Tech Futures Bell Rung

• October 25, 2000
• Marc Dupee

Nasdaq 100 futures found few buyers to pick up contracts
offered for sale as a shock in the networking space left stalwart NDX components
SDL
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the floor of the Chicago Mercantile Exchange. The largest maker of fiber-optic
gear, Nortel
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reacted strongly by bailing out of one of this year’s best-performing sectors.

The limit-down moves that halted trading below 3247.50 and
then 3152.50 for the Exchange-required 12 minutes provided good pullback
opportunities for traders to get short, and did little to assuage the bears’
taste for red in one of the NDZ’s worst carnages ever: NASDAQ 100 futures
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closed 191.00 lower at 3151.50. 

In S&Ps trading, Lewis pointed out in his Borsellino’s
S&Ps P.M. that although “the bulls have been trying, if they fail
to keep the trade in the 1400 handle in the SPZ, it will give the momentum
players another sell light.” Spooz traced an intraday double top three
handles above this level and proceeded to erode from this level for a close 29.00
lower at 1374.00

The downside negativity in tech seeped over to blue-chip
futures which were up triple digits in rotational buying early in the session. Dow futures

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Three signals from the
Market
Bias Indicators Page suggested that index futures could trade
lower. 

Presaging potentially poor numbers for this Thursday and
Friday’s Employment Cost and Gross Domestic Product figures, T-bonds
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sold off for a second day in a wide-range engulfing (candlestick) bar to close
15/32 lower at 100 11/32. Comments by the Atlanta Fed Chairman that the economy
is not clear from inflation were also cited as a cause for selling. Ten-year notes
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also fell 10/31 to 101 9/32.

The euro made an assault on new lows as traders found the
moment opportune to further bloody the troubled currency. One month after the
first coordinated intervention by governments to support the beleaguered
single-currency unit, traders see little threat of a new round of
euro-buying/dollar-selling. 

Recent comments from the European Central Bank basically
pulled the rug of support out from underneath the euro after ECB honcho Wim Dusenberg said
it would be inappropriate for the ECB to intervene in response to the crisis in
the Middle East. Further, empirical studies show that intervention does not work
except when done in a coordinated fashion by the world’s major governments
simultaneously. The US Treasury is unlikely to take action with a presidential
election less than two weeks away. Also, Treasury Secretary Summers made
comments Tuesday underpinning a strong dollar. Interest rates and economic
growth remain higher in the US than in Euroland, which are fundamentals hurting
the euro.

Both the euro FX
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Implosion-5 List.
Both contracts also made good on Off The Blocks
setups for losses of over 1%, or .00950 and .0073, respectively.

Bear in mind that once — and if — equities get back on track,
we should see another rally to new highs in Momentum-5
List member December  dollar index futures
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PowerRating). The
contract rallied a hefty 1.11 to 118.45, making the 1.20 level seem
attainable. 

The rally in dollars sent gold down the shaft to new lows
with the
December
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dollars and relatively more expensive dollars curb demand for the metal. Gold
also broke through triple bottoms at lows (a setup pointed out in this space),
and made good on a combination of Pullback From
Low and 6/100 Low
Volatility signals in its move to contract lows. From the Implosion-5 List,
silver
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sold off. 

Energy markets closed lower despite a much
lower-than-expected build-up in stockpiles of crude and distillates as reported
in the weekly API figures. The market
appears to be bracing for an increase in OPEC production where output will
automatically increase once the price-band
mechanism kicks in (this is where the cartel increases output when the price of
an OPEC barrel of crude remains above $28 a barrel for more than 20 days). 

Cocoa
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gains on news that the military figure who claimed victory in last weekend’s
election in the world’s largest producer of cocoa, the Ivory Coast, has fled the
capital after tens of thousands protested. The contact scored a new
contract low of 775, a loss of 34, and sets up a Turtle Soup Buy pattern for
Thursday.