An Example Of Momentum Raring To Rampage

  • April 25, 2001
  • Marc Dupee

The fundamental laws of supply and demand bring markets
into equilibrium, eventually. But eventually is the operative word in the
markets when it comes to fundamentals. Technicals do a better job of
indicating — in the short run — where prices are going.

For instance, in yesterday’s Futures Market Recap, I
mentioned that high refining margins (making production of gas from crude very
profitable), slower drawdowns in gasoline inventories, and conservation due to
the steepest jump in retail prices in history, all could work to keep the lid on
wholesale (futures) gasoline prices. Indeed, anyone short unleaded gasoline
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three-and-a-half cents at the NY Merc. 

But even as yesterday’s
API and DOE reports worked today to cement the above fundamental arguments for
lower prices, unleaded gasoline rebounded from the selloff. And rebounded impressively.
Today’s action in gasoline is indicative of how momentum rules over
fundamentals. The rebound today shows that this market is talking. Unleaded
gasoline is already the leading contract on the Momentum-5
List, underpinning further upside. And the plunge and rebound that left the
contract down just .0026 at 1.0100, left a long tail-on-high on today’s daily
bar, a pattern that indicates momentum still dominates in this market. 

In energies, yesterday’s API reported that crude and
distillate inventory (heating oil and diesel fuel) fell. This was the first
decline in crude oil stocks in nearly two months and comes with higher capacity
utilization, suggesting higher output of gasoline. June crude oil
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rallied .43 to 27.29 and

heating oil 
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high and at the trigger of its Pullback From Highs
setup. 


Dow futures
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close higher across the board, gaining 157.0 to 10,670.0 and closing on their
highs. Disney
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chip advance that later caught on in the
Nasdaq 100 futures
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S&P futures
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nearly 30-handle range. 

In currencies, the bottom fell out from underneath
the
Canadian dollar
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gap-up opening, leaving an engulfing bar at this contract’s recent high, a sign
of further demise.  

A lower forecast for the winter wheat crop spurred buying in the Chicago and
Kansas City wheat pits. May wheat
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pullback situation, but rallied above the high of the low-bar pullback to match
a one-month high at 272. Wheat closed 5 higher at 268 3/4.

The rally in wheat prompted follow-on buying in corn
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which was looking for a reason to come back from six consecutive losses that had
left it at a contract low. But corn gave back its best gains on the session to
close just 1 cent higher at 195 1/2. 

In the meats, pork contracts fell sharply as traders
respond to Japan’s lifting of a ban on imports of European pork in response
to the hoof-and-mouth scare. June lean hogs
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their daily limit, down 2.000 at 69.175. May pork bellies
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also touched limit-down levels, clipping 2.950 to close at 83.775 after gapping down out of a Pullback From Lows
setup and trading straight down from their opening tick. Pork bellies are in a well-defined head-and-shoulders top at
their neckline.

Coffee
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best gains in six months which were won on Monday, but erased all of that 7% rise. The
contract is finding support below 60.00 level, an area which is shaping
up to be the psychological support ahead of Brazil’s frost season.