 support failed to hold & was followed by sharp sell-off action to re-test March lows.

And, if traders followed our recommendations to:

"Place mkt orders to avoid missing moves for both entry, & exit at predetermined price targets. Traders can enter short trades at 593.50 area, and increase aggressively if failed test of 600-support come resistance seen. Stops based on dollar loss, or 2dc over 610.00. Take full profits between 566 - 576".

They have made excellent profits (make's the price of FMU a give-away, eh?).

Sell sustained action/close below 560 area, & increase aggressively if failed test of 572 level seen on increasing volume. Stops based on dollar loss. With no nearby support & the risk of a mkt collapse very real, traders are advised to use close trailing stops, taking profits via stops. Widen stops on PART of positions if/as profits increase, for longer-term plays.

Gamblers can enter long trades on any sentiment driven rally taking price above the 572 level, but running against long-term trend & run risk that strength will quickly fizzle out, as seen last Tuesday. Trade aggressively using tight stops. Take full profits between 594 - 600. Stops in 560 area, or dollar loss basis.

Nasdaq

The Nasdaq Composite Index closed Friday Sept. 7 at 1687.70 ie, 540.91 points below its 200-day moving average.

Nasdaq Composite weekly breadth figures show advances beat declines (1,959 - 1,541), new lows more than doubled new highs (95 - 36), & declining volume crushed advancing volume by ratio of 2.75 to 1.

Nasdaq Composite weekly - line on close.

MT trend down. ST trend down. The 200-day MA in continuing downtrend with slight easing due to recent trading range action. Stochastics (not shown) in sharp downtrend with %K fast line closing in lower level of oversold zone at 6.29.

MACD lines confirming sustained downside momentum with fast moving exponential average (red line) crossing below slow exponential average (blue line). MACDMA (blue vertical lines) giving early warning of momentum change, but not yet in negative territory.

Nasdaq Composite daily chart - line on close.

MT trend down. ST trend down. Sharp down leg falling to re-test April lows. Both 40-day (magenta line) & 25-day (blue line) MA's in solid downside trend, with distance increasing between lines.

Daily Stochastics (not shown) testing lower level of oversold zone for 3rd time since early August, with close at 5.81. MACD & MACDMA (blue vertical lines) showing clear confirmation of downside momentum.

Upside resistance: 1960, 2185 - 2330 resistance range, 2600 & 2875.
Downside support: prior low of 1638.

Nasdaq Comp (QQ) - HSLP-Nasdaq daily.

HSLP-Nasdaq continues to confirm (& also lead) Nasdaq Comp weakness, indicating Nasdaq Comp will not hold above its April low.

Traders Guidelines:

Traders are short after selling break below 1960 support, & increasing positions on renewed weakness from 1920 level. Take full profits at 1638 (use close trailing stops to lock in profits until price target reached), and re-short sustained action below same level. Use mkt orders to avoid missing fast moves. Positions can be increased if weak bounce seen from April support, on failed test of 1720 - 1785 resistance level, BUT must be accompanied by high volume/strong negative sentiment as just above KEY support. Stops on dollar loss basis. Again, with risk of a mkt collapse very real, traders advised to use close trailing stops, taking profits only if/when stopped out. Widen stops on part of positions if/as profits increase, for longer-term plays.

Sidelines again recommended for bulls. Bounce expected from 1638 area, but as trades remain against the trend, probabilities of sustainable gains greatly reduced. Other charts are offering better signals for bulls.

S&P500 Index

The S&P 500 Index closed Friday Sept. 7 at 1085.78 ie, 173.07 points below its 200-day moving average.

The Commitment of Traders report shows S&P500 commercial hedgers added 7,884 longs, bringing total longs to 350,626, whilst shorts added 8,745 contracts, bringing total shorts to 430,613.

S&P 500 Index weekly chart - line on close.

MT trend up. ST trend down. Price in sharp down leg, breaking through key support with little opposition. The 40-week MA (green line) & top boundary of down trend channel continue to offer solid resistance to price.

Weekly Stochastics (not shown) closing in lower level of the oversold zone at 6.44, the lowest level for more than 5 years. Faster moving exponential average (red line) in MACD making sharp downside cross below slower moving exponential average (blue line), confirming downside momentum. MACDMA (blue vertical lines) moving deeper into negative territory.

S&P 500 Index daily chart - line on close.

MT trend down. ST trend down. The 200-day MA (green line) in firm downtrend. The 40 (magenta line) & 25-day (blue line) MA's increasing angle of decent & distance between lines. Price broken below key 1100 support.

%K on daily Stochastics (not shown), in downtrend closing in lower lever of oversold zone at 6.32. MACD & MACDMA (blue vertical lines) clearly confirming renewed & increasing downside momentum (after temporary slowing of downtrend).

