Archive | December, 2009

Coffee Market Commentary – 2009.12.31

by on December 31, 2009

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The market is oversold technically and has seen a set-back to fairly strong support level near the 135.00-137.00 level for March coffee. Open interest has come down from the December peak but is still relatively high. Some of the tightness issues have not gone away and cash markets remain tight in Colombia and should begin to tighten up in Brazil as well with more movement by the government to absorb excess supply and move it to government storage. For now, however, the increase flow of robusta coffee on the world market and new contract lows for March London coffee on December 29th have helped spark the long liquidation sell-off. Vietnam has exported 4.44 million bags of coffee for the first three months of the 2009/2010 season (October start) which is up 8.2% from last year. For the calendar year of 2009, Vietnam exports reached 19.5 million bags which is up 10.2% from last year. December exports were down 4.6% from last year and traders see a smaller crop this season as a reason to suspect smaller exports for all of the 2009/2010 season. March coffee closed slightly higher on the session yesterday after moving to the lowest level since November 27th which may be seen as a slightly positive technical development. Talk of the oversold condition of the market and ideas that the fundamental outlook for the coming year is somewhat constructive helped to support. A stronger US dollar may have helped limit the upside and pressure the market early in the day. A weak dollar overnight helped to support. Daily ICE certified deliverable coffee stocks were down 11,269 bags to 3.099 million with 25,961 bags pending review.

TODAY’S GUIDANCE: The turn in the dollar and the recent drop in exchange stocks may be factors which help coffee forge a near-term low. Support for March coffee is at 136.15 and then 134.40 with resistance at 139.10 and 141.15.

Sugar Market Commentary – 2009.12.31

by on December 31, 2009

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A weak dollar and a jump in gold prices supported a recovery bounce overnight but it will take a move to new highs or over 27.49 March sugar to negate the potential impact of the key reversal from contract and 29 year highs. The market remains in an extreme overbought condition but outside market forces are positive and longs have little reason so far to move to the sidelines. A lack of new selling interest in this environment is seen as a positive force until support levels are violated. RSI indicators are showing an overbought condition but also a series of lower highs in the RSI during a period of higher highs for the market and the divergent signals suggest a loss in upside momentum. March sugar in London managed another new all-time high overnight which may help provide some underlying support. Egypt has extended the exemption of raw and white sugar import duties until June 30th which may help stimulate import demand. March sugar saw an impressive rally into the middle of the session yesterday and challenged the contract highs before closing slightly higher on the session and down 44 from the highs of the day. London white futures managed new all-time highs on the session as news of increased demand from Pakistan and Iraq helped to support. Pakistan plans to issue a tender to buy 150,000 tonnes of white sugar on January 1st. This is the first tender with a goal to import 500,000 in order to meet domestic needs and maintain strategic reserves. The Trade Minister in Iraq approved the purchase of 250,000 tonnes of white sugar which helped provide support and there was further talk of too much rain in Brazil which has halted harvest activity. Harvest is normally complete by now as normal rainfall is too much to deal with but sharply above normal rains for the second half of December have brought the harvest activities to a complete halt in most areas.

TODAY’S GUIDANCE: The market is showing signs of a near-term top from an extreme overbought condition. March sugar near-term resistance is at 27.49 and a move under 26.92 could spark long liquidation selling and a correction to key support back at 25.14 and 24.42.

TODAY’S MARKET IDEAS: Longs might consider exiting the market or at least sell some call premium while aggressive near-term traders can trade from the short side for the next week to ten days.

