They Got More Than They Bargained For
Economic forecasters and consumers both got more than
they bargained for. The figure of the day, retail sales, up a record 7.1%
in October, was 5% higher that consensus estimates. Economic
handicappers forgot to factor 0% financing for cars into their
calculations and that made the difference as consumers snapped up cars with
zero-finance bargains attached to their sticker prices.
T-bonds
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news, tumbling more than a point as odds dropped the Fed will continue to
ease short-term rates as aggressively on this indication of economic
recovery. T-bonds lapped lower, providing an opening range short that fell
half-a-point before retracing, a setup suggested in last night’s Nightly
Futures Report. T-bonds then retraced to one tick below the “109
20/32 trigger” to provide a second shorting opportunity before settling
down 1 9/32 at 108 17/32.
Stock index futures managed a positive finish after
gapping to new two-month highs, but selling off steeply intraday.
OPEC, on the other hand, got less than it was
bargaining for in its collusive attempt to drive world oil prices higher.
OPEC met in Vienna today to determine output policy, but said it would
abandon its push to get both member and non-members to cutback output. The
news comes just two days after Russia, a non-member, surprised the market by
first saying it would comply with OPEC’s request to cut output. Russia
essentially recanted by announcing it would reduce daily output by only
30,000 barrels a day, an insignificant amount. This fundamental
development was elucidated in Monday’s Futures
Market Recap.
Russia, the world’s second-largest producer, is key
because it alone produces about one-third of the total OPEC output. Non-OPEC-member
Norway, the third largest producer, had already said it would not comply
with output cutbacks. Without output-reduction agreements from these two key
producers, OPEC believes it will lose market share to non-members in a
solitary bid to drive prices higher, something it now says won’t do. By OPEC
announcing that it will not cut its own output, it appears to be saying the
cartel is losing its grip on the global flow — and price — of
oil.
This comes despite President Bush’s announcement that
the US government will fill stockpiles in the Strategic Petroleum Reserve to
top off national energy defense policy. While the refilling of the SPR (a
700-million-barrel reserve kept in abandoned salt mines that stockpiles a
month’s worth of America’s oil needs) is supportive of oil prices, the
reserve total requirements are only about 1.5 million barrels and will be
added only slowly, over the next year to 18 months.
December crude oil
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heating oil
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all gapped significantly lower, confirming Pullback
From Lows signals from yesterday (and today). Crude is down 8%, or 1.87, at
19.80. Notice that it was suggested on Thursday in Friday’s
Futures Setups that “crude could hold at the 50% retracement of
their most recent down swing (which) would coincide with closing the 10/31
gap.” This proved to be the swing high more than 10% above today’s
close at 19.74, down 1.93.
A preponderance of reversal signals in the currencies
suggested the buck could move higher against the euro FX and Swiss franc. December
dollar index futures
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Sell setup and Swiss francs
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had
Turtle Soup Plus One Buy signals. Although the markets had moved too far
away to actually trigger their respective signals (at previous 20-day
extremes), the strong countervailing but complementary indicators
suggested we could get a reaction to multi-month lows in the
contracts.
From Wednesday’s setups,
January soybeans
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headway into their overhead gap, closing up 2 at 447 1/4.
December cocoa
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nearly another 5% today to tag a contract high and a level not seen since
last February. However, there was a steep drop with one hour to go in the
shortened, four-hour session. Unable to hold new contract highs, the late
gap-down drop of 18 off the high works to provide a technical signal that a
short-term top is in place and this market will correct. Cocoa exceeded
“the key resistance at 1225” from last night’s Nightly
Futures Report (probably triggering stops) but closed unchanged in a
doji (another candlestick reversal signal when at a high), at 1200. Cocoa
had run up 25% in seven days.
Coffee
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covered short positions. Basis December closed up 4.85 at 49.70.