Upside resistance 1100, 1150, 1180, 1220 & 1234, 1265, 1315.
Downside support at & 1050, 985.

Trader's Guidelines:

As per recommendations in HSL 617, traders took profits of 103 S&P500 points ($25,750/Cx) on 2nd ½ of September shorts at 1132 :-)

As per recommendations in HSL 618, traders took profits of 86 S&P500 points ($21,500/Cx) on 2nd ½ of December shorts at 1128 :-)

After subtracting brokerage fees & 'extortionate' cost of FMU, it should leave you a little beer money!

Expected bounce from March/April lows failed to materialize. More downside likely before climax sell-off to end down leg. Joe Public expected to sell in panic mode if further downside seen, as hopes for long awaited bounce from March/April lows fades. Mkts on cliff edge yet again - but this time we may not see a miracle comeback. Trade aggressively as risk/reward still favorable. Place predetermined mkt orders for entry (& exit).

Harder to give trade recommendations in fast moving mkts lacking clear chart signals, but overall picture indicates traders should be or go short (even at these levels). If Globex mkt (overnight session) weak on Monday AM & negative sentiment still in full force, gamblers can enter short trades at mkt. Close stops advised.

Best strategy is to make several attempts to enter this mkt, with risk of minimal losses, rather than pin all hopes on 1 trade. Safest is to use e-mini's to trade incrementally, in/out in stages (5 e-mini's make 1 full S&P Cx). Use close trailing stops, taking profits only if/when stopped out. Widen stops on part of positions if/as profits increase, for longer-term plays.

Sidelines temporarily recommended for bulls.

Market Sentiment

Investors Intelligence shows number of bulls at 44.3% virtually unchanged from 43.9% of 2 weeks ago, but down from 46.9% of 3 weeks ago. Bears at 30.9%. Still very bearish.

Bullish Consensus bulls at 31%, down from 35% 2 weeks ago, & unchanged from 3 weeks ago. Remains bearish.

The American Association of Investors Intelligence (AAII) bulls are at 30.3%, down lightly from 31.4% of 2 weeks ago, & 34.5% of 3 weeks ago. Remains Bearish.

10 Best performing industries:

Household Products
Water Utilities
Trucking

10 Worst performing industries:

Oil Drilling
Communications Technology
Technology, Software

10-Year T-Note Yield

10 Year T-Note Yield daily - line on close.

10-Year T-Bond Yield nearing 4.7-price target of Head & Shoulder pattern, to create possible double bottom.

Stock Markets the bottom line

On basis of 200-day moving average, US stock market remains long term bearish, with Value Line, Russell 2000, DJIA, NYSE, Nasdaq 100, Nasdaq Composite, S&P 500, & Wilshire 5000 Index closing BELOW their respective 200-day moving averages.

Globally, as of Sept. 7 the following indexes are neutral to bullish, having closed above their respective 200-day moving averages:

Thailand's SET
Malaysia's KLSE Composite

And, the following indexes are bearish, having closed below their respective 200-day moving averages:

Australia's All Ords
Belgium's BEL 20
Brazil Bovespa
Canada's Toronto 300
Finland's Helsinki General
France's CAC 40
Germany's DAX
Greece's General Share
Hong Kong's Hang Seng
Italy's MIBtel
Japan's Nikkei 225
London's FTSE 100
Netherlands's AEX
New Zealand's Cap 40
Norway's Total Share
Singapore's Straits Times
Spain's Madrid General
Sweden's Stockholm General
Switzerland's SMI

Of the 22 stock markets above, 2 are neutral to bullish (but against global trend), & 20 are bearish, using their 200-day moving averages as key criteria.

Gold

The December gold contract closed Friday Sept. 7 at 275.10 ie, down 1.40 points on the week.

The Commitment of Traders Report shows gold commercial hedgers added 1,805 longs, bringing total longs to 31,650, whilst shorts added 792 contracts, bringing total shorts to 81,489.

N.Y. gold weekly chart - line on close.

MT trend down. ST trend down. Price in upper half of MT downtrend channel, above top boundary of prior bullish, down wedge pattern & 40-week moving average, but below key resistance.

Fast %K in Stochastics (not shown) closing in weakening uptrend at 50.11. MACD & MACDMA (blue vertical lines) in slow transition from neutral to bullish.

N.Y gold daily chart (August contract) - line on close.

Price has retraced 56% of prior rally to close on 275 support/resistance, back within its 18-month downtrend channel. The 25-day MA (blue line) & 40-day MA (magenta line) in healthy uptrend giving support to price.

%K fast line in Stochastics (not shown) turning to upside after brief passage in oversold zone to close at 23.23, but faster %K needs to cross above slower %D line to offer clearer signal.

MACD confirming retracement action seen in price, whilst offering weak signal that downside trend maybe slowing (via MACDMA -blue vertical lines).