Cotton Market Commentary – 2009.12.31

by on December 31, 2009

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Two weeks of holiday-curtailed trading action will come to and end today along with the year, 2009. The New Year will start with expectations of continued fund buying in all commodity markets. It will also start with a far more positive economic outlook than we saw at the end of 2008. Whether these expectations will be borne out by the markets is, of course, another question. In recent weeks, cotton has made a new high for the year and followed with the same general consolidation pattern we have often seen following a new high over the past several months. Export sales have improved, running above the average total needed to reach the USDA’s export projection for the year for several weeks in a row. We are likely to see another such number on the morning’s Export Sales report. This week brought news that China’s 2009 production was lower than expected by as much as 10% compared to the latest USDA estimate, and there were indications that Chinese cotton demand and imports may be higher than previously estimated. All of this reinforces projections of declining stocks in the 2009/10 marketing year. That should make cotton an attractive investment for traders who are looking for places to park some capital. Stocks registered for delivery against the ICE No. 2 contract rose to 409,936 running bales today from the previous total of 406,291 running bales. The start of a new trading year can often bring an entirely new trend to a market. However, the evening up process in recent days seems to be indicating that traders were not leaning to the long side in cotton as 2009 came to an end and, on balance, that is very supportive. The test of the bullish case in early 2010 will probably boil down to what the funds do. If they continue to buy, other traders will follow suit and there will another round of new highs. If fund buying is light, or if funds are consistent sellers in the first few trading days of the New Year, a setback of as much as 10.00 cents would be possible in fairly short order.

TODAY’S GUIDANCE: For now, the combination of investor interest in commodities, the positive economic outlook and the ever-tighter supply outlook for 2010 suggest that the market trend will remain up. First support dropped a bit to 74.78 in March cotton yesterday with next support remaining near 73.72. First resistance remains at 76.58.

TODAY’S MARKET IDEAS: The cotton market seems determined to stay near the center of the 74.00 to 76.00 cent range into the end of the week. That leaves us with little opportunity to buy ahead of the New Year. Stand aside.

Cocoa Market Commentary – 2009.12.31

by on December 31, 2009

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March cocoa settled higher yesterday but within the previous day’s range as the market continues to consolidate following a steep drop from 30 year highs reached earlier in the month. With low market participation ahead of year end, the trade likely lacks the incentive to push March cocoa outside the recent range between $3,300 and $3,220. While there has been some industry news including forecasts of higher Indonesian production and good weather improving the development of the Ivory Coast cocoa crop that would seem to dent the bull case, it doesn’t appear that market sentiment has completely shifted away from the bull camp, even though a lot of weak handed longs were shaken from the market on the sharp technical break seen this month. There still seems to be a general view that Ivory Coast harvest supply flows will begin to trail off in the New Year. And in fact, the pace of cocoa bean deliveries to ports which started the season at 93% above year ago has fallen to an estimate of only 13% above year ago as of December 27th. With March cocoa falling by as much as $287 from the December high, seeing any clear evidence that Ivory Coast supplies are starting to tighten could quickly shift control back to the bull camp.

TODAY’S GUIDANCE: Some of the strength in March cocoa yesterday may have been currency related given the strength in the Pound. But with trading conditions thin and a lack of industry news available, the market is easily being pushed around. With the Dollar trading weaker overnight, the currency action could provide some price support to cocoa this session. The price action in March cocoa still looks as if the market is attempting to form a bottom. But so far the market lacks upside traction and may remain in a holing pattern until more traders return to the market in the New Year. Critical overhead resistance comes in at the 40 day moving average at $3,288 today.

TODAY’S MARKET IDEAS: With the cocoa market likely lacking a fresh fundamental incentive to trade higher but with selling interest also likely limited by the market’s oversold technical condition, a sideways trade in March cocoa between $3,288 and $3,220 seems possible on the last trading day of the year.

