Profiting From Safety
Traders who had recently fled the equities market for the
safety of debt (futures) instruments took profits on signs that the stock market
may be putting in a bottom.Â
June T-bonds
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streak, sliding more than a point as stocks posted strong intraday rallies off
the Turbo Twin Tail mentioned in yesterday’s Futures
Market Recap. T-bonds gave an early indication of their weakness by gapping
down 11 ticks. T-bonds then rallied to three ticks above yesterday’s
high–twice–providing entry on an intraday double top on the Oracle
panic.Â
Then markets did an about-face at 10:03. T-bonds fell out
of their double top in profit-taking and S&P futures
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course at the support band between 1219.50 and 1223.50 defined by Lewis
Borsellino in his S&Ps
A. M. column. Bonds then filled the
panic-gap left two days ago at 105 17/32 and then collapsed to close 1 5/32
lower at 104 25/32.
This is a typical reaction after a flight-to-safety play.
When share prices recover, bond money flows back into the stock market.
A slightly stronger-than-expected Michigan Consumer
Confidence report also worked to add to the view that the Fed may not need
to be as aggressive in cutting interest rates. Â
S&P futures
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setup, rallying as many as 30 handles from the gap-down open before pulling
back as skittish traders refused to go home long over the weekend in the face of
technology stocks’ weakness. Spooz closed 8.30 lower at 1235.20 and Dow futures
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fell 5.0 to 10,470.0 after rallying 120 handles.Â
Nasdaq 100 futures
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shortly thereafter, then rallied 100 handles despite Oracle’s heavy-volume sell-off on its first earnings miss in years and lowered estimates. The semiconductor
sector
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and Novellus
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earnings estimates by as much as 70%. Naz futures settled 83.50 lower at
1876.50.
The Japanese yen
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contract low after a report of record unemployment spotlighted economic weakness.
Just two days ago the Bank of Japan cut short-term interest rates to a near-zero
rate of .15% (yes!). The Nikkei 225 stock index hit a 15-year low overnight as
well. The yen closed .0116 lower at .8426.Â
In the energy pits, traders eyed the approach of the next
OPEC meeting and bid up oil on the prospect of a potential output cutback by the
cartel.
April crude oil
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higher at 27.84.
April heating oil
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which hit its lowest levels since last summer, gapped open and kept heading
higher, making good on its Turtle Soup Plus One Buy
setup to close .0091 higher at .7252. Heating oil has also been indicating that it could make a
larger-than-normal move by registering on the Multiple Days Low
Volatility List.Â
April lean hogs
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gapped to new highs, pulled back, but still managed to close down just one tick
at 63.825, a sign of continued strength.Â
Cocoa
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triggered a Pullback From Highs
setup, closing above its recent pullback-consolidation range in an outside-day
formation. Cocoa was a recent Momentum-5 List leader and today’s price action
implies a continuation to new highs.