Upside resistance between 280, 291 & 297.50.
Downside support at 268, & prior low of 261.

Trader's Guidelines:

Upside progress in gold remains arduous with the mkt still overbought from the August run-up to 12-week high of $283.80. Traders also cautious as Britain to hold 3rd auction this Wednesday, in 3rd & final series of bimonthly disposals - which will reduce its gold reserves by 58% to 300 tonnes.

All mkts facing possibility of sharp moves & major trend changes. Gold to benefit from flight to safety if USD & global equity mkt's collapse. Adapt trading accordingly.

Gamblers went long December gold at mkt (270.80) as per recommendations in HSL 618. Profits were taken on 1st ½, 2nd ½ may or may not be open, depending on levels of individual trailing stops.

Traders may have added additional longs on pullback to 275-support area, with stops placed based on dollar loss. Add lightly to longs on renewed strength accompanied by healthy volume above 275.00, and aggressively on renewed break out from 18-month downtrend channel that takes price above 280.

Use trailing stops on bulk of positions (if trading multiple contracts), to avoid losing profits on deep retracements that occur frequently in this mkt. Widen stops on part of positions if/as profits increase, for longer-term plays.

Lighten up, or exit longs (depending on entry levels) & hedge if sustained action seen below 272, as re-test of 267 area possible.

Sidelines temporarily recommended for bears.

We again recommend that traders diversify into mining shares, which offer more leverage. We continue to build our own positions in Agnico Eagle (AEM), Durban Roodepoort Deep (DROOY), Franco Nevada (FN-Toronto), Harmony Mining (HGMCY), Golden Star Resources (GSRSF). Latter is highly speculative.

Euro vs. USD

The December Euro futures contract closed Friday Sept. 7 at .9032 ie, down .0050 for the week.

Euro weekly cash chart - line on close.

MT trend down. ST trend up. 40-week MA (green line) turning from neutral to bullish. The faster %K (red line) in weekly Stochastics (not shown) turning down in the overbought zone to close at 84.44, but faster %K line still above slower %D line. MACD lines starting to show slight loss of upward momentum, confirmed by falling MACDMA (blue vertical lines), but signal needs more confirmation.

Euro daily (December) futures contract - line on close.

ST trend up. Price in corrective phase after initial breakout from MT down trend channel. Extreme distance between 25-day MA (blue line) & 40-day MA (magenta line) lines, & perceptible slowing of uptrend also confirming corrective mode.

%K (fast line) in daily Stochastics (not shown) in renewed uptrend after briefly hitting oversold zone at -20, to close at 41.03.

MACD lines turning neutral to bullish, but confirmation of sustained action coming from upside cross of faster (red line) above slower (blue line). MACDMA (blue vertical lines) also signaling possibility that uptrend is to renew.

Upside resistance: .9150, .9370, .9640.
Downside support: .8920, .8800, .8720, .8610, & prior low of .8350.

Trader's Guidelines:

Traders took partial profits at .9030 & used trailing stops to lock in remaining profits as weakness kicked in last Tuesday.

Traders then entered new longs on pullback between .8850 & .8950, with stops below .8800 area, or on dollar loss basis. If euro weakness is simply a healthy pullback in solid uptrend, we would expect price to remain above .8800 support for a 3rd & successful re-test of .9150 resistance.

Take full profits at .9150 & re-buy on sustained close over same level, or at mkt if sentiment driven rally develops - for run at .9370, then .9640. Use trailing stops on all positions, allowing for logical pullback from .9370 resistance.

However, if renewed weakness kicks in after another failed attempt at .9150 level, it will place serious doubt on sustainability of further upside action. Gamblers can sell light positions on renewed weakness after failed attempt at .9150 area, increasing positions on action below .9040. Take full profits at .8850.

New Recommendations

Note: Any recommendation in a previous Update issue that is not repeated in the subsequent Update is automatically cancelled. Any recommendation in HSL is "active" until the next issue of HSL or until specifically cancelled in a web Update.

Korea Telecom (NYSE: KTC) sell short at mkt; stop: 22.50.

Lamar Advertising Co (Nasdaq: LAMR) sell short between 34.00 & 38.00; stop: 41.00.

Tele Nordeste Celular (NYSE: TND) sell short between 25.00 & 27.50; stop 30.50.

Stop recommendations

Agnico @ 6.50; ST stop: 7.50; MT 6.50; & Agnico @ 8.35:
Can take partial profits.

Can take partial profits on the following stks:
Ahold
Alliance AG
BHW Holding
Boeing Co
Cablevision Systems
Infineon Technologies
San Paolo-Imi
Smithfield Foods
Suncor Inc
Tele Celular

Caterpillar Tractor: sell ½ at mkt.

"The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function".

F. Scott Fitzgerald.