Energy Market Commentary – 2009.12.30

by on December 30, 2009

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CRUDE OIL MARKET FUNDAMENTALS: Crude oil has seen a choppy to lower trade overnight as the market weighs a sharp decline in product stocks against a jump in oil supplies. February crude oil is starting to slip back after the API inventory report showed an unexpected 1.7 million barrel rise in crude oil stocks, which was particularly bearish since imports fell sharply while refinery operations edged only slightly lower. But a weaker trade in crude oil has been somewhat limited by a much sharper than expected declines in both gasoline and distillate stocks which to a certain extent is raising optimism that fuel demand is starting to recover. The cold temperature forecast has certainly been a key element driving the whole oil complex higher over the past two weeks as rising winter heating demand is clearly cutting through heating fuel supplies. With most economic reports generally stronger this month, including yesterday’s reading on consumer sentiment, the oil markets seems to have regained a more optimistic view for fuel demand to improve given the signs that economic conditions are starting to strengthen. Certainly news that China has agreed to raise oil imports from Kuwait by 50% next year after also lifting import contracts with Saudi Arabia and Iraq supports the view that global oil demand is starting to recover. Escalating geopolitical tensions with Iran along with the latest terrorist attempt also has oil markets skittish over supply. However, in today’s trade the EIA inventory report will likely set the early tone with most traders expecting a nearly 2 million barrel decline in crude oil stocks. But seeing API report an unexpected rise in crude oil stocks may be a sign of things to come since we suspect oil supplies could quickly rebuild again early in the New Year given the low refinery operating rate and after refiners have completed year end oil stock reductions for tax reasons. While February crude oil may still have the capacity to stage a rally towards $80 if today’s EIA report is considered bullish, the market is also showing signs of technically stalling up at these price levels. Therefore, we are a bit concerned that an EIA based rally attempt in oil could be cut short by profit taking, while leaving the market vulnerable to a price slide if the inventory news comes in bearish. We also suspect that weaker global equity markets overnight and a firmer Dollar trade in the early going could also inspire year end profit taking in oil unless the market gets a fresh bullish offset. Close in support for February crude oil comes in at $78.34 then near $78.02 and below there near $77.50 with resistance near $79.20 then around $79.60 and above there at $80.

GASOLINE: February gasoline has seen a firmer trade in the early over night action, but given the bullish surprise seen in yesterday’s API report the market’s reaction has so far been a bit disappointing. API reported a 1.4 million barrel drop in gasoline stocks when most traders were expecting a 1 million barrel rise in supplies. Yet, February gasoline continues to run into strong resistance near the $2.05 price level. A mixed report on retail gasoline sales yesterday may be a factor limiting gains since it showed gasoline pump demand was down over 3% on the week last week although up 1.3% from year ago. But perhaps traders are also a bit hesitant to lift the market up too far ahead of today’s EIA report, since the inventory readings from these two agencies (API & EIA) can be very different. A weaker equity trade may be another limiting factor while the gasoline market is also showing signs of being overbought up at these price levels. In the end, February gasoline may still have the capacity to rally back towards the December high if a bullish surprise is seen in today’s EIA report. But we are afraid the market has become technically vulnerable to profit taking up at these price levels which may cut short a fresh rally attempt or cause a swift price retreat, especially if today’s inventory news is disappointing.

HEATING OIL: It certainly looks as if February heating oil is in the strongest position to trade higher after yesterday’s API report showed a larger than expected 3.4 million barrel decline in distillate stocks when most traders were expecting to a 2.1 million barrel decline. While year ago surpluses are still large, the forecast for temperatures to stay cold at least through mid-January certainly gives the potential for fuel supplies to be significantly trimmed back in the weeks ahead, especially since refinery operations remain so low. But so far gains in heating oil have been limited overnight and we are somewhat concerned that the market is becoming a bit short-term overbought up at these price levels following a 22 cent rally from the December low. Overall, the chart setup for February heating oil remains positive given that the market pushed above the early December high in yesterday’s trade. But February heating oil may need a fresh bullish catalyst to propel prices toward the $2.15 level. But even then we see the market becoming increasingly vulnerable to some year end type profit taking.

TODAY’S ENERGY MARKET GUIDANCE: While the general environment for energy prices remains positive, the rally off the December low leaves markets highly vulnerable to profit taking. Even a rally off a bullish EIA report today may not hold given the market’s short-term technical condition.

