It Re-tested This Area
Back on Monday, Oct. 21, the new “Nightly Futures
Report” pointed out this key level in unleaded gasoline: “The
next upside test comes at .6090 to .6110, a level to re-enter short should the
psychological round .6 level break.” Unleaded has had a healthy rebound
over the past four days and closed slightly lower after tagging .6090.
Whether it was the American Airlines flight 587 tragedy today from JFK or
Russia’s half-hearted compliance with OPEC’s request for non-member exporting
nations to cut output, the re-test of this area failed. To quote S&Ps ace
Lewis Borsellino from a conversation we had on Friday, “If we could take
the news out, the market would have gone down up there anyways. The news
accelerated the process.” This concept applies in relation to the 9/11
attacks, it applies today, and it will apply to coming “news driven”
events. (This interview with Lewis will be available this week on
TradingMarkets.com.) Markets go to where they are going to go, it’s your (and
our) job to discern the subtle cues that tell what level a market is keying off
of.
Jet fuel demand is down 25% from a year ago and is expected to drop slightly
more after today’s tragic crash as people cancel (Thanksgiving) air travel
plans. Jet-fuel demand accounts for about 8% of the total petroleum consumption
in the U.S. The Paris-based International Energy Agency confirmed that world oil
demand is down, saying it fell 1% to 75.7 million barrels per day. OPEC supplies
23.5 million of these barrels and wants to get members and non-OPEC members to
agree to cut output by 1.5 million barrels a day. But Russia, the world’s second
largest oil producer behind Saudi Arabia, said it will cut production by 30,000
barrels a day, a fraction of what OPEC hoped for and an amount that it believes
is hardly sufficient to dent growing supplies. Russia produces approximately 7
million barrels a day, nearly 1/3 of total OPEC output. High output from Russia
could continue to drive oil prices down in the face of declining world demand.
December crude oil, heating oil and unleaded gasoline all
made good on their Pullback from Lows setups out of
1-2-3-4 pullbacks.
Bond and currency futures markets were closed in honor of
Veterans Day.
Markets responded cautiously to news of the crash initially on the prospect
that it could again be the work of terrorists. Stock index futures opened
lower, gold and silver rallied, and energies dropped. The
spot Swiss franc also rallied in a safe haven flight. But as the day wore
on, gold, silver, and the Swiss unit fell and stock indexes recovered. December Nasdaq
100 futures clawed back to a positive finish, and Dow futures pared a
triple-digit loss.
Following through on their big momentum surge down from Friday when all four
meat contracts sank their daily limit, livestock traders again stampeded through
the exit gate. December live cattle and January feeder cattle sank
1.500, their daily limits, to close at 61.750 and 78.150, respectively. The two
are the numbers one and two contracts on the Implosion 5
list, and were pointed out in “Monday’s
Futures Setups” as candidates for opening-range shorts. Neither
traded above its opening range.
January soybeans made headway into their overhead gap. This contract
was also in “Monday’s Futures Setups” as
an Off The Blocks, and edged 2 3/4 higher to 447
1/4 after hitting a high of 449.
New York’s phone system was swamped due to the air accident. NYBOT softs,
trading at the new facility in Long Island City, was affected. Cocoa
trading was halted because orders could not be phoned into the pit.