Futures Market Blog

02.25.09

————————————–Last———————-Last Week
Apr Crude———————42.40————————-37.45
Apr Heat———————–123.50———————–114.80
Apr XRB (Blended Gas)——126.91——————–114.80

Crude oil rose on Wednesday after the Department of Energy released a report showing that gasoline stocks fell by greater than expected levels as refiners cut back on production due to slim profit margins. Gas stocks were lower by 3.3 million barrels to 215 million barrels as refineries ran at only 84% of capacity. This release caught the market off guard and traders rushed to cover short positions. Gasoline consumption came in at 9 million barrels a day, averaged over the last four weeks. This consumption level was higher than last year at this time by 1.7%, another data point that surprised traders. The economy has lost so many jobs since then, it’s counter intuitive that gasoline usage should be higher. Crude had been lower by nearly 8% this year as the world wide recession diminished demand. Gasoline futures were higher by almost 5% after the release of the report. Going into this report, market observers were about evenly split as to whether there would be supply increases or reductions. A positive feature for price was the fact that refineries perceive a very slack demand and consequently are running their refineries at production levels not seen since Hurricane Gustav which resulted in severe production reductions in the Gulf of Mexico. Crude stocks rose by 717,000 barrels for the latest reporting week. This was less than a projected supply increase of 1.25 million barrels. Recessionary pressures continue to factor heavily in this market. OPEC managed to cut back production by 3.8%last month to try and prop up prices. Money flow for crude could reverse with a higher close on Thursday.

—————————–Support—————–Resistance
Apr Crude——————36.50——————–44.50
Apr Heat——————113.50——————-130.00
Apr XRB——————-115.00——————-136.00

METALS

——————————Last——————Last Week
April Gold—————950.50——————984.20
Mar Silver—————-14.64——————14.34
Apr Platinum———-1055.00—————-1110.00

Gold fell in price on Wednesday on renewed profit taking. Earlier in the week gold had traded as high as 1007.00 but had become technically overbought as measured by the relative strength index. For whatever reason, gold remains very sensitive to this index. When RSI reached over 72 on February 20th, a cautionary note was sounded. A reading over 70 for gold based on RSI is widely considered overbought. Ironically enough, gold peaked that day at 1007.70 per ounce. Since that day, prices have eased on profit taking bringing its RSI index reading down to a more realistic 56.82. If this market is to retain its bullish bias, an RSI reading above 50 should be maintained.  Gold was lower on Wednesday for a variety of reasons. Gold prices fell by the most in six weeks Wednesday as traders concentrated on economic contraction in Europe and reduced confidence in the US administration to lead the economy out the current recession quickly. Gold was down by $25 or 2.6% for the session. Still, gold is up 9.6% for the year. Gold continues to be viewed as a transparent currency and not as a barometer of inflation. There is still no guarantee that the massive stimulus packages that are being run by the United States government will indeed regenerate the economy while at the same time expanding the money supply could eventually result in inflationary pressures. Gold has been the singularly most favored asset investment this year so far. Gold is not rallying because of speculation and easy money chasing a return, rather it is a defensive play, a safe haven, a reciprocal reaction to fear and a sense of hopelessness.

———————————Support————————Resistance
Apr Gold———————-925.00————————–990.00
Mar Silver———————13.15—————————14.95
Apr Plat———————–1000.00———————–1119.50

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SOFTS

—————————————Last ————————-Last Week
May Coffee———————–112.85———————–111.05
May Sugar———————— 13.42————————12.95

Coffee appeared to be in a holding pattern, consolidating after recent declines from  the  $125.00 area. The market is looking for more clarity to the current harvest. The market is also looking to see what demand there is given the current economic conditions. It’s been well documented as to how many stores Starbucks is closing.

Sugar has acted very well lately given economic contraction. Sugar is holding recent gains but may be building a broadening top around 1350. A close below 1300 even would be a negative technical development.

————————Support————————Resistance
May Coffee———–110.90————————–115.30
May Sugar————-12.96————————–13.50

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———————————Last——————–Last Week
May Soybeans————-8.80————————9.78
May Corn——————3.722————————3.684

Soybeans could reverse the negative trend by closing higher then 880 on Thursday. A generally stronger dollar has been a price negative. Continued drought in China is something to keep an eye on.