Metals Market Commentary – 2009.12.30

by on December 30, 2009

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OUTSIDE MARKET DEVELOPMENTS: While the overall gain in the US Dollar this morning isn’t that impressive, seeing the Dollar generally hold within close proximity to its recent highs seems to leave the currency impact on precious metals in the bear camp this morning. With global equity markets moderately weaker overnight and the trade seeing some renewed concern from the US financial sector, gold and silver and a host of physical commodities seem to be facing a negative news bias into the early US Wednesday morning trade. The US will present the metals trade with a New York NAPM Business activity Index, a Chicago PMI reading, a K.C. Fed manufacturing Index and mid day auction results of $32 billion in 7 Year Treasury Notes. Given the initial upward tilt in the US Dollar, the presence of anything favorable from the US scheduled report front this morning might serve to lift the Dollar further and in turn undermine gold and silver prices.

GOLD MARKET FUNDAMENTALS: While the Wall Street Journal article on the prospect of rising gold production costs could be seen as a supportive fundamental development for gold prices, this market just doesn’t appear to be that interested in classic fundamental developments. It also seems as if generally supportive Chinese retail gold demand talk is still being generally discounted by the gold trade, especially in the face of a slight rise in the US Dollar. Some traders are suggesting that talk of another bailout payment to GMAC serves to rekindle financial sector concerns again which have generally been seen as a negative to gold prices since the Dubai credit situation initially surfaced around Thanksgiving. With the trade seemingly anticipating something favorable from the Chicago PMI report this morning, the gold trade might be watching the 78.50 level very closely in the Dollar. Some players are suggesting that the failure to hold above the $1,100 level has given the bear camp a technical edge in the early trade today. With equities weaker and the macro economic outlook seemingly sagging today, the bear camp would seem to have more angles in their favor than the bull camp early in the trade today.

SILVER MARKET FUNDAMENTALS: With the slide below the even number $17.00 level overnight and the 50 day moving average seen close-in down at $16.87 today there would appear to be a number of bearish technical themes present in the early trading action. Clearly a weaker US Dollar and negative leadership from gold prices has given the bear camp in silver some added confidence, especially since the equity market action seems to make the outlook for the economy feel even more suspect. While the silver market seemed to have a somewhat less overbought technical condition than gold in the latest COT positioning reports, the bull camp in silver still seems to be without much fundamental headline support into the Wednesday US trade. The bull camp might point to some positive action in copper prices early this morning, as a possible supportive element, but with the equities down moderately and the silver trade potentially facing lower pre-holiday trading activity ahead, it could be difficult to supplant the long list of the outside market negatives.

PLATINUM: After the rather impressive mid month run up in platinum prices and adjustments to the platinum COT positioning, that would seem to leave platinum extremely vulnerable to more downside action ahead. In fact, with internal platinum fundamental changes mostly non existent recently, the platinum market might be dominated by technical or outside market influences. Near term downside targeting in the April platinum contract is seen down at $1,468.

Corn Market Commentary – 2009.12.28

by on December 28, 2009

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NEAR-TERM MARKET FUNDAMENTALS: The corn market started the week with a strong advance. This follows a series of winter storms across much of the Midwest that started around the middle of last week. Traders indicate that this, plus the Christmas holiday, has slowed farmer selling and stalled last-minute progress in this year’s harvest. A lower dollar index overnight and last week’s very strong export sales in corn were also considered supportive. Last week’s net export sales in corn were well above trade expectations at 1,591,800 tonnes, all for 2009/10. As of December 17, cumulative corn sales stand at 46.6% of the USDA forecast for 2009/2010 versus a 5 year average of 50.5%. Sales need to average 755,000 tonnes each week to reach the USDA forecast. There is somewhat of a disconnect between the recent heavier pace of export sales in corn and the light pace of recent corn shipments. This is due to the fact that shipments of soybeans are taking up most of the export shipping capacity into the start of 2010 as buyers such as China continue to rush to fill the gap left in the world’s soybean supply pipeline by last year’s drought in Argentina. Soybean shipments are expected to tail off as we approach the start of the South American harvest in March and the shift to corn shipments is expected to be well underway by that point. Weather forecasts in the US call for light scattered precipitation in the northern Midwest today and eastern Midwest tomorrow. This may be followed by light and scattered precipitation in the western Corn Belt on Wednesday.

