The Natural Way To Cook The Books

August 22, 2001
Marc Dupee

Do you remember last week when natural gas had its
biggest up day of the year, gaining over 12%? That rally came after the
American Gas Association released its weekly data on inventories and showed
a much-larger-than-expected drop in stockpiles. Today the AGA
revised those figures sharply higher and also reported a large
build up in inventories. The current situation appears to show
natural gas reserves building at such a fast pace that storage facilities
will soon be full, a stark reversal from last year when a nat gas shortage
helped prices quadruple. Nat gas tanked over 9% today in response to the
enormous revision and closed at its lowest level since spring 2000.

How could such a gross error occur? Well part of the
problem has to do with the way the data is collected. The AGA collects its
storage data from companies who operate storage facilities, firms that stand
to profit from advanced information about stockpiles. One theory is that one
or several storage facilities from whom the AGA collects data could move the
gas from the actual storage areas to conduit facilities, distorting the
inventory figures. Of course, collusively misreporting data rides the cusp
of illegality.

The “mistake” and revision was so large
that the AGA’s data will be viewed more skeptically unless remedial action
is taken. October natural gas
(
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PowerRating)
closed .315 lower at 2.876.

Energies closed mostly higher following last night’s API weekly national
inventory report. Both the API and the EIA reports showed declines in
stockpiles that exceeded expectations. Comparatively, year-on-year surpluses shrank
as well. Unusually strong demand for gasoline is a primary reason that could
potentially support energies. Other factors include OPEC’s scheduled cutback
of output from cartel members beginning September 1 and a cutback in
refinery utilization rates (meaning less production of gasoline and
distillates).

An unexpected gain in business confidence by German executives gave
currencies, the leaders of the Momentum-5
List, a boost in overnight trade, but pessimism about the country’s GDP
figures slated for release tomorrow prompted sales at multi-month highs at the
Chicago Merc. The consensus is for GDP to remain unchanged at .4%. The ECB meets
on August 30 and has said it will keep interest rates unchanged. Both could
temper the rally in continental currency futures. Any European economic slowdown
has traditionally lagged US slowdowns by six months. Europe will also have to
deal with the chaos of introducing its new currency into circulation beginning
in four months.

Going the other way, September dollar index futures
(
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PowerRating)
tumbled overnight, but reversed in a same-day Turtle Soup Buy pattern.
These patterns occur when a market makes a new 20-day low (today) and
reverses above a previous 20-day low that occurred at least four days ago.
The current “tail” pattern that filled the dollar index’s
overnight gap suggests the currency will retrace here, rather than continue
lower in its Pullback From Lows pattern.

Also in the currencies, in a pattern we have been seeing more of in all of
the futures markets,
Canadian dollar
(
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PowerRating), which
registered a Turtle Soup Plus One signal for yesterday, made good on
the pattern on the day following the signal and closed up .0021 at
.6478.

Soybean traders sold at yesterday’s highs, leaving an overhead gap.
Soybeans are on the
New 10-Day Low List and are therefore eligible for and made good on an Off The Blocks
short entry once the market traded below yesterday’s last-hour low.
November soybeans
(
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Quote |
Chart |
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PowerRating) closed down 5 1/4 at 487.

The Natural Way To Cook The Books

BUY THE FEAR, SELL THE GREED

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