Not-So-Durable Tech Futures
More signs of a slowing economy dimmed earnings prospects
and sent traders sprinting to the exits in tech stocks with high PE ratios.
Ciena
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PowerRating), a stock with a price-to-earnings ratio of nearly 300, was the
hardest hit on the Nasdaq 100
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PowerRating) and set the downside tone for the
December futures
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PowerRating) on the contract which closed at a new contract low.
The slowest durable goods report in three months suggested businesses will have
problems maintaining high earnings growth rates next year. Triple-digit moves
that have been commonplace this year are exacting significant tolls on the NDX
now that the cash index is down nearly half from its March highs. Tuesday both
the Nasdaq 100 cash and December futures contract closed down more than 5%, with
the futures settling 156.50 lower at 2640.00.
The S&Ps got slammed as well. How do you trade this
volatility? I recently spent a day on the floor of the Chicago Mercantile Exchange with
Lewis Borsellino and was impressed with how well the market conformed to the
levels that he forecast in his morning strategy meeting would be key for that
day (click
here to read the article). In Tuesday’s market, Borsellino’s levels have
again proven to be prescient. The accompanying chart shows how the S&P
futures have traded over a 20-handle range, and have again reacted strongly to
the levels Lewis forecast would be key (see this morning’s Borsellino’s
S&Ps A.M.). The S&Ps closed down 20.80 at 1338.00.
Energies accelerated to
the downside ahead of Tuesday’s inventory report from the American Petroleum
Institute. Crude oil
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PowerRating) stalled at contract highs, breaking down from the $36-a-barrel threshold on news that the
United Nations will extend a pact with Iraq to continue exports of oil. The lap
lower in the January contract left a mini-island top reversal formation and also
reacted quickly to its 6/100 Low Volatility
reading, a signal that suggests larger-than-expected moves. Unleaded gasoline
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PowerRating)
was also a 6/100 Low Volatility setup and fell following Monday’s
weak close that left a bearish tail. Crude fell 1.16 to 34.22 and unleaded
gasoline sank .0268 top .8791.
December dollar index futures
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PowerRating) followed through on Monday’s
large-range engulfing bar down on the weak durable goods orders report to make
good on its Turtle Soup Plus One Sell setup for a second consecutive day. The decline in the dollar Tuesday comes despite weak economic
figures out from Germany, suggesting more downside ahead for the buck. The DXZ0
closed down .46 at 116.54.
Warm weather in key
heating fuel consuming regions also had a negative impact on the energy complex.
Both
heating oil
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PowerRating) and natural gas
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PowerRating) fell off contract highs. The
fact that the energies were able to decline on bullish news–an oil workers’
strike in OPEC-member Nigeria–is also a sign that prices could continue to
descend. Both heating oil and natural gas fell by more than 5.5%.
Softs contracts made good on Turtle Soup Plus One
Sell setups. March sugar
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PowerRating) made good on its recent Commitment
of Trader’s report, in that it showed an unusually high number of small speculators
long, a bearish sign. Sugar closed down .17 at 9.94 and OJ slipped .90 to
77.05.
Going the other way,
soybean oil
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PowerRating) is making good on its Turtle Soup Plus One Buy
setup after plunging to a multi-month low on Monday.
