Softs Take Hard Knocks
Coffee and cocoa tumbled Monday and sugar edged off
contract highs in a negative day for soft commodities.Â
Cocoa gave back all but one tick of the gains accumulated
during a week-long rally, falling due to a weaker-than-expected second quarter
US grind report Friday. Cocoa grind reports provide information about demand
from commercial interests. Although the report showed 5% more cocoa beans were
ground than last year, the amount of cocoa butter and liquor melted was down
almost 50%, reflecting diminished demand and the impact of a huge year-2000
harvest. Cocoa
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Weather continued to roil coffee with the September
contract giving back greater-than-10%-gains for the second straight day. Coffee
has been on a two-week roller coaster, rallying–and falling–over 42%. With the
worst of the cold season largely over in Brazil and forecasts of freezing
temperatures failing to materialize in the primary growing regions, coffee
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followed London’s coffee market lower Monday, plunging back to six-year lows.
Coffee closed 10.35 lower at 86.30.
Sugar
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ratcheted the September contract up 20%. Monday, the contract closed .17 lower
at 10.24. Still the leading contract from the Momentum-5
List, sugar gapped lower, a move that would have kept one from trading using
the Off The Blocks approach.Â
Unable to extend a three-day rally and move beyond a
recent 20-day high, September T-bonds
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Sell setup, falling as traders await confirmation that the economy has
slowed enough to keep inflationary pressures at bay. This week, consumer
confidence (consensus 139.00) on Tuesday, durable goods (consensus .5%) and the
employment cost index (consensus 1%) on Thursday, and Q2 gross domestic product
(consensus 3.5%) on Friday, will provide clues about the pace of economic and
price growth. Still, Sep T-bonds closed just ticks from a three-month high,
hinting that the trade believes this week’s data will show benign inflationary
pressures. T-bond’s Momentum-5 reading is also constructive for a possible
continuation move to a test of the April highs.Â
Two potentially huge telecom deals ended up being a
negative on techs such as JDS Uniphase and warnings about slower PC sales hit
Dell and Microsoft, resulting in a negative day in
NASDAQ 100 futures
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Dow futures
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results from Merck
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and Hewlett-Packard to close 10 lower at 10,780.0. September S&P futures
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closed down 7.50 at 1482.00.
As the peak driving season began winding down, gasoline
distilling capacity increased on the East Coast as a Pennsylvania refiner came
back on line after a multi-month outage. From the Implosion-5 List,
unleaded gasoline
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to .8200 and dragged contracts in the oil patch lower: crude oil
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fell .60 to 27.96 and heating oil
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futures also headed lower on ideas that demand for nat gas for cooling will
decrease as supplies (injections) into storage are slated to rise. Natural gas,
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first time since rallying to multi-year highs and closed .107 at 3.730.