The News At 10

  • March 16, 2001
  • Marc Dupee

The
New 10-Day Low List is broadcasting loud-and-clear the economic story that
is effecting nearly all of the major commodity groups. Grains, currencies,
metals, cattle, energies and softs all hit 10-days lows yesterday.

Here’s the deal. A declining economy, reflected by a
declining stock market, will decrease demand for most commodity groups.
Decreasing demand causes deflation — lower prices. The New 10-Day Lows List may
well be providing an early indicator of a secular downtrend in economically
sensitive commodities.

Slower economic growth would reduce the demand for
energies, grains, metals, cattle and softs. Cotton, from the Implosion-5 List,
has been particularly weak and is down .24 at 49.85 today. 

The Japanese yen
(
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PowerRating), euro FX futures
(
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Swiss franc
(
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British pound
(
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Canadian dollar
(
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safe bets than the US dollar.
June dollar index futures
(
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List, are up .69 at 115.56 and are up for a fifth consecutive session and
trading at a three-month high.

In stock index futures trading,
Nasdaq 100 futures
(
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entry out of their daily Pullback From Lows
setup. From the Implosion-5 List,
S&P futures
(
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 entry and also providing entry out of intraday pullback from low setups.

With Producer Prices (PPI) coming in at their lowest
level in seven-and-a-half years, the Fed has more room to maneuver to cut rates
aggressively. Interest rates across the yield curve are at contract highs in the
futures (implying lower interest rates). From the Momentum-5
List, T-bonds
(
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good on Off The Blocks
 upside entries. But at contract highs, the 30s rammed against the 1.618%
(Fibonacci) retracement of a recent swing, which is providing resistance at the
current 106 29/32 high. The intraday double top implies a test of yesterday’s
closing level. As this is being written, bonds are tanking as equities
improve. 

The April Fed Funds futures
(
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in an 88% chance of a 75-basis-point cut (75%). The Fed will likely go just 50
next week. Although another 25-point cut could come after the March 20
meeting (next Tuesday), how likely is another inter-session cut after a 100-basis-point cut in January and another expected 50 points of cut next week? A trade
that is setting up is to short the federal funds futures as they approach levels
that do not jibe with the Fed’s likely more-restrained action of a 50-cut rather
than 75 through April. For more on how this trade sets up, see a previous Trade
of the Week linked here with Tony Crescenzi on our sister site BeginningTrader.com.

Pork contracts are on fire due to the foot-and-mouth
disease outbreak in the UK and Europe. Britain said they may need to slaughter
as many as 1,000,000 animals. Exports of US animals is boosting Momentum-5
List dominators April lean hogs
(
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PowerRating) and May pork bellies
(
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which are essentially limit-up for a second day.