Futures Market Blog

Gold Daily Commentary for 3.3.09

Gold continued its decline on Monday despite crashing U.S. equities.  Gold dropped below all of our supports and tripped beneath our 1st tier uptrend line.  Therefore, if Gold does not rise back above the uptrend line very soon, we could see a heightened sell-off in the near-term.  Although the fundamentals are turning negative for the time being, the medium-term uptrend is not lost.  There are multiple layers of uptrend the precious metal must fall below before we can call the uptrend dead.  While investors may be taking profits after impressive gains, if U.S. equities should continue their demise, we have no reason the negative correlation between the two won’t lock in.  Fundamentally, we find resistances of $930.76, $937.81/oz, $945.57/oz and $953.15/oz.  To the downside, we see supports of $919.22/oz, $911.60/oz, $903.29/oz., and $894.29/oz.  The $900/oz area should serve as a reliable psychological cushion in the near-term.  Gold is currently trading at $925.05/oz.

Corn Daily Commentary for 3.3.09

Corn futures recovered a bit yesterday despite the steep selloff in the S&P futures.  However, the corn futures are still below our near-term downtrend line and all three uptrend lines.  Therefore, we maintain our negative stance on corn.  If corn should fall beneath February lows, then we anticipate a large selloff with a possible retest of December lows.  Corn futures are following the path of U.S. equities.  With Prelim GDP coming in well below expectations, investors are anticipating the demand side of the equation to diminish further.  As the U.S. economy grinds to a halt, food consumption should decline.  Additionally, lower demand for meat in effect reduces the demand for corn used in livestock feed.  Furthermore, with U.S. citizens driving less and crude prices at a bargain, the demand for ethanol based fuel is waning.  Hence, if the S&P futures should continue their selloff as we anticipate, corn futures should flex their positive correlation and follow suit.  Fundamentally, see resistance at $3.4525/bshl, with 2nd tier and top-end resistances hanging at $3.51/bshl and $3.56/bshl, respectively.  To the downside, we find support $3.415/bshl with additional supports resting at $3.365/bshl, $3.3325/bshl, and $3.2825/bshl.  The $3.50/bshl area becomes a psychological barrier again with a psychological cushion at $3/bshl.  Corn futures are currently trading at $3.4525/bshl.

Crude Daily Commentary for 3.3.09

Crude futures crashed on Monday, following U.S. equities into the dumps.  Valuations in the stock market have investors worried about the U.S. and global economy as a whole for obvious reasons.  Therefore, investors ignored the OPEC supply constraints and sent crude tumbling.  However, Crude futures are recovering above the psychological $40/bbl area on Tuesday, and are now lodged solidly between our 1st and 2nd tier downtrend lines.  Our uptrend and 2nd tier downtrend line experienced an inflection point yesterday with a highly negative result.  Therefore, the futures could be sending a message that the downtrend is far from over.  Fortunately for the bulls, the Crude futures still have February lows as a base, so potential losses should be limited in the near term.  We expect a near-term rise in Crude futures today with a possible retest of our 2nd tier downtrend line.  Fundamentally, we find supports of $40.08/bbl, $39.42/bbl, $38.87/bbl, and $38.08/bbl.  The $40/bbl area remains a reliable psychological cushion for the near-term.  To the topside, we see resistances of $40.73/bbl, $41.26/bbl and $41.75/bbl, and $42.22/bbl.  Meanwhile, the $45/bbl area will serve as a psychological barrier.  Crude futures are currently trading at $40.61/bbl.

Crude Daily Commentary for 3.2.09

Crude futures are weakening considerably below our uptrend line as U.S. equities look to add onto Friday’s significant losses.  With the S&P futures closing below 2008 lows, we anticipate a heightened selloff in equities.  Therefore, despite aggressive supply cuts from OPEC, it appears declining demand will have its way with price for the time being.  However, if the price of Crude futures should continue to drop, we wouldn’t be surprised to see OPEC make further cuts in supply to buoy price.  As a result, Crude futures could be comparatively stable compared to equities to the downside in the near-term.  This stability will depend on Crude Oil Inventories continuing their weekly rise.  Crude futures are bouncing off of our 2nd tier downtrend line while remaining above our relatively flat uptrend line.  Fundamentally, we find supports of $42.23/bbl, $41.48/bbl and $40.65/bbl.  The $40/bbl area turns into a reliable psychological cushion for the near-term.  To the topside, we see resistances of $42.93/bbl, $44.05/bbl and $45.12/bbl.  Meanwhile, the $45/bbl area will serve as a psychological barrier.  Crude futures are currently trading at $42.68/bbl.

