T-Bond Futures Bust Top

October 23, 2000
Marc Dupee

Interest rate futures closed on new contract high ground as players assumed a
defensive posture to global and business risk. Tensions in the Middle East have
made Treasury futures something of a safe haven play, as the situation between
Israelis and Palestinians continued to deteriorate over the weekend. Observers
are also concerned about the quality of corporate debt due both to poor earnings
performances by blue chip companies during the past six weeks bear market and to
comments by PIMCO, the country’s largest manager of bonds. The head of PIMCO,
Bill Gross, said last week that the current environment was a terrible time to
invest in corporate debt.

After gapping down, the December euro FX
(
ECZ0 |
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PowerRating) was unable to muster a comeback and fill Monday morning’s down gap. This
occurred in a narrow-range bar at the contract’s low. The weak showing bodes
poorly for the contract and implies that the ECZ0, from the
Implosion-5 List,
will seek new. Higher blue chip stock prices and contract highs in (Dec.)
T-bond futures makes euros relatively less attractive vis-Ã -vis dollars. ECZ0
closed .00650 lower at .83760.

The European Central Bank has said that it will not intervene to support
prices in instances such as recent Middle East violence, helping clear the way
for more downside. Intervention would require a coordinated effort among the
world’s leading central banks to work. With only two weeks to go before the US
presidential elections, the US is not likely to participate in an intervention.

As the dollar rallied, gold, denominated in dollars,
sank. A higher dollar makes gold relatively more expensive when priced in
other currencies and weakens demand for the metal. December gold
(
GCZ0 |
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PowerRating)
closed just shy of its short trigger of a 1-2-3-4
Pullback From Lows
setup, down 1.3 at 272.0.

November soybeans
(
SX0 |
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Chart |
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PowerRating) continued lower after triggering a 1-2-3-4
Pullback From Lows
setup Friday (out of a candlestick engulfing pattern) to close at a fresh
two-month low, down 5 3/4 to 463 and on the lows of the session. Soymeal
(
SMZ0 |
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PowerRating)
left an indicator that grains could decline, registering and making good on a Turtle Soup Plus One
Sell/double spike top for a decline of 2.7 to 167.3.

Coffee (KCZ0) fell for a fourth straight day on
forecasts of rain in the primary growing regions of Brazil. Lower roastings
(representing lower demand) and Friday’s commitment of traders report showing major
funds still had room to get short (or cover fresh longs), also pressured the commodity.
Coffee nearly doubled losses after the bearish situation was pointed out in
Monday’s Mid-Day
Futures Alert, and closed nearly 7%, or 5.70 lower at 78.45.

January pork bellies
(
PBF1 |
Quote |
Chart |
News |
PowerRating) extended an early rally
to close up 3.000 at 62.900, their daily limit, as locals covered shorts in the
final minutes. Despite record levels of bellies in cold storage, strong movement
of meat out of storage and heavy fund buying were cited as reasons for the
strong move. Also in the meats, December live cattle
(
LCZ0 |
Quote |
Chart |
News |
PowerRating) extended
Friday’s outside day breakout at high (a situation pointed out in the last
Futures Recap) for a gain of .325 to 71.700, a new three-month high.

T-Bond Futures Bust Top

BUY THE FEAR, SELL THE GREED

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