Running Of The Bulls

  • January 11, 2001
  • Marc Dupee

February live cattle
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on expansion bars, pegging a second consecutive contract high on ideas the
recent and prolonged cold that has extended down to North Texas will reduce herd
weights. Cattle both eat less and burn more energy in extreme cold. Cattle is a Momentum-5 market and surged 1.250 to 79.775, fueled in part by floor traders who sold
(wrote) call options and were covering their exposure by purchasing long
futures. Interestingly, an  U.S. Food and Drug Administration report that a
large number of cattle feed lot owners did not abide by regulations geared to
keep mad cow disease out of the country failed to hamper the rally. 

February pork bellies
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new 20-day low then reversed course as cattle ran higher, triggering buy stops
and a Turtle Soup Plus One
Buy
 setup. Bellies tagged limit up levels before settling up 2.600 at 66.875.

Tech futures also began running with the bulls. Techs shook off negative performance forecasts from Internet
bellwether Yahoo!
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Motorola
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face of negative news–especially among bellwethers such as Yahoo! and Cisco
yesterday–is a sign of strength. Another sign that the bulls are getting
restless was a third consecutive follow through day in the Nasdaq
Composite. Follow through days are rallies greater than 1% four to 10 days after a major low on volume greater than the preceding day.
Nasdaq 100 futures
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added 7.50 to 1334.50.


Dow futures
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as concerns about a weak economy continued weighing on stocks sensitive to
downturns in the economy. The early clue that the major indexes may be diverging
came from last night’s reading on the
New 10-Day Low List. Dow futures fell 80.0 to 10,651.0

The most powerful economic
machine in Europe, Germany, reported that its economy grew at a pace
slightly ahead of forecasts with GDP advancing at an annualized rate of
3.1%  The report worked to further the argument that Europe’s economy would
outpace the US’s.  The growth in the German economy is
expected to carry over into 2001, spurring today’s move higher. 

From the
Pullback From Highs List,
euro FX futures
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Swiss francs
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setups and continued higher, but them pulled back to close at gap-open levels,
closing up .01240 and .0053, respectively. 

Natural gas
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fell for a second straight day after closing at an all-time record Tuesday
after Wednesday’s American Gas Association report showed stockpiles increased
more than during the same period (week) last year. The decline comes despite a
slightly under-estimate AGA, which may account for the February contract
re-capturing almost all the losses from its gap-down levels. Nat gas closed down
.420 at 8.708.

February gold
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consolidation-on-low formation and continued to a fresh 16-month low today,
before settling .8 lower at 264.8. Gold has been showing its weakness by registering on the
futures Indicators Pullback From Lows
and Implosion-5
lists since the beginning of the year and its swing double top formation implies
a measured move twice the distance from the double top “peaks”
to “valleys” (see the accompanying chart and article on Defining
Reward/Risk Ratios With Chart Setups). Gold has traditionally been a
barometer of inflation and declining prices imply that inflation is contained,
giving the Fed more leeway to exercise “loosening” monetary policy (to
cut rates). 

March wheat
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List, is continuing through on recent momentum following a USDA report that said
“seedlings” plantings were below expectations, reducing the crop
forecast. Wheat managed to maintain a 3/4 gain to 289 3/4 after a four cent
rally, fending off heavy downside pressure from beans and corn. 

A positive USDA crop forecast was negative for beans,
which fell 12 3/4 to 484 1/2. Although bean oil did not make the biggest move in
the bean complex, it registered both a Pullback From Lows List 
and 10/100 Low Volatility
reading before descending .2200 to 14.7800.

Also from the Momentum-5
List, cocoa
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849.