Corn Daily Commentary for 3.2.09

Corn futures continue their rapid selloff, dropping below our 1st tier uptrend line and are now testing our near-term downtrend line.  If corn should fall beneath February lows, then we anticipate a large selloff with a possible retest of December lows.  Corn futures are following the path of U.S. equities.  With Prelim GDP coming in well below expectations, investors are anticipating the demand side of the equation to diminish further.  As the U.S. economy grinds to a halt, food consumption should decline.  Additionally, lower demand for meat in effect reduces the demand for corn used in livestock feed.  Furthermore, with U.S. citizens driving less and crude prices at a bargain, the demand for ethanol based fuel is waning.  Hence, if the S&P futures should continue their selloff as we anticipate, corn futures should flex their positive correlation and follow suit.  Fundamentally, see resistance at $3.51/bshl, with 2nd tier and top-end resistances hanging at $3.56/bshl and $3.6025/bshl, respectively.  To the downside, we find support of $3.4525/bshl with additional supports resting at $3.415/bshl, $3.365/bshl, and $3.3325/bshl.  The $3.50/bshl area becomes a psychological barrier again with a psychological cushion at $3/bshl.  Corn futures are currently trading at $3.46/bshl.

Gold Daily Commentary for 3.2.09

Gold is bouncing off our 1st tier downtrend line after posting losses on Friday despite the substantial selloff in U.S. equities.  We view Friday’s losses as investor hesitation since analysts are forewarning a new bubble in precious metals.  However, the negative correlation should hold true between Gold and equities as far as we are concerned.  With S&P futures sinking below 2008 lows on Friday, we anticipate a heightened selloff in equities.  Therefore, we could very well see a solid rise in Gold with a retest of the highly psychological $1000/oz barrier.  Fundamentally, we find resistances of $951.92, $961.79/oz, $970.96/oz and $977.31/oz.  To the downside, we hold our supports of $945.57/oz, $937.81/oz and $930.76/oz. Gold is currently trading at $949.40/oz.

Crude Daily Commentary for 3.2.09

Crude futures are weakening considerably below our uptrend line as U.S. equities look to add onto Friday’s significant losses.  With the S&P futures closing below 2008 lows, we anticipate a heightened selloff in equities.  Therefore, despite aggressive supply cuts from OPEC, it appears declining demand will have its way with price for the time being.  However, if the price of Crude futures should continue to drop, we wouldn’t be surprised to see OPEC make further cuts in supply to buoy price.  As a result, Crude futures could be comparatively stable compared to equities to the downside in the near-term.  This stability will depend on Crude Oil Inventories continuing their weekly rise.  Crude futures are bouncing off of our 2nd tier downtrend line while remaining above our relatively flat uptrend line.  Fundamentally, we find supports of $42.23/bbl, $41.48/bbl and $40.65/bbl.  The $40/bbl area turns into a reliable psychological cushion for the near-term.  To the topside, we see resistances of $42.93/bbl, $44.05/bbl and $45.12/bbl.  Meanwhile, the $45/bbl area will serve as a psychological barrier.  Crude futures are currently trading at $42.68/bbl.

Corn Daily Commentary for 3.2.09

Corn futures continue their rapid selloff, dropping below our 1st tier uptrend line and are now testing our near-term downtrend line.  If corn should fall beneath February lows, then we anticipate a large selloff with a possible retest of December lows.  Corn futures are following the path of U.S. equities.  With Prelim GDP coming in well below expectations, investors are anticipating the demand side of the equation to diminish further.  As the U.S. economy grinds to a halt, food consumption should decline.  Additionally, lower demand for meat in effect reduces the demand for corn used in livestock feed.  Furthermore, with U.S. citizens driving less and crude prices at a bargain, the demand for ethanol based fuel is waning.  Hence, if the S&P futures should continue their selloff as we anticipate, corn futures should flex their positive correlation and follow suit.  Fundamentally, see resistance at $3.51/bshl, with 2nd tier and top-end resistances hanging at $3.56/bshl and $3.6025/bshl, respectively.  To the downside, we find support of $3.4525/bshl with additional supports resting at $3.415/bshl, $3.365/bshl, and $3.3325/bshl.  The $3.50/bshl area becomes a psychological barrier again with a psychological cushion at $3/bshl.  Corn futures are currently trading at $3.46/bshl.

