6.30.10 Filed Wednesday 6:50 pm
ALL CHARTS THIS WEEK ARE Daily Bars
Last Last Week
August Crude 75.63 76.35
August Heat 201.43 207.23
August Gas (Blended) 207.94 206.95
Crude oil attempted to stage a modest rally on Wednesday after a
severe decline in prices occurred Tuesday. The trigger for the
decline
was the estimation that growth in China was less than previously
forecast. As China is the linchpin for the world's economic
engine, this
news took most markets considerably lower. Previously, China
announced it was going to allow its currency to float against
major
world currencies, albeit within a range. The result of the
un-pegging of
the currency would probably increase the cost of Chinese goods
imported to the United States and this would in turn hurt
corporate
profit margins and result in less off-take of oil. With the
subsequent
downgrading of Chinese economic activity some economists were
revisiting the possibility of a double dip recession in the
United States, a
definite negative for the price of oil. On Tuesday, the S&P
traded at an
eight month low.
As far as the Department of Energy report, they stated that
gasoline
stocks rose by 537,000 barrels to 218 million barrels. The trade
had
been looking for gasoline stocks to have actually declined by
400,000
barrels. An unfortunate price positive for the market has been
the
development of hurricane Alex which has forced oil recovery
workers in
the Gulf of Mexico to evacuate. So far, this early season storm
has
affected about 25% of crude oil output and 9% of natural gas
production in this key area. Money flow in crude oil remains
negative.
Money flow in Heating Oil is negative. Money flow in Gasoline is
negative as well.
Support Resistance
August Crude 73.50 79.60
August Heat 198.00 215.00
August Gas 199.50 216.00
***********************
METALS
Last Last Week
August Gold 1245.90 1237.50
Sept Silver 18.708 18.505
Oct Platinum 1537.3 1574.70
Gold maintained its basic value over the past five sessions by
trading in
a sideways pattern even as other markets underwent substantial
revaluations. Gold is currently being seen as a way to preserve
wealth d
during a period of high market volatility and economic
uncertainty.
Even with some evidence suggesting an economic contraction due
to a
downturn in activity in the Chinese economy which could in turn
lead to
reduced economic activity worldwide and even the possibility of
a
double dip recession in the United States, gold has maintained
its value
primarily as a hedge asset. Some have even suggested that the
current
economic clear and present danger is deflation and not
inflation. For
many, it's difficult to see gold appreciating in price in a
deflationary
environment. There certainly aren’t wage pressures and there
certainly
isn't an economic bubble such as real estate currently at work.
Indeed,
unemployment is currently viewed as being a persistent problem
going
forward and the best that can be said about the housing industry
is that
it may be attempting to stabilize. But as long as paper assets
are viewed
with skepticism and uncertainty about the economic future
persists,
gold will find buyers on any measured decline. Money flow in
gold
remains positive. Money flow in silver remains negative. Money
flow in
platinum remains negative as well.
Support Resistance
August Gold 1220.00 1257.00
Sept Silver 18.21 19.03
Oct Plat 1518.00 1592.00
*********************************
SOFTS
Last Last Week
July Coffee 164.20 160.50
July Sugar 16.06 15.71
Coffee staged a rally on Wednesday after declining
significantly, the
most in seven weeks, on Tuesday. Previously, coffee had reached
a 12
year high at $1.76 a pound, a price that most traders termed
excessive
and not completely substantiated by underlying fundamentals.
Traders
had been reiterating that supplies in Brazil, the world's
largest
producer, were more than plentiful to meet demand. When economic
indicators on Tuesday suggested a slowdown in the Chinese
economy
and the potential repercussions worldwide, coffee saw aggressive
profittaking.
As other markets were being marked down, coffee speculators
were prompted to get out. Fundamentally, coffee production in
Brazil is
expected to increase by 23% this year. Even still, prices have
increased
by 20% this year.
Sugar surged higher on Wednesday, the most in one week, as
traders
believe that adverse weather it will cut back yields in India
and
Thailand. India is the world's second-largest sugar producer
after
Brazil. Sugar was up 2.7% on the day. Spectacular growing
conditions
and imbalanced supply/demand ratios had previously resulted in a
decline of 43% so far this year.
Support Resistance
July Coffee 155.00 167.00
July Sugar 15.25 16.25
*****************************************
Last Last Week
Sept Soybeans 9.12 9.30
Sept Corn 3.626 3.554
Sept Wheat 4.802 4.756
Soybeans turned in a dismal performance on Wednesday. A USDA
report stated that US reserves were actually smaller than
initially
anticipated. On this news, prices were expected to increase
anywhere
from $.05-$.10 a bushel and gap higher on the opening but by
midday
soybeans were actually down three cents a bushel. The soybean
harvest
as of June 1 came in at 571 million bushels, a decline of 4.2%
from 596
million bushels from the previous year. This is the smallest
inventory
since 2004. Still, because of weakness in ancillary markets,
soybeans
have had a difficult time maintaining any sort of price advance.
Corn soared to a four week high, trapping many shorts in the
market as
prices gapped higher. The price advance was the most in nine
months
for a single trading day. A USDA report stated that farmers
planted
fewer acres than expected. Also US beef production may be the
smallest
since 2005. Farmers planted 87.8 million acres, far below former
government forecasts. The reason for the miscalculation was due
to wet
and cold weather conditions which delayed planting. Money flow
in
corn remains negative but nervous shorts will have to cover
their
positions before prices can resume a downward slope.
Wheat saw a similar price performance on Wednesday in the wake
of
the USDA crop report. Traders had been anticipating inventories
of 940
million bushels as of June 1. This would've been 41% higher than
the
previous year. But estimations were incorrect and wheat basis
the
September contract traded as high as $4.92 before producer
selling
emerged taking the price $.20 off its highs. Money flow in wheat
remains negative.
Support Resistance
Sept Soybeans 9.08 9.38
Sept Corn 3.25 3.75
Sept Wheat 4.50 5.00
