It’s A Gas, Gas, Gas

  • March 21, 2001
  • Marc Dupee

Natural gas took a beating, declining 4.75%, after the
American Gas Association reported that withdrawal from the nation’s inventories
were lower than expected. But this market’s action around the recent
shoulder-high gap has been talking, broadcasting that it could trade lower.

In yesterday’s Futures
Market Recap, I pointed out that the contract was fulfilling day three of a
pullback from low, was encountering resistance at the March 9 gap, and to look for
possible further tests to the downside out of NG’s bigger-picture bearish
pattern. (Yesterday’s closing chart.)

In today’s Mid-Day
Futures Alert, I pointed out that Gap resistance was filled, but the 5.340
high in natural gas held, suggesting
sales out of NG’s Pullback
From Lows setup. The catalyst for a probe to new lows came despite analysts’
prognostications for higher prices in gas as the summer cooling season
approaches and despite another round of rolling blackouts in California. 

May
natural gas
(
NGK1 |
Quote |
Chart |
News |
PowerRating) closed .253 lower at 5.088.

April crude oil
(
CLK1 |
Quote |
Chart |
News |
PowerRating) was dragged higher by heating oil
(
HOK1 |
Quote |
Chart |
News |
PowerRating) and

unleaded gasoline
(
HUK1 |
Quote |
Chart |
News |
PowerRating), which rallied on threats of strikes and
production problems in Venezuela and Brazil. The Department of Energy’s report
on national inventories differed from the weekly API. The DOE report showed drawdowns from stockpiles were greater-than-expected, pressuring the
market. 

The dollar sent a “loud-and-clear”
message, rallying on news that normally would make it go down and thereby
implying it could hit new highs. Interest rate cuts usually spell lower currency
prices in countries where rates get cut as institutions move funds to the
highest-yielding “risk-free” interest rate products. But Momentum-5
List June dollar index futures
(
DXM1 |
Quote |
Chart |
News |
PowerRating) closed 1.39 higher at
155.66, despite the Fed’s 50-basis-point cut yesterday and forecasts for further cuts
through the summer.

Dollars also rallied despite stock indexes hitting new
two-year lows yesterday (and today) and a big rally in Tokyo stocks. When a stock
or
commodity does something contrary to what it is supposed to do, that is a clear
signal of underlying (in this case, upside) strength. 

From the Implosion-5 List,
the dollar was again stronger against the yen, with the June yen contract
(
JYM1 |
Quote |
Chart |
News |
PowerRating)
tanking in overnight trading as Japanese markets got their first post-holiday
opportunity to trade since the Bank of Japan cut rates to zero. Short entry was
possible once the low of two days ago was hit and after an intraday pattern of
failed triple tops broke down. An intraday gap at .8200 held in a final 20-tick
descent off a five-minute reversal tail at the gap. Including the gap down from the
overnight activity, the yen closed .0090 lower at .8191, a contract
low.  

Stock index futures rallied after touching new lows on
the open. Both
Nasdaq 100 futures
(
NDM1 |
Quote |
Chart |
News |
PowerRating) and S&P futures
(
SPM1 |
Quote |
Chart |
News |
PowerRating)
slightly overshot the 38% retracement of the pre-Fed announcement high to this
morning’s low, providing entry below a fractal (a high surrounded by two lows).
The break of a Fibonacci support cluster defined by Carolyn Boroden in her Stock Index
Price Action Levels service available through TradingSubscriptions.com implied
these contracts could go to new lows — and they did. This is the second straight
day of 30-handle ranges in the Spooz.  Both closed at contract lows. 

Grain contracts left long tails, implying a short-term
bottom. In the soybean complex, beans and meal have either left tails or rallied
in at least three of the past five sessions. In action today, soybeans
(
SK1 |
Quote |
Chart |
News |
PowerRating) executed
classically out of their Pullback From Lows
setup, (falling from the opening to a test of contract lows) before paring
losses and finished down 3 1/2 at 443 1/4. Meal closed down 1.4 at 150.9. Soybean oil
(
BOK1 |
Quote |
Chart |
News |
PowerRating)
left an exaggerated tail and is in good position to react to its Momentum-5
List reading. 

In softs and fibers, orange
juice
(
OJK1 |
Quote |
Chart |
News |
PowerRating) traded straight down to close below yesterday’s
up-volatility bar, implying that yesterday’s push higher was a fake out. The
setup closed slightly below the pullback-from-lows trigger, yesterday’s low, so
look for short setups in juice.

May sugar
(
SBK1 |
Quote |
Chart |
News |
PowerRating) made good on its Turtle Soup Plus One Buy
 setup, rallying to a high of 8.78 before closing up .08 at 8.72. 

Cocoa
(
CCK1 |
Quote |
Chart |
News |
PowerRating) has fallen $123 since I pointed
out that it was forming the right shoulder of a head-and-shoulders in the March
13 Futures
Markets Recap. Cocoa gapped lower and traded straight down from its opening
tick, to close down 29 at 957.

May cotton
(
CTK1 |
Quote |
Chart |
News |
PowerRating), from the
Implosion-5 List,
continued tanking to a new contract low and closed 1.17 lower at 48.57.