Gold Daily Commentary for 3.2.09

Gold is bouncing off our 1st tier downtrend line after posting losses on Friday despite the substantial selloff in U.S. equities.  We view Friday’s losses as investor hesitation since analysts are forewarning a new bubble in precious metals.  However, the negative correlation should hold true between Gold and equities as far as we are concerned.  With S&P futures sinking below 2008 lows on Friday, we anticipate a heightened selloff in equities.  Therefore, we could very well see a solid rise in Gold with a retest of the highly psychological $1000/oz barrier.  Fundamentally, we find resistances of $951.92, $961.79/oz, $970.96/oz and $977.31/oz.  To the downside, we hold our supports of $945.57/oz, $937.81/oz and $930.76/oz. Gold is currently trading at $949.40/oz.

Crude Daily Commentary for 2.26.09

Crude futures surged above our uptrend line and all three resistance levels after the U.S. released lower than expected Crude Oil Inventories for the second week in a row.  The OPEC supply cuts seem to be having their desired impact.  U.S. crude imports are declining to a point that the U.S. must use more of its reserves, reducing supply and raising the price per barrel.  Therefore, we cannot accurately deduce that U.S. production and consumption of crude oil is improving, which is why the S&P futures are not following suit.  However, while we might see more near-term gains, the medium-term downtrend is still in control until U.S. equities and consequently the demand side of the equation recovers.  The 2/12-2/17 trading range should serve as a telling barrier for the time being. We added a 2nd tier near-term downtrend line.  If crude futures and climb healthfully above the 2nd tier, then we may see accelerated gains in the near term.  Fundamentally, we find supports of $42.23/bbl, $41.48/bbl and $40.65/bbl.  The $40/bbl area turns into a reliable psychological cushion for the near-term.  To the topside, we see fresh resistances of $42.93/bbl, $44.05/bbl and $45.12/bbl.  Meanwhile, the $45/bbl area will serve as a psychological barrier.  Crude futures are currently trading at $42.60/bbl.

Corn Daily Commentary for 2.26.09

Corn futures logged solid gains for the 2nd straight session, rising above our 2nd tier uptrend line on the news that the USDA is lowering its production forecast over 3% below previous analyst expectations.  The reduced forecast comes in reaction to higher fertilizer costs.  Additionally, the ethanol industry is expected to ask the U.S. government to issue a bill doubling the ethanol composition of U.S. gasoline from 10% to 20%.  Finally, Crude prices are rising, increasing the attractiveness of ethanol as a substitute.  These factors combined sent corn futures up to our previous top-end resistance of $3.6425/bshl.  Our 1st tier uptrend and downtrend lines will reach an inflection point to, so we could see corn break out to the upside.  However, the futures still need to face the psychological $4/bshl area.  Fundamentally, see resistance at $3.69/bshl, with 2nd tier and top-end resistances hanging at $3.73/bshl and $3.77/bshl, respectively.  To the downside, our $3.64/bshl resistance is turning support, with additional supports resting at $3.6025/bshl, $3.5625/bshl, and $3.51/bshl.  Corn futures are currently trading at $3.6425/bshl.

Gold Daily Commentary for 2.26.09

Gold is finally finding support from our $951.92/oz support as the precious metal continues to bounce within our uptrend band.  The precious metal is still comfortably above our 1st tier uptrend line while the S&P futures are facing considerable resistances.  The negative correlation between Gold and equities should stay constant.  Therefore, we have little reason to change our positive outlook on Gold, and we could very well see a retest of the highly psychological $1000/oz level.  With the U.S. releasing more key data this morning, we expect another volatile day in Gold. Fundamentally, we maintain our resistances of $961.79/oz, $970.96/oz and $977.31/oz.  To the downside, we hold our supports of $951.92/oz, $945.57/oz, $937.81/oz and $930.76/oz. Gold is currently trading at $954.10/oz.

