Japan Rocks Heavy Metal
A third economic report this week depicting a weaker
Japanese economy had the dual effect of sending the yen to new contract lows and
depressing copper futures at the Comex.Â
The news that industrial output declined followed earlier
reports that household spending declined and Japanese unemployment increased.
The reports suggest that the economy is faring worse than anticipated and
prompted traders to put on short positions in the yen, from the Implosion-5
List, driving the March contract
(
JYH1 |
Quote |
Chart |
News |
PowerRating) to a contract low, down .0056
to .8857.
The move
down in the yen should be more supportive of the euro long term: the euro/yen
cross also hit a contract low. The weakness in the yen should take some of the
attention off the dollar’s weakness, but this effect could just be temporary.
Weak technicals still plague dollar index futures
(
DXH1 |
Quote |
Chart |
News |
PowerRating): the March
contract is on the Implosion-5
List, is heading south in all timeframes on the
Futures
Trend Matrix, and scored a new multi-month low today, despite settling up
.03 at 110.16. Also in the currencies, Momentum-5
List members
British pounds
(
BPH1 |
Quote |
Chart |
News |
PowerRating) and
euro FX futures
(
ECH1 |
Quote |
Chart |
News |
PowerRating) (omitted from the M-5 due to a technical error) also
moved higher.Â
New York copper gapped down and is continuing lower following a
report of a build up of stocks at London Metals Exchange warehouses. The build up in stocks implies waning
demand in a week where many traders are still on holiday. The evidence of a
weakening Japanese economy, the world’s second largest, also worked to reduce
forecasts for global copper demand and helped send the march contract
(
HGH1 |
Quote |
Chart |
News |
PowerRating) to its lowest close in nearly a month, down 1.50 to 84.75.
Also in the metals,
Pullback From Lows List
market silver
(
SIH1 |
Quote |
Chart |
News |
PowerRating) came within ticks of its two-year low and closed down
4.0 at 464.7.
Stock index futures managed to close positive during a
shortened week and light volume. Nasdaq 100 futures
(
NDH1 |
Quote |
Chart |
News |
PowerRating) got going
with a rally in chip and networking stocks.
December S&P futures
(
SPH1 |
Quote |
Chart |
News |
PowerRating) and
Dow futures
(
DJH1 |
Quote |
Chart |
News |
PowerRating) rallied with up moves in the retail sector and
financials.Â
Interest rate futures pulled back from contract highs for
a second day in lackluster trading. Traders eyed a large, upcoming auction of
treasury debt and that worked to depress prices.
T-bonds
(
USH1 |
Quote |
Chart |
News |
PowerRating) closed down 18/32 at 104 26/32 and
10-year notes
(
TYH1 |
Quote |
Chart |
News |
PowerRating)Â ended down 17/32 at 104 28/32.
Nourishing rains in the world’s second largest producer
of soybeans, Brazil, spurred a strong down move in a/c/e overnight trading and a
limit down move at the Tokyo Grain Exchange. Follow-through selling hit March soybeans
(
SH1 |
Quote |
Chart |
News |
PowerRating) and
soymeal
(
SMH1 |
Quote |
Chart |
News |
PowerRating), which both gapped lower, but both contracts jumped the
final half-hour of trading to nearly halve earlier losses and close down 3 1/4
and 1.6, respectively.Â
Finally, notice how cocoa
(
CCH1 |
Quote |
Chart |
News |
PowerRating) appears to be
setting up. The March contract hit a New 10-Day High and this morning’s Agricultural
Futures Pre-Opening Outlook pointed out that “With fund traders net
short over 21,000 contracts, the upside breakout last week leaves the market
vulnerable to active fund short-covering.” Look for a potential
short squeeze play in this contract.
