Succumbing To The Heat

  • December 12, 2000
  • Marc Dupee

Spectacular gains that had rocketed the futures up 113% to
all-time highs in just 27 trading days came crashing back to earth Tuesday as
the first zephyrs of normal temperatures returned to the primary consuming areas
across the Midwest. Colder-than-average temperatures and much lower-than-average
national stockpiles have fanned the flames of the hottest commodity of the past
several months. 

As Midwesterners shoveled away the snow, meteorologists’
forecasts for warming weather in coming days helped send natural gas futures for
their biggest declines in many years, down as much as 13%. This gap lower and
steep downside action in the January contract
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(and others) left shooting star candlestick formations, patterns associated with
exhaustion. Nat gas closed 1.213 lower at 8.200, through expanded trading
limits. 

Stock index futures closed
mixed, despite a battery of negative news and earnings comments that should have
sent key stocks lower and done more damage to major averages and stock index
futures. Eastman Kodak
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Devices
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only down less than three teenies. The positive action demonstrates resiliency
in the face of negative news, a very constructive reaction to negative news and
the fourth session since the November 30 low where equities and index futures
have been able to schluff off bad news.
Nasdaq 100 futures
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Dow futures
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Interest rate futures moved slightly higher, basically
closing right at Pullback-From-High trigger points. T-bonds
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4/32 to 103 14/32 and
10-year notes
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“Crystal Ball” of interest rates and the yield curve, Tony Crescenzi’s
Crescenzi
On T-bond Futures commentary today is a must read. 

Currencies are also trading rather critically at Pullback
trigger levels as well. Both euro FX futures
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Swiss francs
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they trade above today’s closing prices. The euro futures closed up .00300 at
.88400, and francs finished flat at .5889. ECH1 has also held above the .87900
level for two days. December dollar index futures
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the correct inverse relationship to imply a move lower in dollars and a rally in
the euro/Swiss franc complex. Dollar index futures closed just above a 1-2-3-4
Pullback-From-Lows Trigger. 

The Japanese yen
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New 10-Day Low List, also closed at a new contract low, down .0061 at .8982.

 

January soybeans
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High contract, have a strong fundamental story underpinning a potential move
higher–the European mad cow scare and the use of  soymeal as an animal
feed protein substitute. Soybean meal has rallied for the past three days,
making good on its pullback setup and bean’s price persistency, two days of
closes in the upper quartile of its range and a move back to the top of the handle
today, point to a potential pop in these two contracts. 

Cocoa
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previous low was made on Nov. 27, setting this contract up in a Turtle Soup Plus
One buy pattern for tomorrow. The buy trigger is at the previous 20-day low at
713, with the stop going at the low of today’s session at 707, a tight setup.
Cocoa closed down 3 at 716.

March cotton
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head-and-shoulder pattern to close on its low, down 1.83 at 65.59, a move of
2.7%. Its Multiple Days Low
Volatility reading suggested the contract could make a larger-than-normal
move as its mean volatility reverts to the norm.