Coffee Turns to Soup
Traders are looking at the largest rally in coffee in six months and saying,
“too much, too fast,” and selling it as it drops below its previous
20-day high as the commodity makes good on a Turtle Soup Plus One
Sell setup, triggered below the 64.75 level. Coffee is currently down 2.75
at 62.00 but has dropped down to 61.50, giving back half of yesterday’s flush
gains. July appears to have found support at 61.50.
Also in the softs but going the other way, July cotton
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is making good on its Turtle Soup Plus One Buy
signal as it reclaims some lost territory that had left it oversold.Â
June unleaded gasoline
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the leader for over one week on the Momentum-5
List, gapped to a contract high, rallied to a peak of 1.0870 and has pulled
back to opening levels, following an explosion at a refinery near Los Angeles
harbor. Officials at the refinery are not yet saying how much production will be
effected but fear that supplies will dry up with any disruption in refining
going into the summer driving season has traders bidding the price higher.Â
As it currently stands, the pullback to opening levels
leaves unleaded in a Doji star formation, a candlestick pattern that
implies a change in trend. And at least three arguments exist for a more bearish
stance in unleaded. One, refining margins for unleaded, the difference between
the price of crude and the price of unleaded are large. Two, recent APIs have
shown slower drawdowns in national unleaded inventories, implying that retailers
have already stocked up to meet expected heavy summer demand and will,
therefore, not require as-large-as-priced-in supplies of unleaded in coming
months. Three, gasoline just made its biggest two-week price jump ever. With
prices near the 10-year record hit last summer, drivers will scale back on their
demand for gasoline, which could have the “conservation effect” of
lowering prices.Â
Debt futures are responding more to stock indices — which
rallied, but are pulling back and spurring bond buying — than to the consumer
confidence report this morning. Although consumer confidence fell last month,
traders appear to be noting that the data for the report came after the Fed’s
surprise rate cut last week. This means that an additional .50% rate cut will
likely make consumers more optimistic about the economy and will add to the
belief that it will rebound and that inflation may start to rise. High gasoline
prices were barely priced into last month’s CPI and the biggest increase in
gasoline prices ever (as noted) will likely jack the inflation rate up next
month. This means reduces the likelihood of a serious rebound at T-bonds
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multi-month lows and even portends additional downside.