This Happened Just Two Weeks Ago

  • May 30, 2001
  • Marc Dupee

A similar pattern is playing out again in


unleaded gasoline
(
HUM1 |
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PowerRating). Just two weeks ago gasoline sold off from
record levels, and upon reaching its 38.2% retracement level and its 50-day
moving average, bounced to a new contract record. 

The same scenario is
unfolding today following basis June’s .0346 drop to 1.0412, only this time,
with a twist. Now we are front-weighting the most recent data of the moving
average, employing the 50-day exponential moving average to achieve the
coincidence of the averaging line and the Fib level. Watch the action tomorrow
around the 1.0175 level (the 38% retrace) for some kind of a reaction from four
straight down days. 

Sun Microsystems’s vast overestimates of Q4 profits and incompetence
in accurately assessing global demand worked to
pressure the entire technology arena and send the Nasdaq for its fourth
consecutive loss. A downgrade in the fiber equipment makers by Morgan
Stanley DW exacerbated the downside in tech. After Sun, the second weakest stock
on the Nasdaq 100
(
NDX |
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PowerRating) was fiber player JDS Uniphase
(
JDSU |
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PowerRating), which
closed down 11.3%. 


Nasdaq 100 futures
(
NDM1 |
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PowerRating) closed down 71.00 at 1785.50,
S&P futures
(
SPM1 |
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PowerRating) fell 18.50 to 1250.00, and

Dow futures
(
DJM1 |
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PowerRating) ended 152.0 lower at 10,900.0. Two down signals
from the
Market
Bias Indicators Page gave an indication that equity index futures could
continue lower. 

June dollar index futures
(
DXM1 |
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PowerRating) are trading
in day three of a Pullback From Highs, are on the Momentum-5
List and are tracing a pennant. Look for a break to new high ground in an
exhaustion run. On the flip side of the coin, euro FX futures
(
ECM1 |
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PowerRating) and

Swiss francs
(
SFM1 |
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PowerRating), both from the Implosion-5 List,
are trading in narrow bars near their low with overhead gaps also pressuring.
Look for these markets’ downside momentum to follow through. Although the
economic picture isn’t pretty in the US, Europe is viewed as even further behind
the economic recovery curve.


Japanese yen
(
JYM1 |
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PowerRating), also a Momentum-5
and
Pullback From Highs
market, are trading in a narrow range, providing a reduced-risk entry
opportunity for a possible continuation of its recent upside pulse. 

July wheat
(
WN1 |
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PowerRating) is rallying for a second day off
lows. Wheat in Oklahoma and Kansas was damaged by hail yesterday and is followed
through for a gain of 4 cents before pulling back for a fractional loss and
close at 264.

Despite wheat trading at a contract low, crop forecasts for
the winter crop (harvest begins in June through July) are the smallest since
1978. Winter wheat represents about 70% of US production. The #1 (Kansas) and #2
(Oklahoma) producers are forecasting harvests down 18% and 32%, respectively,
signifying that wheat has the fundamental underpinning to stage a rally.

Also trading at a contract low, corn
(
CN1 |
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PowerRating)
closed up a fraction and right below its Turtle Soup Plus One
Buy
 trigger. 

Cocoa
(
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PowerRating) has shown nascent downside
momentum by registering a new
New 10-Day Low. This market has a strong support zone in the 960 to 950 area
that it was unable to break all spring and from which it launched its recent run
up to an 1109 high. Cocoa closed 39 lower at 964.

Also in the softs and down after having made a
New 10-Day Low, July sugar
(
SBN1 |
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PowerRating) fell .15 to 8.59.

Finally, although they are trading above their Turtle Soup Plus One
Sell trigger, August feeder cattle

(
FCQ1 |
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PowerRating) are pulling back after hitting a contract high. The contract traded
straight down from the opening tick with the TS+1 signal acting as a good
leading indicator of a possible pullback after recent torrid gains in this
market.