Weekly Futures Report

09.09.09

US dollar drops to its lowest level of the year

Filed Wednesday 5:15 pm

ALL CHARTS ARE WEEKLY    

                                                            Last                                            Last Week   

Oct Crude                                          71.55                                               68.11

Oct Heat                                              179.70                                         175.10

Oct XRB (Blended Gas)                    182.67                                         180.75

Crude oil saw some short covering just in front of OPEC's scheduled announcement on Wednesday regarding crude output production levels. Crude gained 4.5% on Tuesday, the first day back from the holiday, as the US dollar dropped to its lowest level of the year. Crude also gained strength on the idea that inflation will accelerate due to the weaker dollar. Going into the meeting, OPEC stated that the organization should continue to meet existing production levels and improve their compliance as well. Fundamental traders believe that OPEC will not change their production levels. The consensus is that OPEC would like oil to remain around the $70 a barrel mark. Currently OPEC his a production target of 24.8 million barrels a day. Going into the release of the Department of Energy report, traders are looking for crude oil inventories to decline 1.6 million barrels and for refineries to operate at 86.8% of capacity. Gasoline inventories are expected to fall by 1.5 million barrels. Distillate fuels are expected to rise by 875,000 barrels. The release of the report has been delayed one day to Thursday due to the government holiday Monday. In terms of money flow, crude oil and heating oil are negative while gasoline stocks are positive.

                                                           Support                                     Resistance

Oct Crude                                             65.90                                     74.30 

Oct Heat                                               166.50                                              186.80

Oct Gas                                                170.50                                              192.00                                                               

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METALS

                                                                     Last                                              Last Week     

Dec Gold                                                   993.70                                              979.00

Dec Silver                                                  16.36                                               15.415              

Oct Platinum                                             1279.20                                           1232.70

Gold rallied sharply over the last several sessions primarily due to a weaker dollar. The EC is trading at fresh, yearly highs against the dollar on Wednesday. As long as investors sell dollars to buy riskier assets, gold should be supported in price. Gold is up 13% this year and headed for a ninth straight annual gain. Producers are cutting back on hedge sales in the belief that gold will maintain higher prices. Still, with the excess capacity in the US economy, some economists point towards disinflation as a more viable threat to the economy than inflation. Silver traded at a 13 month high of $16.96 and some believe that silver outperform gold if there’s a rebound in the industrial cycle. A major cautionary note should be noted, however. Whenever gold trades above a reading of 70 in terms of the Relative Strength Index the market has a tendency to run into selling pressure and profit taking. Some market participants believe that the Federal Reserve will not be able to withdraw its injections of liquidity fast enough and that there will be inflationary pressures. Others see downward pressure on prices and that the current rally in gold is a monetary event rather than a reflection of inflation.

 

                                                    Support                                      Resistance

Dec Gold                                    983.00                                             1017.00                                                              

Dec Silver                                   15.81                                              17.20                       

Oct Plat                                       1241.00                                          1317.00    

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SOFTS

                                                                       Last                                     Last Week

Dec Coffee                                                 125.35                                        121.25

Oct Sugar                                                   20.99                                           23.38

Sugar fell sharply in price to a one-month low as monsoon rains returned to India. Most parts of the key producing areas for sugar in India received good rainfall over the past 10 days. Overall, sugar had rallied sharply because rainfall in northwest India was 25 to 35% below normal. Sugar had rallied 72% this year because of this weather concern leading to a worldwide sugar deficit.

 

Coffee has stabilized in price as exports from Indonesia dropped 8.2% in August from a month earlier because of low supply.

 

                                                          Support                                   Resistance

Dec Coffee                                         121.00                                     128.00

Oct Sugar                                          19.92                                       22.16

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                                                                  Last                                    Last Week

Nov Soybeans                                        9.284                                        9.510

Dec Corn                                                3.096                                        3.192     

Dec Wheat                                              4.562                                         4.856

Wheat fell to its lowest level since April on the idea that rains may boost production in Australia thereby diminishing the need for US exports. Wheat is down 26% this year as global production has increased and demand has declined. From the beginning of June to the end of August wheat shipments declined 47%.

 

Corn and soybeans tried to rally yesterday based on a weaker dollar. 68% of the soybean crop is in good to excellent condition compared to 57% last year at this time. Another grain forecast is to be released on September 11. Corn growers are expected to hold back more supplies from the market to try and prop up prices.

 

                                                                 Support                                         Resistance

Nov Soybeans                                          8.97                                               9.62

Dec Corn                                                 2.98                                                3.15

Dec Wheat                                              4.45                                                  4.82

 

Chuck Kespert

NY/NY

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.