Naz Dogs Play Dead

NASDAQ 100 futures
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are following up Wednesday’s losses with another
decline Thursday, extending down to the bottom portion of a six-week trading
range. Poor earnings results by Worldcom and a quadruple downgrade on Amazon.com
are adding to the negative sentiment about tech and have triggered a mandatory
10-minute trading curb in the September contract. 

The quarterly employment cost index (ECI) from the Labor
Department came in as expected, up 1%, despite the inclusion for the first time
of bonuses and hiring costs (but not stock options). This shows that low
unemployment is not driving wages up excessively nor contributing unduly to
inflation. However, a large 10% jump in monthly durable goods orders took the
bond market by surprise, causing a sharp 1/2-point selloff. There is a strategy
called the Opening News Reversals that takes advantage of reactions and
overreactions to such news surprises. As the accompanying chart in T-bond
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futures shows, after an overreaction and reaction to a news event, a buy signal
is triggered once a bond, stock or futures crosses back through the previous
day’s low (sell setups are reversed). 

Energy contracts are up slightly but are tracing
classical pullback from low setups out of head-and-shoulder tops. The narrow-range bars of the pullbacks are also providing lower-risk stop loss points where
stops can be placed at the highs of the pullback and entry short sells at the
low of the high-bar pullback. September crude oil
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is up just .01 at 27.82. Natural gas
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continues to react
to a lower-than-expected injection into storage report from the AGA
Wednesday.