Arctic Blast Fires Natural Gas

February 1, 2001
Marc Dupee

Natural gas staged its biggest one-day rally since
peaking on Jan. 8 as forecasts that a brief shot of cold will descend on the
Midwest, the region that is the heaviest user of nat gas as a heating fuel.
Yesterday’s weekly American Gas Association (AGA) draw forecasts also kicked in,
although one day late, as shorts covered after (as much as) a 38% decline off
the high 15 trading days ago. Forecasts for yesterday’s AGA were for a 108-118
billion cubic-foot drawdown but the actual draw came in at a larger 128 bcf.

In a separate report, the AGA also said that demand for
natural gas will continue to outstrip supply this year–driving up
prices–despite ramped-up exploration and drilling activity. Unusually low
stockpiles, greater power plant demand, and long lag periods between drilling
and extraction should continue to keep demand ahead of supply for up to 12 to 18
months the report said.

March
natural gas
(
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PowerRating) surged 11.79%, or .673 to 6.380.

Today’s January NAPM came in at 41.2 vs.
a consensus estimate of 42.5, another weaker-than-expected national
manufacturing statistic. Today’s report was obviously factored into
yesterday’s no-surprise, 1/2% cut in the federal funds interest rate–the rate
the Fed charges banks for overnight loans. One of the Fed’s key statements
pertaining to yesterday’s action was that the economic “circumstances have
called for a rapid and forceful response of monetary policy.” The action in
individual equities’ earnings and performances and stock index futures have been
telling this tale since September 2000.

S&P futures
(
SPH1 |
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PowerRating) sank initially on the
bleaker economic picture but held at a critical coincidence
of six Fibonacci price relationships, a cluster-pivot defined by Carolyn Boroden in her Futures
Perspectives in the 1361.50 – 1367.00 area. The low
for spooz on the session was 1366.50, the top of this zone. (Intraday

Fibonacci zones from Carolyn are now available through our new TradingSubscriptions
premium service). The SPH held at this zone twice, providing rallies of more
than 12 handles each time before closing on the highs of the session up 9.60 at
1382.50. The March S&Ps have been on the Momentum-5
List for seven straight days now.

Debt futures gapped open in follow-through buying this morning and continue
rallying on the release of today’s NAPM data. The economic figures provided
further evidence that the Fed will have to remain on the offensive to stimulate
the economy, an obvious plus for T-bonds
(
USH1 |
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PowerRating) and

10-year notes
(
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PowerRating), which helped each rally to new 10-day highs. March
T-bonds closed 1 2/32 higher at 105 4/32 and 10-years added 16/32 to 105 23/32.

The Canadian dollar
(
CDH1 |
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PowerRating),
from the Momentum-5
List, spiked to a 19-day high before pulling back into mid-range in a Turtle
Soup-like reversal. Canadian dollars could press to new highs if the perception
continues to build that the Canuck buck has unlinked from the dollar and is
avoiding a recession.

Soybean oil
(
BOH1 |
Quote |
Chart |
News |
PowerRating) rallied in part due to the
possibility that the European Union could ban animal fat in livestock feed
rations. March bean oil added .46000 to 15.0100.0. Bean oil was in a Multiple Days Low
Volatility setup, implying a big move.

Cocoa
(
CCH1 |
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News |
PowerRating), from the Momentum-5
List, came back from yesterday’s decline to clock a (bullish) outside day
and close on its high, up 31 at 1051.

Finally,
March cotton
(
CTH1 |
Quote |
Chart |
News |
PowerRating) declined
in its biggest down day in nearly a month to close 1.93 lower at 59.43 and make
good on its Turtle Soup Plus One
Sell signal.

Arctic Blast Fires Natural Gas

BUY THE FEAR, SELL THE GREED

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