FUTURES Quiet week frustrates scalpers

Press, 26 May 1984, Page 24

FUTURES Quiet week frustrates scalpers

The New Zealand wool futures market was quiet this week, with trading volume down about 10 per cent on last week, Mr Geoff McDonnell, futures manager at Mair and Company, of Christchurch, said yesterday. The price range this week has shown that only a 2 to 3 per cent fluctuation, providing little opportunity to open and close out for a profit, and thus causing the scalpers (those who trade on low margins) some frustration. The wool sale on Thursday at Napier was better than expected, the Wool Board indicator moving up two points to 297 and the futures-type wool indicator moving up four points to 424. Some firmness in futures prices on Thursday led the market to peak, and yesterday futures prices eased 2c across the board in sympathy with the easing of prices at the wool sale at Dunedin. The investors who went short on Thursday may gain by holding on, said Mr McDonnell. The expected break-out of the trading range was starting to occur with the near months, August 84 and October 84, breaking out on the upside in anticipation of a squeeze (lack of futures-type wool for delivery on to the futures market) when these months become the spot months. The middle months, from Jan 85 out, traded in a 2c range and are showing signs of attempting to break-out on the downside of the range. With only two sales at weaker centres between now and the later part of June a firming up in price may be seen in August 84 and October 84, but perhaps the middle months may require more fundamental evidence (trade houses having to get more inquisy from overseas customefc for New Zealand wool)

from the physical market before showing any significant upward move, Mr McDonnell said. A spokesperson for John Marshall and Company, Ltd, of Christchurch, said the futures market this week remained steady except for the nearer months, which recorded gains of up to 5c and with gains of up to 8c in the spot month on Wednesday. The narrowing of the spread between the nearer and distant months was mainly attributable to the apprehension in some quarters that more tenderable stock would be taken off the futures market and that August 84 futures prices would again run at a significant premium when it reached spot month, said the spokesperson. “Fundamentally there has been no further significant enquiry from overseas buyers and prices remain unchanged on forward delivery of wool. “Technically the market has found and consolidated at a support level in distant months with further support at these levels the likelihood of price increases become more of a reality and downward movements become less likely,” said the Marshall’s spokesperson. Mr Peter Jordan, of the Auckland share broker, Jordan, Sandman and Smythe, said that prices were extremely quiet this week with only a 2c range recorded. Volume was also very light, with a lack of any volatility infutures tending to discourage fresh speculators from entering the market. Physical sales this week came in weaker than generally expected, the market indicator at the Dunedin/Invercargill sale yesterday falling to 294, compared with 297 at Napier on Thursday and 295 at the perennially weak Auckland sale the previous Friday. “This lack of price strength compared with Auckland last week, could not be encouraging to people with long positions in the market,” Mr Jordan said. With no sale next week and then weaker sale centres for the following two weeks prices on the futures market may well come under increasing pressure to maintain .purrent