Grinding Surge

  • July 19, 2001
  • Marc Dupee

Cocoa surged in its biggest rally in a month ahead of
key
quarterly demand data and on the threat of unrest in West Africa. 


September cocoa
(
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This is within the zone that acted as a bullish/bearish pivot and
demarcation
line in prior contract
months.  

Funds stepped into the cocoa market, speculating that
tomorrow’s U.S. second-quarter grind report will be bullish and come in
below
views. Europe also releases grind data tomorrow, which could provide an
earlier
indication to tomorrow’s 8:15 ET data release.  

Another bullish factor was a strike threat by a
national
association of cocoa producers in the world’s largest producing country,
Ivory
Coast. 

Stock index futures got off to a positive start on
hopes
for greater sales by communications firms (Nokia) and providers of
communications (chips for cell phones and communication products)
components.
But the

Nasdaq 100
(
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(
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closed
where they opened in Doji bars, signaling indecision and a possible change
in
the (up) countertrend.

NDU1 closed 40.50 higher at 1724.50 and the S&Ps
finished up 10.60 at 1222.90, riding gains of 4% in the chip index
(
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and
3% among networkers
(
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PowerRating). 

Debt eased back following a run that had taken
September T-bonds
(
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(
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eight of the past nine sessions. The contracts finished down 5/32 and 7/32,
respectively. 

Nearby crude
oil
(
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jumped off yesterday’s six-month low after OPEC’s largest producer,
Saudi Arabia, said the cartel might cut output before its
regularly
scheduled meeting in September. 

OPEC has a standing
“price band” policy, where if a barrel of  “OPEC
crude”
(a basket of seven members’ oil) drops below $22 a barrel — or rises above
$28
— then the organization adjusts output. Saudi Oil Minister Ali al-Naimi
said
there could be a “reduction of supplies” now that oil has dropped
precipitously from the May highs. 

Crude made good on dual indications, reversing early
then
tanking to close at a six-month low. Last
night, August crude set up in a
Turtle Soup
Plus One Buy
 pattern and rallied nearly 4% to 25.83 for hefty gains on the reversal
indication. Crude is also a href=”/.site/eminis/indicators/actionsigs/VEMD.cfm”>Multiple Days Low
Volatility contract, meaning it could make a larger-than-normal move as
volatility reverted back to its mean today, in
either
direction. 

But crude fell off an intraday spike and ledge,
stair-stepping out of lower-level consolidations to honor its downside
momentum,
or Implosion-5
List
reading, and closed down .19 at 24.70. 

For another potential Turtle Soup Plus One Buy setup
for
Friday, look at a daily chart of August natural gas
(
NGQ1 |
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PowerRating). It traded
to
its second-lowest close in over a year last night, spurring it to register
on
the Implosion-5
List.
Today, nat gas is down sharply, making good on its down momentum indication,
and provided short entry after the opening
range in an href=”/.site/eminis/education/tindicators/06152000-6563.cfm”>Off The Blocks
 setup. 

But watch this contract for tomorrow. It will not
register a TS+1
buy because of the same lows on July 2 and yesterday at 3.050 (and the
computer
generation of the signals). But this price
action is certainly in the spirit of the pattern and we could see a reversal
from oversold conditions at a significant low in nat gas, despite
California’s
declining energy demand over the past weeks.