TODAY’S GUIDANCE: The corn market is becoming the focus of traders’ attention and this should continue to pull in spec and commercial buying, including funds. The corn market may not be as susceptible to swings in the dollar in coming days as it appears to be ready to start making a move toward the 470 to 480 level. First support is near 405 to 407 1/2 in the March corn contract and then at 393. Resistance is at 421 to 425 and then at 440.

Soybean Market Commentary – 2009.12.28

by on December 28, 2009

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NEAR-TERM MARKET FUNDAMENTALS: Cold and storming weather over the long weekend supported ideas that livestock feed usage is up and ideas that the tail end of harvest has been disrupted for corn and the corn rally helped support the soybean complex overnight. Traders see a bullish macro-economic view for the China economy and a positive world growth view as supportive forces for commodities in general and a weak tone to the US dollar and firm metals market added to the positive tone overnight. South America weather remains mostly a negative factor for the grain markets as Brazil and Argentina look to maintain favorable soil moisture conditions this week with scattered rains. The soybean marked closed lower on Thursday despite continued signs of strong demand from China but the market took out Thursday’s highs in the overnight session. The weekly export sales report showed stronger than expected sales in soybeans and oil and in line with expectations in meal. Net sales for soybeans were 1.369 million tonnes. Cumulative soybean sales stand at 84.3% of the USDA forecast for the entire season as compared with the 5 year average of 60.3%. Net meal sales came in at 254,200 tonnes which pushed cumulative sales to 62.9% of the USDA forecast versus a 5 year average of 41.7%. Net oil sales came in at 46,700 tonnes which pushed cumulative sales to 53.3% of the USDA forecast versus a 5 year average of 31.9%. Traders continue to await a shift in China demand away from US soybeans and toward South America new crop supply soon. Traders also anticipate the US government to extend the bio-diesel blenders tax credit in early 2010 and this has already been priced so anything different would likely impact the market. Traders seem to be raising their estimates for Brazil soybean production by 1-3 million tonnes above the December USDA forecast of a record 63 million tonnes.

TODAY’S GUIDANCE: The market is seeing an oversold technical bounce but the upside seems limited given the hefty supply outlook. March soybean selling resistance 1024 1/2 and more resistance at 1028 with 986 and 982 (50% of Oct-Dec rally) as next objectives. March meal looks to continue to push lower with 289.30 as next downside objective with resistance at 304.40. For traders who want to trade from the long side, March soybean oil support comes in at 38.74 and 38.49 with 39.48 and maybe 39.92 as near-term upside targets.


Wheat Market Commentary – 2009.12.28

by on December 28, 2009

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NEAR-TERM MARKET FUNDAMENTALS: The current holiday-shortened week started on a firm note in wheat. This came in conjunction with a lower dollar and rallies in corn, the soybean complex and a number of other key markets. This follows the sideways price action seen in the wheat market last week. Traders report that a lack of sellers helped support the wheat market last week along with expectations of fund support from rebalancing after the start of the New Year. However, last week’s export sales were below trade expectations. Traders said that this is a continued reflection of the higher prices seen after the October-November rally which further reduced the competitiveness of US wheat on the world market, and interrupted a series of relatively strong weekly sales totals. The latest week’s net sales came in at 221,300 tonnes, all for the current marketing year. As of December 17, cumulative wheat sales stand at 65.5% of the USDA forecast for 2009/2010 versus a 5 year average of 74.5%. Sales of 347,000 metric tonnes are needed each week to reach the USDA forecast. The weak pace of sales for wheat compares to continued strong sales in soybeans and a surge of export sales for corn in recent weeks. Jordan is tendering for 100,000 tonnes of wheat for delivery in April. Egypt is introducing new strains of wheat that are resistant to a destructive mutation of an airborne stem rust fungus.

