Sweet!

  • June 9, 2000
  • Marc Dupee

July sugar
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List, extended gains and plowed to a 16-month high, adding .39 to 8.57 on
anticipation of a smaller world surplus. The commodity has been displaying
unusual strength, evidenced by a high ADX
Reading of 66, and also had three up-signals on the
Futures
Trend Matrix. 

Sugar provided good action and trading clues at its pivot
points Friday (calculated daily on the Futures
Pivots Points Page). The pivots strategy is simple. One trades in the
direction of a move through a pivot point. R1 in the event of an up-move
becomes the first target, and then acts as support once that level is broken. R2 then
becomes the next target. See the accompanying chart for a visual on how well
this contract conformed to this trading strategy Friday. 


Also in softs, cocoa
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As expected the Producer Price Index (PPI) came in
unchanged, leaving basic materials used by manufacturers rising at a 4.3% annual
rate, or at nearly double the pace of one year ago. Energy costs have accounted
for the majority of the rise in PPI in 2000 as oil has tripled from year-ago
levels. Friday’s unchanged levels were somewhat confounded by a
higher-than-expected rise in the core rate of producer prices. September T-bonds
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traded over a 3/4-point range and closed nearly flat, losing 3/32 to 97
10/32. 10-year note futures
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TradingMarkets.com bond analyst Tony Crescenzi said in a
CNBC interview with Ron Insana Friday that “there is no doubt that
inflation is slowing. You can see it on the consumer side with slowing sales. As
long as the money supply remains tight, inflation should remain
contained.” Friday’s PPI may not be telling the entire story, however, as
potentially inflationary items were left out of this month’s calculation.

In his Crescenzi On The Market, Tony emphasized that
“the PPI survey dates for some products might surprise (with) natural gas
to pipelines, liquefied petroleum gas and some industrial chemicals lagging one
month behind other indexes.” Natural gas, the hottest futures market last
month, rose 37% in May to a four-year high. The CPI next Tuesday should do a
better job of picking up gains in energy costs due to the surveying 
methods used.  

Stock index futures closed mixed, with a
slower-than-expected sales report hitting Dow component McDonalds
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close down 53 at 10,645. S&P futures
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and their down-5.00 finish at 1484.00 belies the session’s steady, 20-handle
slip from a pop up opening.
NASDAQ 100 futures
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52.95 higher at 3760.26.

In currencies, the June dollar index futures
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fought back (gaining .19 to 106.92) from two-weeks of hefty declines, falling as
the Fed tightening cycle appears to have come to an end and the expectation that international interest rate differentials should narrow.

The Japanese yen
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after their economy grew at a slower-than-forecast pace during the last three
months. June closed down .0062 at .9373.

The Euro FX
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continued slipping despite this week’s unexpectedly strong tightening by the ECB.
Normally currencies rise when rates rise as investor benefit from relatively
higher yields, but the rate-rise has been considered excessive and potentially
damaging to a nascent economic recovery in Euroland.


Reports from the International Energy Agency that higher prices have eased
demand for oil may take the pressure off OPEC to raise production at its June 21
meeting in Vienna. Any delay in raising output would be constructive for
energies. Venezuela’s oil minister Rodriguez said OPEC has no
“timetable” for implementing the cartel’s price band policy (raising output). July crude
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.42 to close at 30.20 and July unleaded gas
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1.0182. 

Natural gas
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did not close within, or above, the window. This action could act as a cap on the
contract at 4.240. July closed .027 higher at 4.160.

In the meats, June lean hogs
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2.000 daily limit at 71.025. Hogs tipped their hand by registering on the New
10-day High List, an indicator that often presages strong momentum in futures.