May corn can reverse its intermediate negative trend by closing higher than 371 on Thursday. Technically, prices have been in a broad decline since the highs made back at the beginning of the year when corn traded as high as 4.39. Since then, the market has been in a steady downturn, retracing half the gains made from the lows set on December 5 at 3.15. It remains to be seen if the market can find some piece of positive fundamental news to drive the market back challenge previous highs in the face of a worldwide spending contraction.

—————————–Support—————–Resistance
May Soybeans————-8.61———————-8.94
May Corn——————-3.50———————-3.82

Chuck Kespert

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.

—————————————— Last——————————-Last Week
Apr Crude—————————37.45———————————42.55
Apr Heat—————————–114.80——————————-132.60
Apr XRB (Blended Gas)———114.80——————————135.83

Crude oil fell on Wednesday for a second consecutive day on speculation that tomorrow’s report from the Department of Energy will show that crude stocks have continued to increase. The trade was looking for increase of 3.2 million barrels. The report was delayed for a day due to the observance of Presidents’ Day on Monday. Market sentiment remains poor. The outlook for demand remains weak. Prices are lower by 22% this year. Housing starts were lower by 16%, lower they anticipated. Also a report from the Federal Reserve continued to downplay the possibility for an economic rebound during 2009. The Fed reported that industrial output declined for the sixth time in seven months. Some market observers believe that because of supply problems at the terminus in Cushing Oklahoma that prices will eventually head towards $20 per barrel. Market observers also expect the gasoline supplies decline by 5000 barrels for the latest supporting week. On Tuesday afternoon the American petroleum Institute said that inventories for crude oil rose 1.6 million barrels for the latest week to 345 million barrels. OPEC is cut production by 3.5% in January. Money flow for crude oil remains negative. March crude comes off the board on Friday.

—————————————Support——————————-Resistance
Apr Crude—————————–35.00———————————–44.00
Apr Heat—————————– 108.50———————————-135.00
Apr XRB——————————110.70———————————-136.00

METALS

—————————————–Last———————————–Last Week
April Gold———————————————————————- 939.90
Mar Silver———————————————————————-13.495
Apr Platinum—————————————————————–1075.20

Gold continued to trade higher. Gold moved to render and $75 announced, the highest price since July of last year on speculation that low-interest rates and a crisis of confidence in paper assets will drive investor interest towards gold. Of course, gold is a non-interest-rate bearing asset and as the world seems to be heading towards a zero interest rate model in the hopes of stimulating growth, gold finds little competition for investment dollars. Again, as mentioned last week, gold is being cast as a currency, not as a barometer for inflation. With interest rates being driven to zero, market observers are of the mind that currencies are being debased and against that gold is an obvious store of value. To further undermine confidence, the bank shares of Eastern European institutions fell to six year lows. Russia continues to add to its gold reserves. With gold continues to be nominated as a safe haven in these difficult times. Money flow in gold remains positive. One cautionary note, relative strength in gold is at 70, traditionally an overbought level.

————————————–Support—————————-Resistance
Apr Gold————————–922.00——————————-998.00
Mar Silver————————–13.15——————————-14.62
Apr Plat—————————-1039.00—————————-1134.00

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SOFTS

————————————— Last—————————-Last Week
May Coffee———————–111.05—————————-117.80
May Sugar————————-12.95—————————–13.50

Coffee fell to a four-week low as recessionary pressures hit the market. Coffee traded at its lowest level in a month. There is the widespread fear that the stimulus plan will not really that many jobs but will increase deficits. Manufacturing levels in New York attracted the fastest pace on record. Another coffee center, the United Kingdom faces its worst recession in almost 30 years. Most players are hoping the coffee will be range bound for the near-term between $1.10 to $1.20.

Sugar fell in price for the second consecutive day. Dollar strength against most major currencies was a negative for the market. Declining demand is falling at a greater pace than declining production. Reduced fertilizer use is also a market negative.

————————————- Support—————————Resistance
May Coffee————————-110.00—————————–115.60
May Sugar—————————12.00——————————13.70

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—————————————-Last—————————Last Week
May Soybeans———————9.78—————————–9.494
May Corn—————————3.684—————————-3.582

Money flow in soybeans remained negative. A stronger dollar is a negative influence on export business. Money flow in corn is also negative. Continued worldwide economic contraction is a negative for both soybeans and corn. Also, a decline in speculative interest in the grains is a negative.

————————————-Support————————–Resistance
May Soybeans———————-8.61—————————–9.83
May Corn——————————3.44—————————-3.82

Chuck Kespert

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.