Is The Crisis Over?
Californian’s have felt the pinch of the highest natural
gas prices in the history of the contract. A dearth of new power plant
construction, higher electricity usage and environmental regulations requiring
plants to burn more nat gas were cited as reasons for the shortages. And the
media has been saying that the California crisis would spread to other
states.
But what is the natural gas market saying? Natural gas
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prices at the NY Merc sank to a six-month low today, tanking 5.6%, or
.251 to 4.239. This represents a drop of 1.000 in just nine trading days, a 20%
drop. Sucking this much price out of the contract in such a short time shows
that traders believe there are ample and rising supplies.
Nat gas has been on the Implosion-5 List
since April 27. I have been writing about this contract in this space since its
breakdown out of a four-month descending triangle, mentioning that traditional
measured-move analysis (see my article on Defining
Risk/Reward Ratios With Chart Setups In The Futures Market) suggests this
contract may visit 3.850.
Energy prices fell across the board. Retail gasoline
prices at the pump hit their highest prices ever over the past two weeks, rising
an average of 8.58 cents, according to the Lundberg Survey of 8,000 retail
stations. Even though those prices were unadjusted for inflation, the high-end,
$2-plus pump prices highlight April’s strong rally in June unleaded gasoline
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Futures prices on the NYMEX represent wholesale prices.
But with no disruptions
at refineries over the weekend to spur shortage-rear rallies, gasoline traders
sold the nearbys, helping HUM1 to make good on its Turtle Soup Plus One
Sell setup and close Friday’s lap-up hole left after Thursday’s expansion
bar. Action today in gasoline left an engulfing bar, an outside bar down on high
that closed in the bottom 25% of today’s range. This is de-constructive,
at least for the next few days.
With little news to react to,
T-bonds
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lower interest rates could have in stimulating inflation. The Fed has said in
policy statements accompanying the four cuts it has made in short-term rates
this year that it is concerned about the slowdown in the economy and possible
recession, not inflation. Long bonds are highly sensitive to potential
inflation, and with the Fed no longer targeting inflation, growth in prices is
likely. The June contract made good on its Pullback From Lows List
setup and fell one-half point before settling down 8/32 at 102 3/32. 10-year notes
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were more subdued and settled flat, but traded lower initially to make good on
an intraday Pullback
trade.
August pork bellies
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daily limit, -3.000 at 78.050, as traders liquidated (all contract month) longs
ahead of May deliveries.
Coffee
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off the Momentum-5 List after having a down day on Friday, continued rallying as
lower production figures (down an estimated 7.5%) emerged from Colombia. Traders
are also looking at a dry season in Brazil, the world’s largest producer of
coffee and the negative impact it will likely have on bean size and ultimate
output. Traders are also reticent to hold shorts ahead of the South American
winter. The July contract closed 2.50 higher at 68.75.
July sugar
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market that is in day two of a pullback from its three-month high. Keep this one
on the screen for a continuation and test of its highest level of the year in
the 9.35 area. July sugar is currently trading unchanged at 8.98.