A Molotov Cocktail
Russia again became the locus of attention, moving center stage with Iraq
as one of two focal points in the energy markets. Russia’s decision to cut
— or not to cut — its production of oil will be a key determinant of crude
prices in coming months. Speculation about Russian output and if the
far-flung nation can even control its maverick oil companies, enhance the
likelihood of increasing volatility in oil prices in coming months.Â
Iraq joined the mix in the oil cocktail today after President Bush
broadened the war on terrorism. Bush all but threatened Iraq
to allow inspectors access to verify that the country is
not making weapons of mass destruction. While no direct ultimatum was
directly leveled at Sadam Hussein’s regime, Bush commented that his father’s adversary in the
1991 Gulf War would “find out” what the administration would do in
response if Baghdad failed to comply with inspections.
Although its output has been hampered by sanctions, Iraq is one of the
world’s major suppliers, producing nearly 4% of global needs. Military
conflict in Iraq could spur a price escalation similar to that seen in the
conflict 10 years ago. Oil reached $40 a barrel during the conflict that
ousted Iraq from Kuwait.Â
January crude oil
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19.48. But at its high, crude was halted at a tight clustering of Fibonacci
ratios from the two most recent swing highs. With the momentum still
pointing down in the energies, look for this market to potentially trigger
out of its Pullback
From Lows setup. Â
Contracting demand due to an economic
recession, much lighter travel, as well as the warmest November in recent
memory are also factors that could add to the downside in products heating
oil and unleaded gasoline, contracts that rallied in concert on a percentage
basis with crude todayÂ
Natural gas
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triggered for a second consecutive day out of its Pullback
From Lows setup and closed down .126 at
2.570. Supplies of the heating and electricity-generating fuel are at their
highest level in seven years.Â
In a topsy-turvy session that sent the
contract on
a volatile price-finding mission indicative of a change in trend, T-bonds
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as they sought to arrest the recent, massive downside momentum and digest
events that suggest the economy may not be as solid as perceived. The first
piece of the day’s new reality was an unexpectedly strong
consumer confidence number from the Conference Board. Then when Fed Governor
Laurence Meyer chimed in the economy “appears to be contracting,”
traders reassessed the speed at which markets have suggested the economy
might recover and pulled the market from an afternoon consolidation at the
break-even level to a close 10/32 higher at 103 21. This could be the
beginning of an anticipated bounce that could undo some of the heaviest
selling seen in T-bonds in years.
December
copper
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yesterday’s “low/close at 68.25” as suggested in last
night’s Futures
Trader’s Report. But entry has been difficult in this Momentum-5
List market because of the gap openings today and in recent, past sessions.
The market has held at the 38.2% or 50% retracement of the prior day’s low
to the following day’s high, so the observation looking ahead on any gap-up
openings is
to consider getting long on a pullback to those
ratios. Of course, if the market does not gap more than 1% higher,
consider entering on a Off The Blocks,
a technique explained in TradingMarkets.com’s Futures Education section.Â
December gold
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silver
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Multiple Days Low
Volatility plays and are both indicating direction by their
Implosion-5 List readings.
Finally, S&P futures
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conflicting signals this morning, but you had to be agile to catch the
swings. The spooz initially triggered and made good on
their
Turtle Soup Plus One
Sell
signal this morning — declining 10 handles from the opening print after
trading below their trigger at 1154.50 (the previous 20-day high on Nov. 19)
The
contract rallied back after hitting support spelled out in Lewis
Borsellino’s S&Ps AM commentary, reasserting upside inertia displayed
from their Momentum-5
List reading.Â
The S&Ps then tested to within one handle (1.00) of the tail high
left on the September 4 mini-swing, before slamming lower and re-triggering
at the Turtle Soup sell. If you realized the 1160 area was critical in that
it was a gap-down area that also defined the breakdown-point of the
summer-long descending triangle, than you may have gotten in before the
re-trigger at the exact top of the session at 1164.80.. Spooz closed down
4.70 at 1150.0.