Controlled Implosion
Natural gas sank for a fifth consecutive session as mild
weather and expectations that higher injections into storage will fill depleted
stockpiles eroded buying interest and sent the contract to a fresh two-month
low. Wednesday’s American Gas Association report is forecast to show injections
into storage of 60 to 80 billion cubic feet. Nat gas
(
NGU0 |
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PowerRating) has been
registering on the Implosion-5 List
and closed .075 lower at 3.650.
Other energy contracts slowed their recent sharp
declines ahead of Tuesday’s American Petroleum Report (API). The API is expected
to show a slight decline in gasoline stockpiles amid firm demand. Still the
market is being pressured by OPEC’s recent decision to increase production by as
much as 200,000 barrels per day. September crude oil
(
CLU0 |
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News |
PowerRating)Â closed .09 lower at 27.93,
unleaded gasoline
(
HUU0 |
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PowerRating) gained .004 to .8200 and
heating oil
(
HOU0 |
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PowerRating) closed unchanged at .7583.
Interest rate futures held on to early gains
despite a flurry of economic news that is usually construed as negative. Tuesday
morning, existing home sales took an unexpected jump, rising above the consensus
5.00 million units to a 5.23 million unit annual rate, the highest level in 11
months. Consumer Confidence also rose unexpectedly and Fed Chief Greenspan is
doing little to reassure bond traders that the Central Bank is finished raising
interest rates this year. Greenspan said in his twice-yearly presentation on the
economy before the House Banking Committee that it is still “too soon”
to determine if the US is in the clear from inflationary pressures caused by excess
demand.Â
Greenspan also expressed uncertainty and concern about
the effects of the lowest levels of unemployment in decades on inflation and the
economy. Low levels of unemployment have historically placed upward pressure on
wages, the largest factor in cost of finished goods and services.
Thursday’s employment cost
index (ECI, consensus estimate +1.0%) on Thursday, a number Alan Greenspan
watches closely, could prove pivotal in determining short-term bond direction.Â
Technically, T-bonds are showing fractal (repeated,
though perhaps different in scale), cup-with-handles as well as rising lows and
are on the Momentum-5 List. These factors–and Tuesday’s gain of 3/32 to 98
17/32 on a bearish news day–suggest that
Thursday’s ECI will be positive and lead to a test of the contract high in the
99 24/32 area.Â
Many locals in the S&Ps pit place trades based on the
opening range. They wait for the first one to two minutes for the opening range
to be established, then they wait for a break, or a failure to break the opening
range by more than a given point value, approximating 2.00 points. Tuesday
morning one can see the Sept. S&Ps
(
SPU0 |
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PowerRating) establish an opening range,
test but fail to break to the upside, test but fail to break to the downside, test and fail to break to the upside by more than 2.00 points again,
then make the fourth and decisive move of the morning to the downside. The
S&Ps traded within a 10-point range for the rest of the session with traders
finding the best “value area” at the 1487.50 morning high as well as
at higher lows. The S&Ps
(
SPU0 |
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PowerRating) closed up 3.10 at 1484.50. NASDAQ 100 futures
(
NDU0 |
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PowerRating)
rallied 68.50 to 3888.00 and
Dow futures
(
DJU0 |
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PowerRating) slipped 15.0 to 10,765.0.
Â
In other markets, cotton
(
CTZ0 |
Quote |
Chart |
News |
PowerRating)Â made
good on a Turtle Soup Plus One
Sell setup after spiking to a fresh 20-day high Monday. Rains moving
over Oklahoma were forecast to bring needed moisture to crops in the South.
December closed 1.13 lower at 62.13.
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