TODAY’S GUIDANCE: The wheat market has had every reason to continue its decline in recent days. The fact that it has not done so is due to a lack of selling which suggests that the market is far from overbought. It is not clear that we can count on funds to buy as heavily in January as traders seem to be assuming, but the recent move back above the 100-day moving average in the March contract suggests the possibility of a broader sideways pattern in coming weeks with a push up to the 545 area over the very short term. First support is at 524 in the March contract with next support near 515. First resistance is at 537 and then at 543 1/2 to 545.

Currency Market Commentary – 2009.12.24

by on December 24, 2009

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DOLLAR: At least in the early action today, the Dollar appears to be in the midst of a further profit taking slide on the charts. Apparently the US housing news yesterday was a significant undermine of sentiment. However, the Dollar was already in the midst of a correction prior to the weaker than expected new home sales news was released. If the scheduled data was responsible for the wave of selling in the Dollar yesterday, then the market will be taking a long hard look at the claims and Durable goods data at 7:30 am this morning. However, the Senate vote on its Health Care reform bill is expected to start at 7:00 am eastern time and the outcome of that vote might be seen as an added negative to the Dollar. In other words, since the passage of the health bill became a nearer term reality, the Dollar seems to have come under pressure and therefore a passage of the bill looks to extend that bias today. While some might wonder if the Senate can get the bill passed today, one shouldn’t expect Congressman to work any overtime, as they already have guaranteed pensions and Cadillac health care in place. More downside in the Dollar today, with initial targeting seen at 77.74, unless the scheduled data disappoints and then the low today might be seen down at 77.60.

EURO: Technical short covering continues in the Euro as the fundamental shift doesn’t look to be definitive enough to justify the type of bounce seen in the Euro over the last two trading sessions. However, less concerns toward the situation in Greece seems to be contributing to the euro recover and that development alone could give the euro a sustained lift directly ahead. While a normal retracement of the December slide in the March Euro would allow a bounce to 145.67 without altering the down trend pattern, we doubt that the market is poised for that type of recovery. In fact, unless the US scheduled data is disappointing this morning it might be difficult for the March Euro to get above the next close-in resistance zone of 144.30 today.

YEN: Like the rest of the currency markets, the Yen is seeing a technical reversal of recent trends. It is possible that a series of BOJ comments overnight have fostered some fresh bargain hunting buying in the Yen, but if one looks deep into the BOJ Governor dialogue overnight, the Japanese economy continues to face serious slowing threats and that in turn could provide fundamental resistance to the March Yen directly ahead. However, a temporary recovery back above the 110 level, looks to be ahead, with a possible bounce to 110.56 possible in the coming two or three trading sessions. We continue to think that the yen might be the best currency sell for all of 2010.

SWISS: A normal retracement of the November through December washout in the March Swiss would seem to allow for a rise to 97.30 level. In fact, unless the US scheduled numbers are stronger than expected this morning, we see no reason to call for an end to the upward track on the charts. Traders should note that the March Swiss would regain its 100 day moving average at 96.90 today and that could give the bull camp a little added confidence.

POUND: While many commodities have waffled around their 50 day moving averages and the Swiss is attempting to regain its 100 day moving average, the March Pound managed to climb back above its 200 day moving average overnight. However, with the BOE recently fostering ideas that quantitative easing might be left in place and UK economic readings this week mostly disappointing, the trade in the Pound is lucky to have noted weakness in the Dollar, as buyers wouldn’t be interested in the Pound because of its fundamentals. A normal retracement of the November/December slide in the Pound, would allow for a bounce back to 1.6270 without actually derailing the downside pattern.

CANADIAN DOLLAR: We think the Canadian has clearly benefited from the recent reversal in the Dollar and to a degree it is also possible that the Canadian benefited from a recovery in oil and metals prices. At least in the near term, the losses in the Dollar should allow the Canadian to continue to win by default. Near term upside targeting is seen at 96.08.

TODAY’S MARKET IDEAS: Ongoing technical pressure to weigh on the Dollar again today and in turn that should serve to lift all Non-Dollar currencies.

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