Euros Explode After Turtle Soup, Stocks

  • February 23, 2001
  • Marc Dupee

Both euro FX
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Swiss francs futures
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 setups, springing higher as US stocks weakened and dropped to two-year lows.
Euro FX futures
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Swiss francs
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eroding stateside equity situation spurred rumors that the Fed might cut
interest rates before its March meeting. 

Rumors aside, debt traders bet that the Fed will likely
be more aggressive in stimulating the economy by cutting short-term rates. The
July federal fund futures
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upping the odds of a 100-basis-point cut (1%) by the June FOMC meeting to 52%. T-bonds
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also benefiting and closed 18/32 higher at 103 25/32, and filled a gap left on Feb. 15. 

Higher prices in debt futures translate to lower yields.
Narrowing US yields with Europe make holding dollar-denominated debt
relatively less attractive and the euro, Swiss franc, and
British pound’s
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market became more confident that the Fed could cut short-term rates by a full
1% by summer. 


Nasdaq 100 futures
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traded to new contract lows on the heels of fresh warnings from brand-name techs Motorola
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who joined the parade of
tech companies to complain that a declining economy will hurt their performance.
Motorola said it would miss earnings and Sun said its earnings expectations
could be half of previous estimates. 

Naz futures tumbled through a limit-down level (where
trading is halted for 12 minutes) for the second time in as many days, but then
woke up to the unusually powerful combination of signals appearing on
TradingMarkets
Market
Bias Indicators Page. Five indicators pointed up, hoisting a strong warning
flag that a rally might ensue at some point. The Nazdog’s low of the session,
1940.00, coincided with cluster support (1944) identified in Carolyn Boroden’s S&Ps
and Nasdaq Price Action Levels service available on TradingSubscriptions.com. 

S&P futures
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also fell sharply and challenged yesterday’s lows. Lewis Borsellino pointed out
from the Spooz pit in his Borsellino’s
S&Ps AM that “If we can take out 1240, we think yesterday’s 1230
low will be tested and most likely exceeded. We have a support zone between 1231
and 1227. If we were to fail at this level, we would hit limit down, which comes
in today at 1225.50.” The Spooz are trading at the bottom of their range at
1231.50. 

Borsellino’s spooz scenario played out before
reacting in kind to the
Market
Bias signals and making up 30 of a 40-handle deficit to close 10.00 lower at
1247.50.

As I mentioned in yesterday’s Futures
Market Recap, soybeans sketched a Pullback From Lows
pattern suspiciously similar to two prior instances in the current downtrend
that implied a gap-down opening and move to fresh negative territory today. The two
following graphs tell the story of the repeating pattern that can, and did in
this instance, play out in threes. May beans
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Finally, livestock remains in a momentum phase on continuing worry over foot-and-mouth disease in the United Kingdom. March pork bellies
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the Momentum-5
List closed 1.875 higher at 75.075.