Traders Pick Cotton In Explosive Rally
Funds triggered buy stops after cotton hit an
intermediate-term low and triggered a near-classical Turtle Soup Plus One Buy
setup.
March cotton
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six-month low yesterday, and left a long tail, a reversal signal. Trading today
started lower and slow, but picked up as stops triggered at least one order of
1500 contracts to take the March contract up almost the daily limit, before
settling up 1.83 at 61.11.
Softs contracts that
have been in momentum phases–cocoa
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PowerRating)
from the Momentum-5
List and
coffee
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New 10-Day Highs List–traded inside days near their recent highs.
A reporter who follows the Federal Reserve for
Market News, Steven Beckner, wrote in an article yesterday that the monetary-policy
setting body was inclined to cut rates 25 basis points rather than 50 basis
points, the amount the market was widely expecting. Today, Beckner sought to
clarify yesterday’s story, saying he had not intended to signal that the Fed
would only cut rates by 25 basis points, but that it was just a “consideration.”
Federal funds futures
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PowerRating), the best predictor of
the Fed in the days before their FOMC meetings, plummeted, reflecting
expectations of a lowered rate cut, but bounced back, maintaining odds of a 50
point cut at around 90%.
T-bonds
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trigger on the news but then sank, ending down 5/32 at 102 14/32.
March dollar index futures
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the news today, correcting from the expectation of the 50-point cut. Dollars
receive greater demand when dollar-denominated assets such as Treasuries offer
interest rates relatively higher than in Europe.
At the same time, a report that consumer prices in key
states in Germany rose unexpectedly higher created the impression that inflation
will rise faster in Germany than in the US and limit the European Central Bank’s
(ECB) capability to lower interest rates to stimulate their economy. Here we
have an example where the market took some of its directional cue from future
economic growth rather than relative interest rates. Faster economic growth in
the US would create relatively greater demand for dollars than euros. Usually,
the market is more closely focused on interest rate differentials, positing that
there will be greater demand for the currency that offers the highest interest
rate.
Euro FX futures
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PowerRating) gapped lower in
overnight trading and continued down to a one-month low. The contract provided
an entry opportunity in a 20-bar (5-minute) reversal, an intraday setup that is
similar to the Turtle Soup Plus One buy setup for swing traders at the low of
the day, but edged down into the close for a finish .01550 lower at .92460.
The Japanese yen
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a second day out of its Pullback
From Lows setup, providing additional upside to the dollar. Here the cause
was jawboning. Lawrence Lindsey, President George W. Bush’s economic adviser,
told Japanese officials the U.S. would tolerate the yen at 120 per dollar. The
March contract closed .0066 lower at .8546, which implies a price of 1.17 yen to
the dollar by expiration.
Heating oil
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From Lows setup after weekly oil and distillate inventory figures showed
that stockpiles of the heating fuel have risen sharply and probably sufficiently
to avert any shortfall barring an exceptionally cold and long spell of inclement
weather in the Northeast, the primary consuming region. Stockpile levels were
nearly ten times higher than one year ago and it is believed that many
households that use heating oil have large stockpiles on hand, inventories that
do not show up in the weekly
February lean hogs
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PowerRating) continued tumbling, following yesterday’s
limit down move in the April contract. Basis February, which hit a new
New 10-Day Low, continued 1.050 lower to 54.150.