Furnaces On High Blast Nat Gas

December 11, 2000
Marc Dupee

A cold front descending on the heaviest consuming US residential market torched
natural gas futures to new all-time highs in a dramatic repeat of trading action
one week ago Monday. Temperatures in Illinois and other Midwestern states,
states that account for more than 25% of residential consumption, descended to
below freezing and well below seasonal averages to spike prices in overnight
Access trading. NGF1, from the Momentum-5
List, opened as much as 14% higher to expanded trading limits after the
Access limit maximum was hit. Suppliers of the heating fuel are buying more
expensive nat gas inventories at ever higher levels due to an early winter and
national stockpiles shortage that remains nearly 30% below last year’s levels in
a situation of perceived dwindling supply. Spiking on cold weather forecasts
last week as well, nat gas has added as much as 45% in six sessions. The January
contract closed .836 higher at 9.420.

Friday’s dramatic Florida State Supreme Court
announcement after the close of equity trading hit the still-open stock index
futures. Stock index futures remain open 15 minutes after stocks. The S&Ps
tumbled as many as 35 handles and the Naz 100 futures tanked over 150.00. Both
contracts recovered in after-hours trading on the US Supreme Court action to
stay the remanded hand recount of ballots from contested counties. The big apparent
gains in stock index futures–Nasdaq 100 futures
(
NDH1 |
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PowerRating) closed 225.00
higher,
December S&P futures
(
SPH1 |
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PowerRating) added 45.50, and
Dow futures
(
DJH1 |
Quote |
Chart |
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PowerRating) finished up 245.0–came in response to the US Supreme
Court’s own stay of the Florida high court’s decision. The indexes still moved
above Friday’s high with the Naz futures adding 75 from the highs and the
S&P and Dow futures finishing slightly below Friday’s high.Â

Despite three up days in
DecemberÂ dollar index futures
(
DXZ0 |
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PowerRating), the contractÂ looks
vulnerable. DXZ0 has descended to a two-month low out of a double top formation.
The clear definition of the pattern heightens the likelihood that DXZ0 will make
a measured move (see my article Defining
Reward/Risk Ratios With Chart Setups In The Futures Markets on calculating
measured moves). Classic technical analysis implies a move to 110.55. You
calculate the measured move by measuring the distance from the peak to the
valley of the double top, and then subtracting that distance from the valley
(the low, or important support, between the double top “peaks”). Here,
the calculation is 118.65-114.60 = 4.05. Then, 4.04 – 114.60 = 110.55, the
downside objective. Notice that the DXZ0 is also on the
Implosion-5 List and
is setting up in a Pullback From Lows setup.Â

Juxtapose the dollar index’s negative setup with the
mirror image setup in the
euro FX futures
(
ECZ0 |
Quote |
Chart |
News |
PowerRating). Although the euro FX is not a double top, it has a
clearly defined inverted head-and-shoulders pattern. Measuring objectives here
are twice the distance from the head to the neckline. Try the calculation. You
should get .93780 as an upside measuring objective in the ECZ0. (Please note we
are rolling the currencies to March tonight, symbol “H1” and that you
will have to make separate measuring calculations for those contract
months).

March cotton’s
(
CTH1 |
Quote |
Chart |
News |
PowerRating) slow drift down has created a 6/100 Low Volatility
setup. Play this one for a break either way out of its narrowing pattern. The
fact that the contract remains supported by the Nov. 6 gap, closed near its high
today, and has rallied for the past two days out of its Turtle Soup Plus One
setup, gives the upside a slight edge.

Furnaces On High Blast Nat Gas

BUY THE FEAR, SELL THE GREED

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