Midsection Thaw Breaks Gas Trend
Temperature forecasts in the midsection of the United
States heated up, rising an average of 10 degrees and dampened expectations of
high natural gas demand for the coming week. Even though reserves of the heating
fuel are 32% below last year’s levels, a recent build up in stockpiles has left
many traders unwilling to hold long positions at historic highs. March natural
gas has fallen 33% in 14 days.
Natural gas
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PowerRating)
also traded back down
into the gap left nearly six weeks ago when fears of shortages and an unusually
cold winter took the heating fuel to all-time records. Nat gas paused for the
first two hours of trading at its
lap-down level (down 6%) and then broke the neckline of a head-and-shoulders
pattern later in the session, adding to losses to close 10%, or .694, lower at
6.136.
Other energy contracts fell in sympathy with
plunging natural gas. March crude oil
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PowerRating) sank despite reports of cutbacks in exports of Iraqi oil from Turkish ports. Iraq, at
times, plays a role in oil prices because it is one of the only members of OPEC
that does not have quotas and pumps as much as 3% of the world’s supply. But
an OPEC official said he believed Iraq would go ahead with plans to provide the
world market with up to 2.3 million barrels a day by the end of February.
Unleaded gasoline
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PowerRating)
head-faked to the upside and them plunged to leave conflicting technical signals
while making good on a Volatility
Compression setup. Unleaded gasoline did an about face in a Turtle Soup sell
reversal, then left an engulfing bar at a one-month high, both negative
signals. Juxtaposed to these downside readings in HUH1 is its cup-and-handle
pattern, holding position above a trendline from its Dec. 20, 2000, low and above
its 50- and 20-day moving averages and developing weakness in the energy
sector,
March dollar index futures
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PowerRating), from the Momentum-5
List, continued higher on the prospect that falling interest rates will
stimulate the US economy and demand for the dollar. The Fed funds futures
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PowerRating)
is pricing in a 50-basis-point rate cut for this week from the Fed’s FOMC
meeting. Normally, lower US interest rates versus competing European debt instruments
imply a lower dollar as investors
sell bucks and purchase higher yielding European assets. Unless the dollar is
signaling that the Fed will not cut rates by 50 points, traders should start to
look at the widening interest rate differentials. The European Central Bank is unlikely to cut rates soon, keeping continental rates
relatively higher.
March wheat
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PowerRating) dropped for its third
straight day as cold temperatures moderated and rain and moisture in growing
areas enhanced the prospect for a good crop. Wheat indicated it could continue
lower by registering on the
New 10-Day Low List. Both the Off The Blocks
and 1090 Opening entry methods worked out in this trade.
March soybeans
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SH1 |
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PowerRating) continue to decline and make good on their
Implosion-5 List
signal.
Cocoa
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PowerRating), from the Momentum-5
List, traded higher for much of today’s session but pulled back after
hitting a new contract high and then sank to make good on its Turtle Soup Plus One
Sell setup. Cocoa closed 11 lower at 1045.