Crude Cracks

October 16, 2000
Marc Dupee

Crude oil fell apart Monday, crumbling over 6% in a
follow-through move off a reversal signal left Friday. A meeting of Middle
Eastern leaders and President Clinton in Egypt had the effect of easing tensions
and reducing fears that oil exports from the region could be disrupted. Â

Bearish comments from OPEC also pushed
energy prices lower. Bridge News reported that the Saudi oil minister said
“OPEC…countries are ready to give the market what it needs,” perhaps
unilaterally. This oil-bearish pessimism comes ahead of an OPEC oil output
meeting and the completion of a five-day oil strike in Venezuela, the cartel’s
second largest producer.Â

November crude closed 2.14 lower at 32.85, unleaded
gasoline closed .0413 lower at .9250, and heating oil fell .0436 to .9725.

Stock index futures closed higher, shaking off earnings
concerns about Intel, which was downgraded, and Microsoft, which fell ahead of
earnings data scheduled for release this Wednesday. That the Nasdaq 100
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stocks Monday is impressive. Note the following declines: Intel -11%, Microsoft
-6.28%, Worldcom -5.4%, Dell -7.15%, Oracle -3%, and Nextel -9.8%. Impressive
gains in second-tier Naz 100 stocks, those with a lesser, but growin, weighting
on the total index held the NDX up. There appears to be some “bifurcation” between “old tech” and “new tech” stocks, similar to the “old economy-new economy” bifurcation we have seen over the last year in Nasdaq over the past year. November will be Microsoft and Intel’s one-year birthday as Dow components.

Also note that the last 15 minutes of
trading in the NDZ (futures) has been prescient (the futures trades until 4:15
PM ET, 15 minutes longer than equities): Friday the NDZ sold off 50 points after
the NDX’s close, presaging the early decline in Monday’s NDZ action. At Monday’s
close, the NDZ also rallied in the final minutes.Â

The Naz futures closed 41.00 higher at
3316.00. The S&Ps rose 6.00 to 1391.50 and Dow futures
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85.0 higher at 10,342, and were also restrained by losses in INTC and
MSFT.Â

Positive fundamentals underpinning both the dollar and
oil as well as an unusually high number of up signals–five–from the
Market
Bias Indicators Page, signals that are valid for two days, also enhance the
odds of more upside in index futures Tuesday.

Intervention–or the threat of intervention–has been one of the few factors
propping up the euro as the single currency forged new lows. But comments by the
President of the European Central Bank, Wim Duisenberg, may have taken away the
final reason for the currency to not test new lows. The ECB chief said his
institution would not intervene in world currency markets to support the euro in
the event of more Middle East violence. Market opinion also holds that there
will not be a coordinated currency intervention among central
banks to support the euro, especially with a US election less than one month
away. This situation and other factors were pointed out in Friday’s Futures
Trading Outlook.Â

The coffee market is looking at dryness in Brazil with
no forecasts for moisture in the near future as reasons to buy the contract.
Coffee came off six-year lows and rallied as much as 7% to the top of a
two-month range before selling off in a Turtle Soup reversal (Turtle Soup
reversals occur in the same day as a 20-day high rather than in the following
day of the Turtle Soup Plus One signals). December coffee closed 4.60 lower at
85.65.

Finally, March 2001 sugar
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PowerRating) powered ahead to
a contract high, gaining .39 to close at 1.39. Sugar is also on the Momentum-5
List and provided a low-risk entry opportunity using the Off The Blocks
method.

Crude Cracks

BUY THE FEAR, SELL THE GREED

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