A New Trend: They’re Fading
While it is never advised to trade using only a single
indicator, it can be instructive to recognize trends, and not just trends seen
on price charts. Today in the energies — for the fourth consecutive week
— October crude oil
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heating oil
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sold off from their opening highs on the day
following the release of the weekly American Petroleum Institute
(API) national inventory data.
Today’s selloff came
despite bullish data, implying that traders have been buying the energies in
anticipation of declining inventories, only to sell on the release of the
actual news. So keep an eye for this next week to see if players are buying
the rumor, and fading the actual news in the API report.
Natural gas
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continues to make impressive declines and is down for the 10th
consecutive day. Notice that an Off The Blocks
short has worked out several times in this market during the two-week spate
of selling. Tomorrow’s APA report will likely be regarded cautiously due to
last week’s huge upward revision in nat gas inventories, a blow to the
creditability of the industry group.
In financial futures, there was a momentary euphoric rush when the revised Q2 gross domestic
product (GDP) figures did not come in negative, as many had feared,
and were actually slightly above expectations. But when players realized that a revision down from .7% to
.2% still seems close enough for government work to be called a recession,
they leaned on the sell buttons of stock index futures.
Dow futures
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finishing below the July 10 low and testing into the April 10 gap for a loss
of 127.0 to 10,111.0.
S&P futures
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1152.40, also undercut their recent summer lows and touched below the
1150.00 zone. Traders using a strategy that has worked repeatedly during recent
sessions — selling the high of the opening range — did well as there were opportunities
to get short in the 1167-68 area when the September S&P futures
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traced intraday double tops. Shorting at the trigger of the daily Pullback
From Lows setup in the spooz also worked out nicely.
Nasdaq 100 futures
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One point to bear in mind about the GDP figures. We are still an industrial economy
and have been in a manufacturing recession for months. Manufacturing
matters, no matter what individuals may have once extolled about the
emergence of a new economy. Cutbacks in the production and sales of our
(high value-added) manufactured goods trickle down and have an often
underrated impact on the service sector and on service sector jobs.
Also, the slight up-tick from forecasts of the GDP
(again, down from the 1.4% growth rate first announced in July and down from
last month’s +.7% revision) came largely from consumer spending. With
yesterday’s surprise decline in consumer confidence, the lowest in four
months, trading desks had evidence fresh in their minds that consumer
spending may not keep the economy from slipping into recession, defined as
two consecutive quarters of zero or negative growth.
Debt futures moved in counter-step to stock index futures. A slight
down revision in the GDP report of the price deflator, a measure of
inflation, helped. 10-year notes
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List, spike to a new contract high, to close up 11/32 at 107 15/32. T-bonds
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also rallied 20/32 to 106 6/32.