How Much Is Too Much?

October 19, 2001
Marc Dupee

Oil demand is forecast to rise at its slowest pace in
nearly two decades, while the price of an “OPEC barrel” of crude —
an average of cartel members’ prices — hit a 27-month low yesterday. Some
of OPEC’s members met today and prices rose as observers pondered whether
the cartel would implement its non-formal agreement where members cut output
once the OPEC “basket” of crude prices falls below $22 for more
than 20 days. (The basket is an average of Saudi Arabia’s Arab Light, The
United Arab Emirates’s Dubai, Nigeria’s Bonny Light, Algeria’s Saharan
Blend, Indonesia’s Minas, Venezuela’s Tia Juana Light, and Mexico’s Isthmus
oils). Yesterday’s OPEC basket price was $18.54 and just one day short of
the 20-day cutoff for an output decision.

In a move that occurs with greater frequency,
unleaded gasoline
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Turtle Soup Plus One Buy signal, in an upside expansion bar that importantly
closed above the previous three days’ closes, up .0279 at .5952. The
suggests a continuation of the reaction off a multi-month low.

Crude rose .44 to
115.18 and heating oil rallied off a double bottom pattern to tag the
confluence of its 10- and 20-day moving averages before erasing half the
session’s gains to close up .0154 at .6263.

Natural gas
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managed to maintain its upside bias by nearly closing above the bearish
engulfing bar left two days ago. Nat gas nearly has a critical mass of gaps,
laps, thrusts and multiple up-days to qualify it for early
“runaway” status. The contract closed at a one-month high in an
expansion bar that took the price up 7.84% to 2.681.

Going the other way against the dollar index, the
most heavily weighted currency in the index’s basket, euro FX futures
(
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as well as the
British pound
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From Lows setups. The British pound was one of the contracts featured in
last night’s Nightly
Futures Traders Reports as “looking heavy out of its bearish
flag/pullback from a one-month low formation.” The pound dropped
out of its flag to close .0106 lower at 1.4304.

T-bonds
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10-year notes
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mentioned in the past two evenings’ Nightly
Futures Traders Reports as having the potential to
fail at their current levels near contract highs, possibly in
a (same day) Turtle Soup sell pattern. Although T-bonds missed the high mark
of 107 11/32 (and a Turtle Soup Sell trigger) by four ticks this
morning, they left outside-bars-at-a-high setups, suggesting the market
could continue to sell-off.

December lean hogs
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sinking twice the distance of their peak-to-valley ranges — the 200% levels
in red on the chart (see my Defining
Reward/Risk Ratios With Chart Setups) show the completion of a measured
move. Now pulling back, hogs have retraced to the Fibonacci ratios of their
recent plunge and have failed to fully close, let alone close
above, the 10/15 gap, a sign that more downside is in store. Hogs also
register a 1-2-3-4 Pullback From Lows setups today. Two possible areas to
short from are at the Fib resistance levels specified above in the 50.800 to
51.00 area. Alternately, the Pullback From Low is triggered on a move below
today’s low.

The following chart shows downside objectives reside in the 46.225 to
47.600 area for hogs.

Going the other way,
December

copper
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Implosion-5 List and the
New 10-Day Low List, sank to new contract lows, making good on an Off The Blocks
short entry and closing down .85 at 62.35.

How Much Is Too Much?

BUY THE FEAR, SELL THE GREED

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