01.14.09

————————-Last————————Last Week 1.07
Mar Crude—————-44.37—————————-47.39
Mar Heat—————–146.55—————————155.21
Mar XRB (Blended Gas)—–120.52—————————112.04

Crude oil and its products came under renewed selling pressure on Tuesday as the Department of Energy reported an unexpected increase in distillate supplies even as the severely cold weather in the Midwest US made its way towards the more densely populated East Coast. Gasoline inventories in the report rose by 2.07 million barrels to 213.5 million barrels for the latest reporting week. The trade was looking for an increase of only 1.8 million barrels. The more surprising aspect of the report came with the release of distillate stocks which surged by 6.35 million barrels to 144 million barrels. The trade had been looking for a crease of only 1 million barrels. Crude stocks were also higher but by only 1.14 million barrels while the trade had been looking for an increase almost twice that size. Prices also fell in sympathy with weaker US equity prices. Retail sales were worse than expected due to falling employment. US consumers cut back on spending in almost all categories due to the economic contraction, job losses and tight credit. The Department of Energy went on to state that world oil demand should be 800K barrels a day less than last year.  Earlier in the week, crude tried to rally after OPEC leaders indicated that they might be forced to seek even steeper production cuts to support prices. Saudi Arabia and Venezuela both were calling for production reductions. The Saudis are currently producing 8 million barrels a day, in line with previously stipulated quotas. Compliance by other producing members has always been a problem, however. The need for hard currency is always a constant and when prices decline there’s always a temptation to try and grab greater market share to compensate for lost revenues. To many OPEC members, the “correct” price for oil is $70 a barrel. At the same time, The Department of Energy has projected $43 a barrel as being the median price for oil this year due to economic stagnation. Oil supplies at Cushing, Oklahoma are 81% higher than a year ago.

——————————-Support———-Resistance
Mar Crude———————–41.00————48.00
Mar Heat————————140.00————159.00
Mar XRB————————-108.00————125.00

METALS
——————————–Last———————–Last Week (0/7)
Feb Gold————————808.80 ———————–841.70
Mar Silver———————–10.475————————11.105
Apr Platinum———————936.50———————–990.10

Gold continued to lose value through the second trading week of the year as oil fell in price, the dollar traded higher against most major foreign currencies and the US economy continued top contract. Sales at US retailers for the month of December fell by twice as much as initially forecast. Gold was not being seen as a safe haven over the past week. Instead, the trade was to deleverage, buy dollars and pay back Yen loans. Silver was lower by 24% in the past year while gold gained 5.6%. The flight to quality market was still the US treasury market, not precious metals. The dollar is higher by almost 4% for the month against a basket of currencies. Also, weaker prices for oil helped to distract metals buyers. Eventually the massive infusions of liquidity into the US banking system will work its way through the economy with inflationary consequence but that moment is still distant on the horizon. The dollar has maintained its strength against the EC as it’s thought that the ECB will lower short term rates to 2.0% from 2.5% later this week. A depression in car sales has hurt the price for Platinum.

—————————–Support———————Resistance
Feb Gold———————–800.00———————-840.00
Mar Silver———————–10.10———————–11.15
Apr Plat————————909.00———————-980.00

*********************************

SOFTS
——————————Last———————Last Week
Mar Coffee———————115.05——————–114.20
Mar Sugar———————-11.60———————11.98

Coffee is expected to rally this year as the Brazilian harvest was much less than expected and demand appears to be almost recession proof. Some trade forecasters are pointing at $1.45 a pound as being a target price. The global credit crunch had the effect of Brazilian coffee growers buying less fertilizer resulting in a smaller crop. Production may be off by as much as 20% as coffee trees enter the second year of the two year growth cycle which sees a drop off in production normally. The harvest next year could be off by as much as 10 million bags. Domestic usage is expected to be up 21% while exports are expected to decline by 8%. All of this math points to higher prices.

Sugar had traded as high as 12.50 recently but the fall in the price of oil and renewed worries of economic contraction and decreased ethanol usage pushed prices lower.

——————————Support——————Resistance
Mar Coffee———————-112.50——————–118.50
Mar Sugar———————–11.25———————11.75

**********************************************
——————————–Last———————Last Week
Mar Soybeans———————9.715———————-9.90
Mar Corn————————-3.664———————4.164

Soybeans traded lower on a stronger dollar. Also, the most recently released USDA report showed better than expected ending stocks for grains almost across the board. Additionally, a world in economic contraction has reduced expectations for export demand.  Soybean imports by China rose by 22% last year. This pace is not expected to be maintained this coming year. Money flow for soybeans remains positive as it does for corn.

Corn rebounded off the recently seen lows due to speculation that hot, very dry weather will hurt Argentinean production levels. Lack of rain fall is hurting production in this key growing country. There’s also the expectation that China will remain a good buyer of corn in the coming months.

——————————–Support——————-Resistance
Mar Soybeans———————–9.42———————10.10
Mar Corn—————————3.50———————3.85

Chuck Kespert

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HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.